Who is responsible for the Greek debt crisis?

The headlines are full of Greek politics – will the country opt out of the austerity/bailout/Euro package or not? It seems the rest of the Eurozone is presenting the issue as an ultimatum.

It set me to wondering why there hasn’t been more discussion about exactly what the terms of the bailout cover, and why. Because it was a shock to learn – via Paul Seabright’s recent Princeton in Europe lecture – that by 2008 Greece had become the world’s fifth biggest arms importer (pdf), and the second and third biggest customer for German and French arms exporters respectively, presumably in deals financed by German and French banks. Even in 2011, Greece’s defence spending amounted to 3.2% of GDP, the highest in Europe as a share of GDP,  and $1230 per Greek citizen.

(Parochial note – the UK is the world’s 5th biggest arms exporter, Europe’s 3rd behind France and Germany, and our biggest customers by 2008 were the US, India and Chile.)

Stopping the purchases would make a handy dent in the 9% of GDP budget deficit. So surely would ending interest payments – even defaulting – on those loans that financed the earlier arms build-up. If German and French banks were encouraged to extend them by their governments for geopolitical reasons, then those governments should take responsibility and face their own taxpayers, rather than placing the whole burden on Greek taxpayers.

This obviously isn’t the whole story. After all, not that many Greeks are taxpayers (only just over half, it seems), so there is definitely a need for Greece to face up to its own responsibilities too. But I find it odd that the story about Greece’s astonishing military build-up isn’t better known. All I could find is one Guardian article that mentioned it.

The data source is the highly-regarded . This is one of the shadowy areas of the global economy that economists don’t discuss enough, along with the outright illegal economy – as I touched on at the weekend with a little rant about the vampire cephalopods of the global economy.

[amazon_image id=”0199695520″ link=”true” target=”_blank” size=”medium” ]SIPRI Yearbook 2011: Armaments, Disarmament and International Security (SIPRI Yearbook Series)[/amazon_image]

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