Forgiving Greece's debt isn't just biblical, it's smart economics

Europe, just as much as Greece, is facing a crisis. German Chancellor Angela Merkel finds herself in a dilemma that many Christians have struggled with on both an ecclesial and personal level: that divinely intended tension between law and mercy.

On Sunday Greece voted, in their first referendum since ridding themselves of a monarchy, to reject an already-expired bailout deal loaded with demands for even stricter austerity from its foreign creditors.


Germany, prompted perhaps by a Kantian sense of duty, must decide whether to double-down and bully the Greeks to stick to the letter of the their payback agreement and risk exiling them from the eurozone, or work to forgive an unpayable debt that has overburdened the debtors and hardly benefitted the creditors.

There is an ancient, biblical tradition of forgiving debts for the sake of the community.

In Leviticus, God says to Moses on Mount Sinai, “And you shall hallow the fiftieth year, and proclaim liberty throughout the land to all its inhabitants; it shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his family,” (Leviticus 25, 8-10).

Fred Kammer, S.J., executive director and senior fellow of the Jesuit Social Research Institute and author of Doing Faithjustice: An Introduction to Catholic Social Thought, writes about how the tradition of the Jubilee year is one of the pillars of Catholic Social Teaching.

“If someone is brought so low that they cannot get up, the community helps them on their feet again and lets them start life over,” Kammer said at the 2012 Ignatian Family Teach-In. “These concepts all seem rooted in the image of the sovereign who can forgive debts, injustices and crimes in the interest of reestablishing the right order of the community, bringing peace to warring factions, and helping the entire community to have a fresh start.”

Slightly more than 50 years ago, Germany found itself in need of a fresh start. Still burdened by reparations from World War I, the German economy was floundering during a period of growth for the United States and much of Europe. In 1953, Germany’s creditors met in London for a debt summit, and forgave half of what was owed, “desiring to remove obstacles to normal economic relations…and thereby to make a contribution to the development of a prosperous community of nations;”

Not only were German debts forgiven significantly, the only way for creditors to collect was to buy German exports. That’s the macro-economic equivalent of not only forgiving the prodigal son, but throwing a banquet for him as well. The West German economy flourished as a result.

Now the practice for countries burdened by debt, as Nick Dearden at The Guardian writes, “could not be more different…the practice since the early 1980’s has been to bail out reckless lenders through giving new loans, while forcing governments to implement austerity and free-market liberalization to become ‘more competitive.’”

And it isn’t working. Paul Krugman chimes in: austerity measures and “Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients—and when their treatment made the patients sicker, demanded even more bleeding.” The Greek economy has shrunk by a quarter since 2008 and youth unemployment hovers around 50 percent.

At the bottom of this, with a Greek banking system on the precipice, are the lives of the real people. Pope Francis has constantly reminded us that we need a more person-centered conception of economics. Right now real persons and their pensions, wages and livelihoods are at stake.

French Economist Thomas Piketty said of the situation, “Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.”

Negotiating more lenient terms with Greece draws on an ancient Biblical tradition. But it's also smart economics.

Zac Davis is an editorial assistant at America





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Joseph McAuley
3 years 6 months ago

In an "irony of ironies," it was the Greek finance minster who willingly signed an agreement in 1953, cancelling 50% of the debt Germany owed after World War II, as seen in this photograph, with Chancellor Konrad Adenauer sitting nearby.  How things change!


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