The European authorities’ doctrinaire decision to use debt issues to force austerity on Greece made the situation so much worse.
Three months ago, I wrote here about the risks that the European authorities were posing to the US economy and asked what the US government was going to do about it. It was clear at that time that “the Troika” – the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) – was once again playing a dangerous game of brinksmanship at that time with the government of Greece. They were trying to force the Greek parliament to adopt measures that would further shrink the Greek economy and therefore make both their economic situation and their debt problem worse, while inflicting more pain on the Greek electorate. The threat from the Troika was putting the whole European financial system at risk, since it raised the prospect of a chaotic, unilateral Greek default.