IMF Chief Economist Olivier Blanchard has said that Greece needs to slash pension spending by 1% of GDP in order to reach its new budget targets. The Greek government continues to resist, arguing that Greeks dependent on pensions have already suffered enough. But it has yet to put a compelling alternative to its creditors.
What depresses us is how little attention has been paid to one major area of Greek government spending that seems ripe for the ax: defense spending. Greece spends a whopping 2.2% of GDP on defense, more than any NATO member-state save the United States and France. Bringing Greece into line with the NATO average would alone achieve ¾ of what the IMF is demanding through pension cuts.
Greece has long argued that its defense posture is grounded in a supposed threat from Turkey – also a big spender on things military. But surely the United States and the major western European powers can keep a cold peace between NATO allies at much lower cost.
So why don’t they? German and French arms-export interests surely explain the silence on the creditor side: Greece is one of their biggest customers.
With Greece sliding towards default and economic chaos, such silence is indefensible.
Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”