The situation in Greece really began in the 2010 G-20 Toronto summit, when Canada, the UK, and, most importantly, Germany announced the end of fiscal spending to deal with a global recession that began with the crash of the US's financial sector in 2008. The message was clear from Germany: Restoring business confidence was the only way to recovery. And restoring business confidence always means cutting government spending. Germany imposed austerity on itself and demanded that all other countries in the eurozone do the same.

At the time of that G-20 summit, the massive debt crisis in Greece entered the news and was quickly framed by those on the right as an example of the ills of excessive government spending. But the problems in Greece did not begin until it entered Europe's currency union, the eurozone, in 2001. What happened was simply this: Before entering the eurozone, Greece's sovereign bonds had a credit rating that reflected its weak (relative to other advanced capitalist societies) economic position; after, it had a rating that reflected Germany's strong economic position. What this meant was Greece could borrow cheaply, and it did. But why were banks in Germany so eager to loan so much money to a country whose real credit rating was low? Because they had surplus cash that desperately needed investment opportunities. (For excellent details about this, read Martin Wolf's book The Shifts and the Shocks: What We’ve Learned—and Have Still to Learn—from the Financial Crisis.)

The country's problems were further worsened after "Goldman Sachs Helped Greece to Mask its True Debt," as a headline in 2010 put it.

After facing half a decade of fiscal austerity to pay back loans from French, Italian, and German creditors, Greece voted into power an anti-austerity and leftist party, Syriza. For the past 6 months, the world has watched very closely a struggle between Berlin and Athens to determine the future terms of Greece's debt repayment. Berlin will not budge. It wants nothing but an austerity that is politically unpopular in Greece. As for Syriza, it has an obligation to its citizens, who this weekend voted overwhelmingly against a bailout offer that demanded more of the same painful austerity.

What's next at this point? Almost immediately after receiving a vote of confidence, Syriza decided to sacrifice its controversial but wildly popular finance minister, Yanis Varoufakis, to appease the gods of global capital. Varoufakis, a Marxist economist who once worked in Bellevue for a game company, Valve Corporation, has not hesitated to call the creditors "terrorists" and their form of debt collection "waterboarding." This kind of dramatic language and his open opposition to Berlin cost him his seat at the negotiation table in April. And now it has cost him his job. "I shall wear the creditors’ loathing with pride," he posted on his blog on the day he was fired.

It must be pointed out, however, that Germany's hard position on Greek debt is not consistent with its own past experiences with debt. Germany and France and the UK would not be where they are today if they had repaid all of their massive war debts to the US. This point was recently made by Thomas Piketty, the author of the most influential economics book of this generation, Capital in the Twenty-First Century. As Piketty writes:

Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.

History is always important because it's very good at telling a different story from the ones we find our dailies and other news sources. In fact, in Robert Skidelsky's biography of the British economist John Maynard Keynes, you will find this excellent detail:

The last payment the UK made [to its debt from World War One] was on 24 March 1949, when the US Treasury received $4,480.65 under the terms of a will made by a British subject.

In the early '90s, when Skdelsky wrote the biography, this unpaid debt still stood at $14 billion.

As always with the right, we must do as they say and not as they do.