Only fools commit a nation to a course of action without providing any emergency alternatives in case of policy failure. Greece has signed off all its sovereign rights to its creditors for a half-baked debt exchange and a €130 billion bailout loan that resembles a Ponzi scheme and that the IMF’s debt viability studies deem insufficient. Swedish finance minister, Anders Borg, cynically remarked that the agreement was not to solve the Greek problem, but to isolate the Eurozone from it. Greece has nothing to fall back on in the eventuality of a hard default and ejection from the EZ.
The third Hellenic Republic is now a dead letter. Greece is effectively a colony of the E.U.! The Greek political elite have sent Greece into oblivion as a nation, even pledging its gold reserves to E.U. Creditors.
The Greek political elite are obsessed with a failed ideology. For the last 30 to 40 years, being part of the E.U. was their sole national strategy. Instead of building a productive economy, opening markets for export of goods and services and developing a sense of national pride from economic accomplishment, the Greek political elite preferred artificial credit enhancement from Eurozone accession and E.U. transfer money to buy votes and support a corrupt, crony capitalism centered on a bloated public sector.
Eurozone membership (effectively a greater Deutschemark zone) wiped out local production and accelerated substantial E.U. import dependence. The artificially low interest rates led to massive asset misallocation and over indebtedness. The hard currency rates destabilized the Greek balance of payments without having currency depreciation or national monetary tools as an adjustment mechanism.
The E.U. initially looked the other way in the interest of economic integration, until Greece lost access to public markets and the crisis started to threaten Europe’s single currency union. The ensuing E.U. austerity measures resulted in classic debt deflation. From a public debt ratio of 110% GDP in October 2009, the ratio soared to the present 170-180% of GDP due to the E.U. program.
The latest E.U. imposed ‘voluntary’ PSI+ scheme forces substantial ‘haircuts’ on private creditors but gives E.U. public creditors seniority. This gives Greece alleged debt sustainability at 120% by 2020 – far higher than the 110% at the outset of the crisis! While the IMF questioned this restructuring scheme, the EU coerced them to recant.
The Greek political elite - and the middle class who supports them - have collectively sadomasochistic consciousness. They derive a perverse joy in the pain resulting from the humiliation and economic carnage that has gone on in Greece: 25% of the Greek private sector is in bankruptcy, There is 20% unemployment and 50% youth unemployment. GDP has compressed 14% (more than the U.K.’s GDP drop in the Great Depression) and is accelerating.
After so many years of living parasitically on E.U. transfer money, mired in ever increasing dependency, the Greek political elite have an atavistic, myopic desire for more Ponzi-type loans and transfer money to remain in what is an economic prison for its citizens with drastically lower living standards for many years ahead.
The European Commission, the ECB and the IMF are only getting away with this carnage in Greece because of a confidence game. They assert in bad faith that the necessary "tough medicine" will restore solvency and the economy will grow again. The reality is that the Greek government has been systematically sacrificing the well-being of its citizens and colluding with foreign creditors to shift the cost and burden onto the Greek people to minimize public creditor losses.
Unfortunately, Eurozone membership on an empty stomach and poverty for a large part of the Greek population is not opium that will last forever. The growing public rage is leading to collapse of the political system and social revolt.
The Greek political elite are obsessed with a failed ideology. For the last 30 to 40 years, being part of the E.U. was their sole national strategy. Instead of building a productive economy, opening markets for export of goods and services and developing a sense of national pride from economic accomplishment, the Greek political elite preferred artificial credit enhancement from Eurozone accession and E.U. transfer money to buy votes and support a corrupt, crony capitalism centered on a bloated public sector.
Eurozone membership (effectively a greater Deutschemark zone) wiped out local production and accelerated substantial E.U. import dependence. The artificially low interest rates led to massive asset misallocation and over indebtedness. The hard currency rates destabilized the Greek balance of payments without having currency depreciation or national monetary tools as an adjustment mechanism.
The E.U. initially looked the other way in the interest of economic integration, until Greece lost access to public markets and the crisis started to threaten Europe’s single currency union. The ensuing E.U. austerity measures resulted in classic debt deflation. From a public debt ratio of 110% GDP in October 2009, the ratio soared to the present 170-180% of GDP due to the E.U. program.
The latest E.U. imposed ‘voluntary’ PSI+ scheme forces substantial ‘haircuts’ on private creditors but gives E.U. public creditors seniority. This gives Greece alleged debt sustainability at 120% by 2020 – far higher than the 110% at the outset of the crisis! While the IMF questioned this restructuring scheme, the EU coerced them to recant.
The Greek political elite - and the middle class who supports them - have collectively sadomasochistic consciousness. They derive a perverse joy in the pain resulting from the humiliation and economic carnage that has gone on in Greece: 25% of the Greek private sector is in bankruptcy, There is 20% unemployment and 50% youth unemployment. GDP has compressed 14% (more than the U.K.’s GDP drop in the Great Depression) and is accelerating.
After so many years of living parasitically on E.U. transfer money, mired in ever increasing dependency, the Greek political elite have an atavistic, myopic desire for more Ponzi-type loans and transfer money to remain in what is an economic prison for its citizens with drastically lower living standards for many years ahead.
The European Commission, the ECB and the IMF are only getting away with this carnage in Greece because of a confidence game. They assert in bad faith that the necessary "tough medicine" will restore solvency and the economy will grow again. The reality is that the Greek government has been systematically sacrificing the well-being of its citizens and colluding with foreign creditors to shift the cost and burden onto the Greek people to minimize public creditor losses.
Unfortunately, Eurozone membership on an empty stomach and poverty for a large part of the Greek population is not opium that will last forever. The growing public rage is leading to collapse of the political system and social revolt.
Posts
Socialist oligarch dynasties drove their Trojan Horse to Brussels and now resort to preSocratic sophistry to talk their way out. How can Greece grow is simple business software costs fivefold due to kleptocratic taxation?
ReplyDeleteGreek Elites And Debt Crisis
ReplyDeletehttp://www.coolissues.com/government/greekelites.html