I love to receive interesting posts by KTG-readers. Different ideas and opinions enrich a blog anyway. An article on Greek economy and rescue efforts, written in a way that everybody can understand, is a must now a days for those who want to know the What and Why and Why Not as much as Greece economy is concerned. You don’t have to agree with it. But it is important to open your mind and see other possibilities. “Cheshire Cat” is an economist leaving in Greece who is very much concerned about the economic events taking place in the country. The author points out among others the malpractices prohibiting Greece from becoming competitive even in the tourism industry. At the end, he asks a crucial question: Does anyone here feeling rescued? My personal answer to this question is a simple “No!”…
I asked Cheshire Cat to sent me a short and easy to understand version. You can read the full article clicking the link below.
When the Shoe Does not Fit, Redesign the Foot
Greece isn’t allowed to default, why? Keynes once said that if you owe your bank manager a hundred pounds you have a problem but if you owe a million, it has.
The Euro was sold on the idea that economies that do not match can somehow converge towards a happy union. The opposite has happened. Persistent trading surpluses in one economy were maintained by persistent deficits in others. The global recession hit the finances of those least able to cope. To argue that Euro economies can stop diverging from each other by using austerity measures, that push indebted economies so far back that it will take them years to recover, is simply madness. Prosperity returns by the population leaving the economy. This tends to be the young and mobile. This means having a smaller tax-base to pay for pensions, and hence the focus of the austerity packages is on pensions.
The IMF/ECB package tries to work by cutting up Greece to make it fit. But economies can be different because they just are. I will never go to Germany to sun bathe no matter how efficient Germans are at getting the sun beds out. With monopolies and cartels, internal devaluation fails as prices are divorce from costs and this is then confused by desperate attempts to raise tax revenues. Exports are boosted, but it takes from those who have little market power to those who have. Small businesses, who tend to be more competitive, are the first to disappear. The more powerful ones can make money from privatizations (‘briberisations’). As for reducing wages, holiday in Greece will always be more expensive than those Turkey. The Greek waiter has pay artificially high European food prices to survive, the Turkish counterpart does not. Inefficiencies in the Greek economy are not all domestically produced.
A different solution is needed to provide a way for surplus countries to give to the deficit countries. This happened when West and East Germany unified. It happens between US states when an employed Californian pays taxes which goes to the unemployed Texan. A Modest Proposal by Yanis Varoufakis and Stuart Holland provides one way of doing this by re-cycling trading surpluses into investment programs.
But Euro-crats are not listening as bankers are concerned with morals. Honestly, when did the Greek and OECD statistics ever agree? Preventing defaults at all costs is perverse. Aren’t the buyers of risk, not the sellers, supposed to suffer the loss? The European Casino is saying come and play here. If you lose, our staff will pay. How can this be sustainable?
The Greek ECB/IMF package is a bank rescue package. Is anyone here feeling rescued?
You can Read the Full Article Here