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Guest Post: Greece – Anyone Here Feeling Rescued?

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

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3 comments

  1. I wish the protesters would demand a return to the drachma. I think it is the only solution. As long as they are part of the eurozone, Papandreou can claim his hands are tied, Greece won’t get a bailout, etc. But with the drachma, Greece will regain its sovereignty. The troika is out to get Greece’s assets. They want Greece to fail economically, as no one in his right mind could think cutting jobs will help unemployment. I can’t bear to see Greece following the orders of the Germans and the banks.

  2. Yes, I agree. The Drachma is the way to go. Times were good when 1 dollar used to buy lots of drachmas. take a taxi go to glyfada, eat a souflaki and drink a beer all for one dollar… I hope the drachma comes back again too.

  3. Like MariaS and Larry miss I too the drachma. I might even suggest reforming the Eurozone, dividing the Eurozone or even a Balkans currency. The problem is how we get from A to B.

    If Greece leaves, the new currency will depreciate and, as soon as it becomes obvious that Greece will exit, capital will flee from the country. This is the lock on the prison door. Breaking this lock collapses the entire prison on its inmates. The exit of Greece will trigger the exodus of capital from any other deficit Eurozone countries. The Euro system, as we know it, falls but we don’t want it to fall on our heads. A complex buffing game is paralyzing decision making in the Eurozone.

    However, when the pain of staying in exceeds the pain of exiting then something like ‘A Modest Proposal (mentioned above) sounds like one of the most reasonable choices left. I say something like ‘A Modest Proposal’ as the problems are European-wide. The basic appeal of it: it is the 1930s, so lets jump over the Second World war and go straight to the Marshall Plan.

    I promote the proposal, not because I agree with it, but because it needs debating. The prevalent ideology in the EC runs against idea creating Euro bonds (common debt) and an active European Investment Bank. Euro supporters need it to save the Euro, but accepting it means rejecting the very neoliberalism, market orientated principles that the original design of Euro is based on. Its ingenious and cheeky of ‘A Modest Proposal’ to expose this contradiction. One of its authors is very familiar with Game Theory.