“Greece doesn’t need yet another rescue package – it needs a way out”: That’s a really wise conclusion amid the discussion of a third ‘rescue’ package of some 10 billion euro with the IMF pressing for another debt haircut and Germany vehemently rejecting such option. The strict austerity measures imposed by the Troika and implemented by the Greek governments since 2010, had not other result than despite drastic cuts state expenditure and taxes-tsunamis unemployment and recession skyrocketed and millions of Greek households wee pushed into impoverishment without options for a better future. The crisis-generation of those aged 15-24 is unemployed to 65%.
But of course. A fiscal adjustment program primarily tailored by the IMF and without options for growth and development cannot but fail.
Even if Greek Finance Minister Stournaras claims a ‘third rescue’ package wouldn’t definitely mean new austerity measures, he cannot convince even my famous clever cat.
Ergo? What’s the solution to the Greek debt problem? New loans or a totally new approach: a realistic way out of the crisis?
Below are some excerpts from the approach of Greek economist Costas Lapavitsas in an article published in UK’s The Guardian
Greece doesn’t need yet another ‘rescue’ package – it needs a way out
By Costas Lapavitsas
If threatened by Germany with exit from the euro, Greece should not blink, but instead do what’s needed to save its economy.
There is no doubt that the Greek programme has failed. In 2010 Greek public debt was just over €300bn, mostly privately held, two thirds of it by lenders abroad and governed by Greek law. The rational option would have been for Greece to declare default, seek a rapid restructuring of its debt and place its economy on a new footing. This would probably have meant exiting the European Monetary Union, a move with considerable costs but also major advantages in allowing the Greek economy to make a fresh start.
Instead, the EU, led by Germany, decided to “rescue” Greece by offering it massive fresh borrowing, while forcing it to submit to severe austerity and wage cuts. The results have been catastrophic: cumulative economic contraction approaching 25%, adult unemployment at nearly 30%, youth unemployment close to 65%, unprecedented poverty, destruction of the welfare state and humanitarian crisis in the urban centres. Greek debt, meanwhile, is currently higher than in 2010, standing at €321bn and, since the economy has collapsed, its ratio to GDP approaches an exorbitant 180%. This is the background to the current debate.
The problem is that in 2014-15 Greece must still make debt payments of more than €40bn and, since the rescue programme is ending in 2014, it is not clear where these funds will come from
In 2014-15 Greece must still make debt payments of more than €40bn and, since the rescue programme is ending in 2014, it is not clear where these funds will come from. The government has cut spending dramatically and imposed a storm of taxes; it could also use some money left over from the borrowing of the last three years. Even so, it is highly unlikely to make up the entire sum, particularly as its own finances for 2015-16 remain uncertain.
The real problem, however, is longer term. The growth potential of Greece has been devastated during the last three years, and the EU policies of cutting wages and privatising public assets at knock-down prices are making things worse.
So, what should be done? It is time for Greece to show some gumption and stop accepting conditions dictated by German politics. The country does not need another rescue package that would bring a continuation of austerity policies, possibly with some further ineffectual restructuring of its debt. Greece must have a moratorium on debt payments followed by genuine restructuring of its debt, including deep write-offs. This must be accompanied by a lifting of the disastrous policies of austerity and wage cuts. On this basis, the economy could be placed on a different footing that would restore growth potential with social justice.
The [EU] policies to defend the euro since 2010 have not only destroyed Greece but disrupted the unity of Europe as a whole, putting at risk the entire postwar settlement. If Greece is threatened with exit from this rickety and absurd mechanism, it should not blink but do what is necessary to save its economy and its people.
The current Greek government is, of course, incapable of following such a strategy since it is entirely subservient to the lenders. The only hope lies with the left, led by the official opposition, the party of Syriza.
A government on the left offers a chance to restore some sanity to Greece, helping to change the course of the continent before the ghosts of the past really make a comeback.
Greece does not need another rescue package but a wholesale change of direction. Perhaps even German politicians might then understand what they have truly created in Europe. (Full article TheGuardian)
*Costas Lapavitsas is a professor of economics at the School of Oriental and African Studies, University of London. He is supporter of main opposition party, left-wing SYRIZA.
PS I don’t know if all political components of SYRIZA would agree on that. And furthermore I would like to read more details (pro & contra & risks included) about the strategy SYRIZA is up to towards Greece’s lenders. And then check if the left-wing party is the real alternative.
Nonsense. If it was so subservient it would have implemented the other half of the agreement (real restructuring of the state and DEKOs). But it didn’t. And that’s a much more obvious reason why we are back on square one…
Realistic solution? I can see only one: Yes, “Greece must have a moratorium on debt payments followed by genuine restructuring of its debt, including deep write-offs”. But on one condition which is real restructuring of the Greek state in all it’s facets… Because doing what this wonderful specimen of the nomenklatura is suggesting is just more of the same old rut: “Give us the money and we will do… eh… something… eh… I promise!”
Mr. Lapavitsas is right. That’s the way how to do it. Or more correctly: that would have been the right way how to do it three years ago. Now Greece doesn’t have private debtors anymore but instead the IMF, souvereign states and the ECB. None of them can really accept debt write-offs. On the other hand Greece has no change to ever pay back these debts. So I guess Greece will be tortured for another couple of years before the card house eventually collapses leaving behind a completely destroyed Greece and other EU countries losing hundreds of billions of euros. These will be no nice times. You think present day is bad? The worst it yet to come.
Typo: “change” should read “chance”.
Greece is acting like a nation state,but it’s village in mentality and action. every man for himself.4oo years of turk rule doesn’t go away over night.