It has been clear long ago, that the way Greece’s creditors address the Debt does not work. It has little to do with Greeks’ attitude to not implement all austerity agreements they sign with the creditors.It has to do with the wrong “rescue” formula that demands form a bankrupt country to pay previous loans.
Caught in an endless spiral of bailout over bailout, does not help Greece’s economy to stand on its feet and recover. It only helps creditors, EU member states to turn into loan sharks, and their trap formula to pump billions of euros to Greece so that it can pay the same creditors and their previous bailouts. And enslave the borrower forever with no way out and drain Greeks from the last cent they could manage to earn until the end of time.
Instead of having money circulating in order to help economy recover, every earned cent goes back to lenders via taxes, taxes and more taxes.
What would be the solution though? How could Greece’s economy recover? An excerpt from an article “How Europe put Greece on permanent life support”
“At the end of the day, an actual recovery for Greece looks like this: Its economy would create enough food, clothes, housing, medicine, and other goods and services to give everyone in the country a decent and at least somewhat equitable standard of living. And in the course of producing all that stuff, it would also give the vast majority of jobseekers some sort of employment. How money fits in here is equally simple: It is what is traded back and forth in exchange for all that productive work.
What austerity does is drain the Greek economy of so much money it can’t maintain that circulation. The Greek government has to hike taxes, which means taking more money out of circulation. It then has to cut spending, public investment, welfare aid programs, pensions, etc — which means putting less money into circulation. That’s all so the Greek government can build up a surplus of money, which it then sends to its creditors abroad.
The problem, of course, is that the less money there is to circulate in the Greek economy, the less productive stuff people can do, and the less they can employ one another. If there’s not enough money to go around, their only other option is to barter. (Which is actually happening!)
Furthermore, the specific currency in this instance is the euro, which isn’t just used in Greece, but throughout most of the Continent. So when the creditors get those euros, they don’t necessarily invest them back into Greece. In fact, they almost certainly don’t, since Greece’s economy is a disaster zone and there’s nothing attractive to invest in. They invest them in Germany or France or wherever.
If fewer people are trading money for goods and services, that means the overall amount of income in the economy falls, which means there’s less for the Greek government to tax. So even as it hikes taxes and cuts spending to create surplus money to give the creditors, it further damages the economy its drawing that surplus from, making it even harder to get further surpluses. This has been termed the “death spiral.”
Which is why Greece, Germany and the creditors are caught in a loop of endless bailouts. With each bailout, the creditors pump euros into Greece’s budget, which then go right back out again to pay the creditors for the previous bailout. And since Greece has to do another round of austerity to get each new bailout, it winds up bleeding its economy dry all over again. So instead of recovering, which economies can usually do if they’re just left in peace, austerity just ensures Greece is in equally dire straits for the next round.” (full article here)
Would lay-off of 100,000 civil servants, cuts of pensions into half, structural reforms (which are indeed “austerity cuts”) and sale of all Greek assets help the country pay back a 326-billion euro from three bailouts? I doubt it… The base of the endless bailouts is wrong.
One should notice that the article author favors the International Monetary Fund proposal for Debt Relief and grace period of 40 years.
Well… if that’s the mercy the IMF begs form Greeks for all the wrong multipliers and wrong projections of 4.5% Primary Surplus, we could talk about it…