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…
Of course everyone knows the real issue is to try and force Greece into reforming various aspects of the way politics and the economy work in Greece, and no politician in Greece has ever been brave enough to risk the political cost. Politics and the economy work as if it was a zero-sum game and there is a fixed amount of money to go round, and everyone struggles to get their bit of it. In fact what needs to happen is that Greece becomes super-investment friendly (as all the surrounding Balkan countries are doing, advertising that you can set up a company in 24 hours for example because they know that Greece, which should be the local powerhouse, can’t do that). If that happened and change started to be immediately apparent, it would be much easier to negotiate better deals with our creditors. The economy would open up, offering employment. It’s only by getting more money into the economy that change will happen – the present multiple rounds of endless cuts, which fall unreasonably on those whose incomes are most visible to the authorities and who usually can least afford it – cannot in the long run possibly work, and everyone knows that. Just as wars are fought to create leverage with people who won’t otherwise negotiate and have inflated ideas of what they (their army, munitions manufacturers, supply line etc) can achieve, Greece’s creditors are trying to create leverage, while Greece continues to believe – what? That by pushing anyone who wants to work away from the country? by continuing to hack away at the incomes, the health service, all public services, then take away anything that’s left in tax? will ultimately work? No, all just too cowardly to hack through the generations of over-bureaucratised, over unionised, over cartelised organisations, and too afraid of losing the political support of whichever side they happen to be on. Power has thus become so diffused across the whole range of interest groups I can no longer see how anything can change. The EU, IMF etc are not so stupid they can’t see that as well. Meanwhile the poorest and those lacking political clout continue to suffer.
The real issue as far as the debtors are concerned is to make Greece pay. The “reforms” imposed on Greece are neoliberal nonsenses, that are ideological and not practical. They consist primarily of liberalisation of the economy — such that there is no limit to the number of taxis or pharmacies that can exist, since “the market will take care of the problems”. Alongside these destructive “reforms” are the imposition of taxes to balance the budget. Of course, the Troika is not imposing taxes — merely setting the budget such that either the Greek state shuts down, stops paying pensions and salaries, or raises taxes to pay off its debts to the Eurogroup (when previously the debts were only to private German and French banks).
So no, your comment is wrong. And the IMF are notorious for being particularly stupid with their ideological beliefs about free markets. They have a track record going back decades of how to mismanage countries. Along with the incompetence and arrogance of the Germans and the rest of the Eurogroup, there is no interest in “reforming” Greece so that its economy can improve.
With respect to Jeff Spross, the author of the article (“How Europe put Greece on permanent life support”). All this is well known by now. There is a mounting tsunami of articles and analyses that conclusively show that the Eurozone’s policies have not helped Greece one bit and have instead confined it in a deflationary debt trap. There is also a growing understanding on the part of most people that the reasons behind the choice of these economically unsound policies are purely political and that they were embraced in order to to hide unpalatable decisions made in Germany and elsewhere to bail private banks with public money. Finally, most people also realize that the bad cop-worse cop routine being played by the IMF and the Eurozone has very little to do with “saving” Greece and Greek society which will end up footing the bill to the iMF and the Eurozone one way or another. The more interesting question is WHY is no one (and by that I mean local politicians of the liberal or conservative shade) doing anything to overthrow this destructive logic? This is where I feel the major lessons are to be drawn if we are ever to move forward. And the main lesson to be drawn is one – namely, the total and utter failure of the democratic process to deal with entrenched interests whether at the local or the supranational level. If the crisis in Greece has demonstrated anything, it’s the EU deficiency in matters democratic and the fact that the people of Europe are left with nothing more than the illusion of democratic decisions when it comes to how they are represented and governed. Examples abound: local elected governments are basically told what they can and cannot do for their constituencies; the will of the people as expressed through elections is happily trampled on; the law of the jungle reigns supreme in that certain countries are forced to follow the letter of the law to a “t” while other happily trample on legally binding European decisions simply because they can. Until and unless we resolve the issue of political legitimacy of the EU and redress the fact that the political structure of the EU remains largely outside democratic control, I’m afraid we are just appearing over the fact that when you look behind the curtain in Brussels, you see that the Emperor has no clothes.
To “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” is very easy and therefore no-one needs politicians, slave-drivers and other rich piggies:
Just abolish the money system, fuck up like kicking a domino the death-machine called “world-trade” with it’s import-export-dogmatix, destruct the state and organize life locally, welcome friends but not lazy tourists and Greece will be free.
Is there not a wealthy person on this planet to donate their wealth to Greece? There are so many charities on the planet, and now that Greece truly needs help, maybe countries should assist and donate to Greece and get it back on it’s feet. Afterall, without Greece, we would not have many of the modern societies we have today. Of course, other civilizations may disagree but I’m sticking with that for now.