IMF mission chief to Greece says ambitious surplus targets could constrain the economy

“‘As a member of the eurozone, Greece has lost the ability to implement an independent monetary policy. The fiscal constraints mean that there are very few tools left with which to boost economic activity,’ [Peter Dolman] said.

Referring to the 2.2 percent primary surplus target after 2022, Dolman said it will be very challenging to meet the forecasts of the European Commission’s Compliance Report in this fiscal environment. ‘At this time, we consider the realistic forecast for real growth in Greece is 1 percent annually. Our own research, based on the historical record, shows that a country cannot maintain a positive primary balance above 1.5 of GDP for such a long period.’”

Taxation strangles Greece’s growth prospects

“Greece is scheduled to exit its marathon bailout this summer after hitting the tough fiscal targets set by its creditors. But the country has done so by raising taxes so high that they are strangling the small businesses that form the backbone of its economy.”

Portugal dared to cast aside austerity. It’s having a major revival.

“At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continent’s economic and financial crisis. While countries from Greece to Ireland — and for a stretch, Portugal itself — toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade. […]

Voters ushered Mr. [António] Costa, a center-left leader, into power in late 2015 after he promised to reverse cuts to their income, which the previous government had approved to reduce Portugal’s high deficit under the terms of an international bailout of 78 billion euros, or $90 billion. Mr. Costa formed an unusual alliance with Communist and radical-left parties, which had been shut out of power since the end of Portugal’s dictatorship in 1974. They united with the goal of beating back some of the toughest aspects of austerity, while balancing the books to meet eurozone rules.

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. […]

The economic about-face had a remarkable impact on Portugal’s collective psyche. While discouragement lingers in Greece after a decade of spending cuts, Portugal’s recovery has pivoted around restoring confidence to get people and businesses motivated again.”

Heiner Flassbeck: Eine deutsche Falle für Italien

“Ja, es muss jemand einen Kredit aufnehmen und mehr Geld für Güter und Dienste ausgeben, als er selbst eingenommen hat. Mit anderen Worten, jemand muss neue Schulden machen. Denn wenn alle nur so viel ausgeben, wie sie einnehmen, bleibt die Wirtschaft genau stehen. Geben bestimmte Gruppen sogar weniger aus als sie einnehmen, das sind die, die wir üblicherweise Sparer nennen, ohne dass andere entsprechend entsparen oder sich verschulden, bricht die Wirtschaft weiter ein. […]

Man kann darauf bauen, wie das Deutschland im Zuge seiner ‘Strukturreformen’ zu Anfang der 2000er Jahre getan hat, dass andere Schulden machen, die einem selbst zugute kommen. Das kann gelingen, wenn man selbst den Gürtel enger schnallt und so billig wird, dass die Menschen im Ausland vermehrt die eigenen Güter kaufen und dafür Kredite aufnehmen.

Diesen Weg wäre Italien als exportstarke Nation in den vergangenen Jahren gerne auch gegangen, doch dieser Weg ist für Mitglieder der Eurozone weitgehend verschlossen. Er ist verschlossen von der Nation, die sich mit Hilfe ihres Lohndumpings auf den globalen Märkten der Welt dick und fett breit gemacht hat und den höchsten Leistungsbilanzüberschuss der Welt aufweist, nämlich Deutschland.”

EU’s debt deal is “kiss of death” for Greece

“Arguments for privatization aside, the deadly combination of higher debt and declining GDP had most economists convinced quite early on that austerity was killing Greece’s economy, and that a debt write-off would be at some point absolutely necessary for medium- and long-term recovery. However, Germany and its northern European allies had diametrically opposed this idea, insisting on even stronger doses of austerity, while balking at the prospect of a debt write-off.

At the same time, the idea of Greece exiting the euro was also an anathema to Germany and the eurocrats in Brussels. Keeping Greece in the Eurozone—even while its economy and society were going to bleed to death as a result of harsh austerity measures—was deemed absolutely imperative for the very survival of the euro, and for ensuring that all previous debts to European banks were going to be repaid. […]

In contrast to Tsipras’s outrageous claim that the debt deal represents a ‘historic’ agreement, in that it allows Greece to become a ‘normal country’ once again, the measures agreed on to make Greece’s debt sustainable will doom the country into becoming a permanent semi-peripheral debt colony of the EU. The deal simply pushes the debt into the very distant future, and locks society into a state of perpetual austerity by requiring that the government run exceedingly large primary budget surpluses. The deal is not a cause of celebration for Greece but, rather, a kiss of death. […]

At this point, with full budget surpluses running in the range of 5.3 percent (until 2022) and even 4 percent (from 2023-2060), ‘severe’ is not the right word to describe the level of austerity that will need to be enforced on the Greek population. A more apt term is ‘brutal’ austerity […]”

Greece, Germany and the IMF: the struggle continues

“To its credit, the Fund [IMF] saw what was happening and gave up on its austerity program. Germany did not. In early 2012, numerous reports surfaced of growing friction between the IMF and the EU countries over the Greek program. The Fund was upset that the EU (Germany in particular) was focused almost completely on getting Greece to reduce its government deficit. The Fund insisted this one dimensional approach had failed. Clearly, the IMF was attempting to distance itself from the austerity measures imposed on the country under the insistence of the EU. […]

But Germany and other countries who foolishly lent Greece monies do not want any defaults. Are they not engaged in wishful thinking?

  • Where are the funds to pay off these debts going to come from?
  • What happens when the European Central Bank stops buying up Greek bonds?

Consider what Greece would have to be paying in interest on its debt at market rates. 5% of €320 billion works out to €16 billion annually. And when you add to that paying off its maturing debt…. The Fund is right to be concerned. The Europeans are ‘kicking the can down the street.’ And Greece is supposed to run a surplus of 3%+ indefinitely? This ‘crisis’ has just been extended.”

Geplündertes Griechenland

“Die griechischen Renten wurden Schritt für Schritt um bislang 60 Prozent gekürzt, die nächste Kürzung ab Januar 2019 ist beschlossen. Jede dritte Altersrente liegt bereits heute unter 500 Euro im Monat, bei durchaus mitteleuropäischen Lebenshaltungskosten. Ganz allgemein sind die Einkommen unter das Niveau von 2003 gefallen. Allerdings auch nur für die Griechen, die überhaupt eine Arbeitsstelle haben, die offizielle Arbeitslosenquote liegt bei rund 20 Prozent, die Jugendarbeitslosigkeit bei über 45 Prozent. Nicht zuletzt deshalb sind bereits über 300.000 junge und qualifizierte Griechen ausgewandert. 40 Prozent aller Griechen können nicht rechtzeitig Miete und Rechnungen zahlen.

Das Gesundheitssystem ist in einem desolaten Zustand, mehr als 50.000 Griechen sollen in den letzten Jahren gestorben sein, weil sie sich eine medizinische Behandlung nicht leisten konnten. Drei von elf Millionen Griechen sind nicht mehr krankenversichert. Es ist üblich, wie in der Dritten Welt, dass Patienten Bettwäsche und Hygieneartikel ins Spital mitbringen müssen; ein Bakschisch hilft, eine Behandlung zu beschleunigen. Wenn die Apparate funktionieren und Medikamente vorhanden sind.”