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.”

Why the debt deal with the EU is bad for Greece

“As a result, rather than ending the crisis once and for all by cancelling part of the debt and thereby sharing the burden of adjustment equitably with European creditors, this deal simply shifts the burden of adjustment onto future generations of Greek workers and taxpayers. […]

At the heart of Greece’s protracted fiscal crisis was always a highly contentious social and political question about the real meaning of European solidarity: Who should be made to pay for the presumed ‘profligacy’ of successive Greek governments, or the ‘excessive risk-taking’ of profit-hungry private creditors in the lead-up to the crisis?

The course of action that European leaders ended up settling on turned out to be very one-sided in this respect: Greece alone was to blame for its predicament, and therefore, Greece alone would be made to pay for it.

The real motivation behind the bailouts was always to safeguard the survival of a dangerously over-exposed European banking system—but this fact was quickly obscured.”

Griechenland: Was die EU unter besten Arbeitsmarktpraktiken versteht

“Was die Bewertung der griechischen Arbeitsmarktreformen angeht, hat die ILO gewisse Zweifel, ob es sich dabei um beste EU-Praktiken handelt. Vielmehr sieht sie den Acquis Communitaire, die grundlegenden Werte und Errungenschaften der Europäischen Union, verletzt, zu denen die Tariffreiheit und gewisse Mindeststandards für Arbeitnehmerrechte gehören. Ebenso werde die Europäische Sozialcharta verletzt.

Und was hat das alles gebracht? Die Arbeitslosigkeit ist trotz Erleichterung von Massenentlassungen auf einsamen EU-Rekordhöhen. Also müssen Massenentlassungen weiter erleichtert werden. Vielleicht sinkt die Arbeitslosigkeit dann. Der Schuldenstand im Verhältnis zur immer weiter wegschrumpfenden Wirtschaft ist in völlig untragbare Höhen geschossen, trotz aller Sparbemühungen. Aber das ist ein anderes Thema.”

IWF-Experte: “Die ökonomischen Annahmen waren irrwitzig”

Der Autor Paul Blustein recherchiert seit Jahren im Inneren des Internationalen Währungsfonds.

“Bluestein: Problematisch war vor allem, dass es nicht früh genug einen Schuldenschnitt gegeben hat. Das wäre sicherlich nicht ausreichend gewesen – in Griechenland waren viele Reformen notwendig. Die ökonomischen Annahmen im Jahr 2010 aber waren geradezu irrwitzig optimistisch. Griechenland hätte unglaubliche Sparmaßnahmen durchsetzen müssen, um die Ziele des Programms zu erreichen. Am Anfang sollte ein Haushaltsüberschuss von sechs Prozent der Wirtschaftsleistung erzielt werden. Das ist viel mehr, als selbst eine gesunde Volkswirtschaft schaffen kann, dabei steckte Griechenland schon damals in der Rezession.

ZEIT ONLINE: Hat denn keiner im IWF gemerkt, dass dieses Szenario unrealistisch ist?

Bluestein: Klar, aber die Alternative lautete Schuldenschnitt, und das war für die mächtigsten Politiker in der EU inakzeptabel. Zu diesem Zeitpunkt gab es auch gute Argumente gegen einen teilweisen Schuldenerlass, nämlich die Ansteckungsgefahr, wenn auch andere Länder dies gefordert hätten. Trotzdem wurde die größte Bürde für die Rettung Europas bei Griechenland abgelegt. Das war unfair, und es rächt sich bis heute: Die Krise hält immer noch an.”

Finance as warfare: The IMF lent to Greece knowing it could never pay back debt

“For the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink.

So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay. When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade.

Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see.”

Greece: Where did all the money go?

“The breakdown of how the programme funding was allocated clearly illustrates the crisis management strategy Greece’s lenders opted for. Eurozone leaders, with the reluctant agreement of the IMF, made a conscious decision to use almost two thirds of their ‘taxpayers’ money’ (as they like to refer to it) to service the debt which they refused even to reprofile at the beginning of the crisis, when it was essential and could have given Greece a chance of recovery.

To protect the integrity of the eurozone, the strategy has left Greece with a massive pile of debt and a quarter of the economy gone, still unable to stand on its own feet. It is this very debt and the pretence of key decision makers to present it as sustainable that keeps the country in a vortex of ongoing political instability, fiscal crises, troika fall outs and economic uncertainty. It is the magnitude of the surpluses required to maintain this sustainability pretence that in spite of the most phenomenal fiscal consolidation in ferocity and speed, Greece is still required to find savings in the volume of billions.

If the intention of eurozone leaders and institutions was indeed to keep their ‘boots on Greece’s neck’ due to the failings of its political class, as the ex-US Treasury Secretary Tim Geithner claimed in his book, they have achieved their goal. Now they need to be open about their own crisis management decisions and answer the uncomfortable question: Where did all the money go?”