Monday, 13 July 2015

Not #Grexit but #Greviction?

Even in the Eurozone hall of monetary mirrors there is only so long you can keep eating your cake and have someone else unwillingly pick up the tab for it. Greece may not exit; it may simply be evicted.

Five months of negotiations in which its left-wing Government destroyed goodwill among creditors that have lent it hundreds of billions of dollars have cost Greece dearly in its frantic attempts to save its economy.
    With its banks closed, cash machines rationing withdrawals to just 60 ( $99) a day, pharmacies running short of drugs and businesses teetering on bankruptcy, salvation for Greece now lies in the hands of half a dozen European politicians exasperated by what they see as a litany of lies, insults and deviousness….
    "There is a major issue of trust," said Jeroen Dijsselbloom, the Dutch Finance Minister who heads the 19-nation group of countries sharing Europe's single currency. "Can the Greek Government be trusted to do what they are promising in coming weeks, months and years?"

Now they’ve been repeatedly slapped around the face with it, the answer to that question is finally sinking into the minds of those 19 European finance ministers – and with it the Greek government’s chances of continuing the charade. Germany, Finland, Estonia, Lithuania, Slovakia, Slovenia, Holland all want to suspend Greece EU membership for 5 years. Which probably means indefinitely.

What’s happened? Syriza is finally being exposed for its emptiness, explains Liberty Scott. Having removed his “rockstar economist” – who proved even less long-lasting than this hemisphere’s “rockstar economy”—Prime Minister Tsipras  gained parliamentary support for raising a lot of taxes, increasing the pension age, some modest spending cuts and privatisation of ports and airports to seek a third, yes third, bailout with Greece's Eurozone partners. 

The problem for Tsipras is that other Eurozone countries are losing patience, and it is more the Finns, Slovaks and Baltic States that are fed up with Greece, than the Germans.  
    Why?
Because many Eurozone countries don't trust the Greek Government.
     The first bailout saw Greece granted loans between 2010 and 2012 of 107 billion yes billion, Euro on condition that Greece would get its budget deficit down to 3% of GDP by 2014.  Part of this deal was to end the practice of paying public servants two more months of pay a year every year.
 

They didn’t.

The second bailout saw 50% of Greece's debts with private bondholders written off and the remaining debt on an interest rate of 3.5% (so much for the rhetoric about the evil foreign bankers profiteering), knocking 100 billion Euro off of Greece's debt.  Again, the Greek government was expected to cut its budget deficit.

Which it did. A little.

However, the extent of reforms of the Greek economy that were expected simply didn't happen. State pensions for "dangerous professions" such as hairdressing (yes really) were still paid out at age 50. Defence spending exceeded the 2% of GDP expected for being a member of NATO (and there was little scrutiny of where that money went).  In short, Greece maintained big government, corporatist for the centre-right, large public sector for the centre-left, but little welfare state besides pensions.   
    Syriza got elected promising an end to "austerity" that was part of the deal for the two previous restructurings of public debt, but found no appetite at all [outside Greece for them] to do this.  After all, why would other governments expect their taxpayers to pay for Greece to continue its corrupt, unreformed bloated inefficient state?
    So Syriza embarked on two rather vile strategies to frighten the Eurozone.
 

One was to start talking about German debts from World War Two. The other was to cosy up to Putin. Both backfired. And now too has Syriza’s third stratagem, the “no” vote, leaving them up a creek full of crap with nary a paddle to be found.

And why should any European financier care? Who would want to swallow more Greek government debt, or the lies that always go with it?

The right response of the Eurozone is to say no.  To tell Greece that if it wants to save its banks, it needs to live within its means, default on privately held bonds if it wishes and expect not to borrow any more.  The xenophobic socialists that are governing Greece are the [political] descendants of those [Marxists] who fought on the Soviet side in the Greek civil war.  Had they won then, Greece's fate would have looked a lot like Bulgaria and Albania to its north.  It would be nice if some in Greece realised how much they are to be grateful for and face down the rent seekers of the state that are holding their country back.

That may now have to happen, if it ever does, outside the Eurozone they hoped would forever pick up the tab. Because finally they’re being called on it.

[Hat tip Frances Coppola for the Greviction quip.]

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1 comment:

  1. If Greece (or NZ) were serious about fixing the economy the first step would be to stop all state pensions, and the second step, to stop all other state welfare. In Greece or in NZ, both steps could be done by their parliaments overnight. Any competent economist can explain this to a three-year old!

    We ridicule politicians who rant about chemtrails or deny the moon landings. We must create policitians who advocate for welfare with exactly the same disdain.



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