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10 February, 2017

Greece: the low-noise collapse of an entire country

The Greek crisis is still there. European officials and the IMF have issued a new ultimatum to Alexis Tsipras. He has three weeks to present new austerity measures. Exhausted, the country is on the verge of financial, economic and moral collapse. Syriza officials are talking about getting out of the euro.

by Martine Orange

After rejecting the idea for more than two years, Syriza seems ready to think the unthinkable: to leave the eurozone. Even if government officials do not talk about it openly, eminent figures from the left-wing party publicly talk about the hypothesis. For the former European affairs minister of Syriza, Nikos Xydakis, the issue of the exit from euro, in any case, should no longer be considered "taboo". "There must be no taboo when we talk about the destiny of the nation. We have reached the point where the people are at the end of their endurance. I think we need an in-depth national political discussion. And this discussion, of course, needs to start in parliament," he said recently.

Since then, the observers are lost in conjectures. Is this a personal test ball of the former minister? Is this intervention intended to loosen the grip of the Syriza government, at the moment when it finds itself again in a dead end against its creditors? Or is the assumption of an exit from the euro really a scenario discussed by the government, exhausted from finding no support and no solution?

The Greek crisis has disappeared from the radar screens since the third rescue plan, torn off after the Syriza surrender in July 2015. Everything has even been implemented to carefully bury the subject, so as not to reopen European divisions, with the hope that time would eventually make Greece forget. European officials do not want to bring the subject back to the forefront, while the Netherlands, France and Germany are called to vote this year.

This attempted mute almost worked. But the Greek crisis is still there. More than ever: the third plan of rescue, as feared, brought no solution, no respite in Athens. And the Greek case could be re-invoked very quickly throughout the European debate, if events continue at this rate.

Each disbursement of additional appropriations provided for in the plan, the creditors are always show more demanding. The last meeting of the Eurogroup, which was held on 26 January in the presence of officials of the IMF, has not escaped the rule. While Athens expects a release of European appropriations to help refinance about 6 billion of debt in July, the discussion has given rise to the usual mantras, where there is no question in the Newspeak dear to responsible that "to keep the commitments, to implement the reforms, to reduce the deficits, to find a sustainable growth, etc.". It is completed by a new humiliation for Greece.

A new ultimatum has just been launched in Athens. Greek Prime Minister Alexis Tsipras has three weeks to reach an agreement with the country's creditors. At the European meeting on 22 February, everything must be done. Until then, a full draft of the plan proposed by Athens is to be presented in Brussels on 6 February. "Let us say that the window of opportunity is a window that is still open, but that will soon close because there are electoral deadlines" in the Netherlands, France and Germany, recalled the French Minister of Finance, Michel Sapin, following the meeting of European finance ministers. As if to remind Greece that she can not invite herself in the European elections, and that thereafter, she risks finding "European partners" less disposed towards her.

The dispute carries as usual on these famous financial ratios which take the place of policy for the European officials and the IMF. While the Greek government managed to achieve a budgetary surplus (before payment of debt and financial expenses) by 1.5% in 2016, in a superhuman budgetary effort, European officials conditioned their new aid in July to a Primary budget surplus of 3.5% from 2018 and for at least 20 years!

Until then, the IMF argued that such a level of budgetary surplus was unrealistic or counterproductive. But in recent weeks, the IMF has completely changed its position. Not only does support the 3.5% surplus target but it also requires guarantees. The international organization bases its support for the rescue plan on the preventive adoption by the Greek government of additional austerity measures, in addition to those already provided for in the rescue package. These should be automatically implemented at the least budget overrun.

While the Syriza government has already raised the VAT to 24%, decreased by 40% pensions, increased taxes, especially land, decided new taxes on cars, telecommunications, televisions, gasoline, cigarettes, Coffee, beer, announced new cuts of 5.6 billion on public wages, it refuses to adopt these preventive laws that would impose further declines in public wages and pensions and further tax increases. In the name of the last shreds of national sovereignty that remains to Greece. "Asking for such measures while government revenues are better than expected is not only extreme but absurd. No nation can consent to such arrangements," said the Greek Finance Minister Euclid Tsakalotos, stressing the anti-democratic nature of the measures required.

He found no support from his European counterparts. Germany making the IMF's presence on the Greek bailout a prerequisite for its own participation, Berlin is ready to accept the conditions imposed by the international institution. Especially since they do not seem exorbitant. All Europeans have aligned themselves with the German position.

This does not prevent disputes between the IMF and the Europeans. This weekend, the international institution has leaked new documents on the financial situation of Greece. As it had already said in 2013, 2014, 2015, 2016, it reaffirms that the Greek debt is "explosive". According to its latest calculations, it would amount to 260% of GDP in 2060. "Greece can not repel its debt problem. Athens needs substantial debt relief from its European partners to regain an acceptable level of indebtedness," it says.

Should we really expect the IMF calculations until 2060 to say that the Greek debt is unsustainable? It has been there for a very long time. While Greece's debt level was 120% of GDP in 2010, it now reaches 180% of GDP. Almost twice the annual production of national wealth. For years, many economists, whatever their beliefs, argue for a deep restructuring or even a complete cancellation of Greece's debt. The only condition, in their eyes, is to put the country back on an economic track.

But the European officials do not stop. At the January 26 meeting, they again denied the problem to IMF officials. "There is no reason to make such alarming remarks about the Greek debt situation," said the European Stability Mechanism, which is responsible for managing European credits to Greece. Given the lower rates and longer maturities granted to Greece, worry, according to the European officials, is not appropriate, let alone the slightest relief for Athens. The only thing the Greek government should do, they repeat, is to "implement two-thirds of the reforms" that it has not yet implemented.

An exhausted country

The vacuity of all this austerity policy determined by certain financial ratios is obvious. European officials may argue that their bailout is working, they welcome the recovery of Greece and the budget surpluses, but the situation is quite different: passively we are witnessing the low-noise collapse of a whole country.

While forecasts foresee a rebound of the Greek economy in 2016, with growth of at least 2.6%, these risks once again prove to be false. If a slight start was recorded at the beginning of the year, it continued to slacken. In the last few months, the engine seems to have stalled. According to Markit figures published on February 1st, manufacturing activity recorded its largest decline in 15 months. "The decline is related to both the decline in production and new orders. While rising import prices have accelerated to their highest level in 70 months, companies nevertheless lower their selling prices," explains the economic and financial institute, pointing to the fall in consumption and the lack of outlets.

In seven years Greece's GDP decreased by a third. Unemployment affects 25% of the population and 40% of young people between 15 and 25 years. One third of companies have disappeared in five years. Successive cuts imposed everywhere in the name of austerity now bite in all regions. There are no more trains, no more buses in whole parts of the country. No more schools, sometimes. Many secondary schools had to close in the most remote corners because of lack of funding. Per capita spending on health has declined by a third since 2009, according to the OECD. More than 25,000 doctors were dismissed. Hospitals lack personnel, medicines, everything.

The human and social cost of this austerity policy is not included in the Excel tables of the Eurogroup. But it is paid cash by the population. One fifth of the population lives without heating or telephone. 15% of the population has now fallen into extreme poverty compared to 2% in 2009.

The Bank of Greece, which cannot be suspected of complacency, has drawn up a report on the health of the Greek population, published in June 2016. The figures it gives are overwhelming: 13% of the population are excluded medical care; 11.5% cannot buy prescription drugs; People with chronic health problems are up to 24.2%. Suicides, depression, mental illness show exponential increases. Worse: while the birth rate has fallen by 22% since the beginning of the crisis, the infant mortality rate almost doubled in a few years to reach 3.75% in 2014.

After seven years of crisis, austerity and European plans, the country is exhausted, financially, economically and physically. "The situation is getting worse. What we need most now is food. This shows that the problems relate to the essential and not the quality of life. It's about subsistence," says Ekavi Valleras, head of the NGO Desmos. And it is to this country that Europe asks moreover to assume alone or almost the reception of the refugees coming to Europe.

Initially, observers analyzed the repeated intransigence of European officials as a political coup against Syriza. After two years of government, after the turn about the July 2015 referendum and the new rescue plan, the government of Alexis Tsipras is at the lowest level in public opinion. To demand new austerity measures, to put him back on the wall and to force him to call a new election was analyzed as a final maneuver to defeat him politically, to make him pay one last time his insult of 2015 and to replace it with a new one much more acceptable.

This political scenario seems a little short for other economists. For them, it is the addition of European management of the Greek crisis that will soon be presented. The German Finance Minister, Wolfgang Schäuble, who has never hidden his desire to get Greece out of the euro but had seen his line beaten in July 2015, is gaining the notice of observers. Gradually, the European leaders, tired of this problem that defies their solutions, align themselves with his thesis. The IMF, which is also trying to get out of the Greek quagmire, also advocates a Grexit, the only solution that, according to it, could give monetary oxygen back to the country.

The trouble is that nobody wants to assume the historic responsibility of this rupture and its consequences. Because to exclude a country of the euro area is to say that the single currency is more intangible, as has been said during its creation. Other, voluntarily or not, could follow the example. Already, the financial statements are on the lookout. The Deputy Journalist at the New Factory, the World, and the Tribune. Several books: Vivendi: a French affair; These gentlemen from Lazard, Rothschild, a bank in power. Participation in the collective works: the secret history of the V Republic, the secret history of the employers, The happy days, informing is not a Greek offense is again subjected to intense speculation, raising its rates to over 7%. Beyond that, the entire European bond market is under tension, pushing Italian, Spanish and French rates up, despite the interventions of the ECB.

The attitude of the European leaders and the IMF in recent weeks is staggering, as it is part of a historical setback. Pushing Greece out instead of granting it the necessary restructuring of its debt, at a time when geopolitical tensions have never been so strong, where Donald Trump explicitly attacks the construction of Europe and bets on its breakup, seems incomprehensible. As history knocks on the door, they answer only as shopkeepers. As always, since the beginning of the Greek crisis.

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7 comments:

  1. Anonymous10/2/17 16:07

    Sad indeed to see yet another European nation undergo massive population migration, infrastructure destruction both human and otherwise and mass misery due to neoliberal policies.
    It makes one wonder if the ongoing torture of the entire Greek nation was one of the prices demanded by Turkey in order to further American neocon/Qatari sheikdom dreams in Syria.

    ReplyDelete
    Replies
    1. Neoliberal ! What ????
      It was the Socialism they voted for decades that led to it !!!!

      "Never before had so many people been hired by the state, with such salaries, pensions and benefits—to the point where the average government job paid almost three times the salary of the average private-sector job. An egregious but not isolated example was the national railroad company, which had annual revenues of €100 million against an annual wage bill of €400 million, on top of €300 million in other expenses. This is how the average state railroad employee came to earn €65,000 a year."

      https://www.amazon.com/Modern-Greece-Everyone-Needs-Know%C2%AE/dp/0199948798

      Delete
  2. Anonymous13/2/17 20:19

    BUT, where does Greece get the BILLIONS to house, feed, clothe, etc the illegal Arab/African invasion? They sure seem to have MONEY for that invasion and destruction of Greek culture, language and nation.

    ReplyDelete
  3. Anonymous14/2/17 03:43

    Greece is a test case for the EU and the IMF. Somewhere, sometime, the ugly truth of a global debt repudiation being a (somehow) just cause must be brought to light, and where better to demonstrate it than the "cradle of democracy" and home of western philosophy, all wrapped up in an economy that is really too small to care much about? It is rather like Puerto Rico for the US. We will use Puerto Rico as a laboratory to see how far we can push people before they vountarily give up their claims to contracted payments. Once that point is identified, all the ret of the bankrupt states can sell a similar program to their peasantry, er, Imean citizens.

    This will not end well, or as planned.

    ReplyDelete
  4. Greece has two problems that are interconnected;

    - It needs euros to buy fuel, these euros have to be borrowed from non-Greek banks.

    - The use of the fuel does not offer any returns: the only way to retire maturing loans is to borrow more in ever greater amounts. Because Greece' is credit- constrained it can only retire loans with extreme difficulty and cannot buy much in the way of fuel.

    The solution is also two-fold:

    - The Greek government must issue 'greenback' euros allowing the repayment of loans as they mature. Doing so would require a repeal of the Statute of the Bank of Greek: the banking law that authorized a Greek central bank.

    - The Greek government must mandate stringent energy conservation, so funds do not flow out of Greece.

    The alternative to Greece is more of the same: Conservation by Other Means, whereby the Greek economy collapses and energy use falls to zero.

    Here: http://www.economic-undertow.com/2015/07/15/it-all-falls-apart/

    And here: http://www.economic-undertow.com/2016/02/29/ben-franklins-revenge/

    ReplyDelete