Tuesday, April 24, 2018

The Germany-led Eurozone Austerity Program Has Left Greece in a No-Win Condition, but the IMF Tries to Force Needed Debt Relief

THE REAL NEWS TODAY IS THAT THE GREEK DEBT DILEMMA IS BACK. Actually, it never left. The media just quit talking about it. • • • GREECE BAILOUT UPDATE. Derek Gatopoulos of the AP posted this on Monday : "Greece has beaten its bailout budget targets for a third successive year and eased its massive debt burden by a fraction as the country prepares to exit its international rescue program in four months.But the economy has not yet grown back to its level of 2014, before its last recession. As the country prepares to exit its international bailout program in August, the independent statistics agency on Monday reported long-awaited data for 2017. The results will affect ongoing negotiations between Athens and creditors on the terms of Greece’s exit. The agency reported that the 2017 primary budget surplus -- the balance before the cost of debt repayment is included -- stood at 4%. National debt stood at 178.6% of gross domestic product, down from 180.8% the previous year [still an impossible-to-sustain debt-to-GDP ratio]. Economic output was 177.7 billion Euros ($218 billion), confirming a return to growth, but still almost a billion euros lower that annual output in 2014. Left-wing Prime Minister Alexis Tsipras’ government has promised to continue privatizations and tough economic reforms after the country exits its bailout in exchange for more lenient repayment terms from European bailout lenders. A draft of Greece’s exit plan is due to be presented Friday at a meeting of Eurozone finance ministers in Sofia, Bulgaria. Tsipras on Monday insisted Greece planned a full return to bond markets after the bailout ends in late August : 'We are completing the (bailout) program with success, rebuilding the economy, and preparing for the market access with Greek bonds,' Tsipras told government lawmakers.The Tsipras government is racing to complete a list of demands from creditors over the next month that includes continued administrative reforms and infrastructure privatizations. A national power workers’ union launched a 48-hour strike Monday against plans to privatize coal-fired power plants in a protest that has threatened parts of Greece with rolling blackouts." • • • GERMANY STILL HOLDS THE KEY TO DEBT RELIEF. Handelsblatt reported on April 17 that : "Germany’s newly minted finance minister, Olaf Scholz, has inherited the thorny issue of Greek debt relief just as it’s time to stop kicking that can down the road. Longtime finance minister Wolfgang Schäuble had played for time, insisting for years that Greece make a firmer commitment to reform before Germany would consider debt relief. But, now the current bailout program is running out, and the Eurozone needs to make concrete decisions on debt relief to get buy-in from the International Monetary Fund (IMF) on aid going forward. The international lending agency says that Greece’s debt is unsustainable and is calling for some debt relief before joining any further bailouts. Mr. Scholz will be grappling with this issue as he attends the IMF meeting in Washington this week for the first time." • Handelsblatt reported that : "The Washington Group -- representatives from the IMF, the European Central Bank (ECB), the European Stability Mechanism (ESM) and the finance ministers of the four biggest Eurozone members -- will meet informally on the sidelines of the IMF gathering. They must pave the way for the Eurogroup of finance ministers to make concrete decisions at their meeting next week in Sofia. Amid expectations that the new Social Democrat finance minister will take less of a hard line than his predecessor, Mr. Scholz has sent mixed signals. Rather than any philosophical differences, the timing is forcing Mr. Scholz to show his hand. Whatever his own beliefs on the matter, he will have to walk a tightrope between approving enough relief for the IMF but not so much as to provoke a backlash at home." • Scholz has made it clear that he won’t be easy on Greece, certainly at least in part because Scholz is a member of the SPD, the center-left partner in Chancellor Merkel's new governing coalition. Scholz also has to beware of the opposition parties, the Alternative for Germany (AfD) and Free Democrats, who will attack him for any indication of his being too easy on Greece. And, Scholz will need to keep an eye on the Bavarian sister party of Merkel’s Christian Democrats that would criticize anything that seems like a hidden bailout of what they consider a wayward Eurozone member. Andreas Dombret, chairman of the Bundesbank, Germany’s central bank, also opposes debt relief for Greece : “the problem would just start all over again.” • According to Handelsblatt, Scholz, who spent the past seven years as mayor of Hamburg, surprised his fellow SPD members by naming Jörg Kukies, formerly head of Goldman Sachs in Germany, as his state secretary for Europe, and by keeping most of the conservative Schäuble finance ministry team, including the conservative-leaning officials who formulated Germany’s hard line on Greece. Handelsblatt said : "Scholz made those decisions partly to avoid further disruption in the ministry after having to make room for a whole slew of new staff to help him in his new role as vice chancellor....Kukies took part in a preliminary meeting to discuss Greek debt in Brussels last week. The group of deputies prepared several plans to provide relief once the current bailout program runs out in August. One is the buyback of Greek bonds in the ECB’s portfolio as part of its asset purchase program. Subsidized credits from the ESM would finance this buyback, allowing Greece to retire expensive bonds and replace them with longer term credit on concessionary terms." • • • THE ESM GREECE BAILOUT PROGRAM. The European Stability Mechanism (ESM) is an intergovernmental organization based in Luxembourg City that operates under public international law for all Eurozone Member States who have ratified a special ESM intergovernmental treaty. It was established in 2012 as a permanent firewall for the Eurozone, to safeguard and provide instant access to financial assistance programs for member states of the Eurozone in financial difficulty, with a maximum lending capacity of €500 billion. • On March 23, the Board of Directors of the ESM announced that it had approved the fourth tranche of €6.7 billion of ESM financial assistance for Greece : "This decision follows the Greek government’s completion of all prior actions and the subsequent approval of the Supplemental Memorandum of Understanding by the ESM Board of Governors. The tranche will be used for debt service, domestic arrears clearance and for establishing a cash buffer....The Board of Directors approved for release the first disbursement under this tranche, amounting to €5.7 billion...expected to be made by the ESM on Wednesday, 28 March. A further disbursement for arrears clearance of €1 billion may be carried out after 1 May 2018. It is dependent on Greece making progress in reducing its stock of arrears and improving the effectiveness of the e-auction system." • ESM Managing Director Klaus Regling said in March : “Today’s decision by the ESM Board of Directors acknowledges the hard work by the Greek government and Greek people in completing an extensive set of reforms. These include important actions in the field of privatisation, public revenue collection, tax policy and resolution of non-performing loans. The fourth and final review of the program has already started and I am confident that Greece is on track to successfully exit the ESM program in August 2018, provided that the remaining reforms are implemented by the Greek government." • After the March €5.7 billion payment to Greece, ESM financial assistance for Greece will have reached €45.9 billion, out of a total program availability of €86 billion. But, combining the ESM payouts with those of its predecessor, disbursements to Greece have so far totaled €187.77 billion, including the amount approved on March 23, making the ESM the largest creditors to Greece by far. • • • WHY DOES GREECE NEED DEBT RELIEF? Why is the Eurogroup discussing debt relief measures for Greece? Because the Eurozone's ESM bailout program has left Greece with a debt burden that is not sustainable and the IMF is demanding debt relief as a prerequisite to its continued participation in the Greece post-bailout program. • In July 2017 -- when the IMF Executive Board approved in principle a precautionary Stand-By Arrangement (SBA) for Greece amounting to SDR 1.3 billion (€1.6 billion) -- the IMF issued a press release that stated : "The arrangement, which supports the authorities’ economic adjustment program, has been approved in principle, which means it will become effective only after the IMF receives specific and credible assurances from Greece’s European partners to ensure debt sustainability, and provided that Greece’s economic program remains on track....The arrangement will expire on August 31, 2018, shortly after the expiration of the European Stability Mechanism program." In essence the IMF says that Greece's debt burden is unsustainable and that the IMF will not participate in future Greek-ESM arrangements until the debt burden issue is resolved. • This is the reason the ESM is addressing what it calls a "general concern that future debt payments will pose an undue burden on budget spending and thus stifle the economy." The ESM points out that : "Gross Financing Needs (GFN), the total amount of money a country spends in one year on interest rates payments and repaying maturing debt, is the benchmark used to measure this burden. The Eurogroup has agreed that, under a baseline economic scenario, Greece’s GFN should remain below 15% of GDP during the post-program period for the medium term, and below 20% of GDP after that." • As of March 2015, Greece owed $352.7 billion to foreign investors. Its top two foreign creditors are the European Union (EU) and the International Monetary Fund (IMF) that together hold roughly $264.5 million (75% of its total debt). Germany, followed by France and Italy, are the largest individual EU member State holders of Greek debt. • • • FINDING WAYS TO RELIEVE GREECE'S DEBT BURDEN.So, the meeting this week of the Washington Group of Eurozone finance ministers will look for ways to increase the value and quality of key Greek assets, as well as the quality of services that state-owned enterprises and real estate provide to the Greek public. Since the ESM is likely to have money left over when the Greece bailout program runs out, a final payout of €11 billion this summer would still leave funds available, to finance a bond buyback and to find other solutions for Greece's debt burden, at least in the shorter term. • One alternative solution is for Eurozone members and ESM to pay Greece back the interest the ECB has earned on its holdings of Greek bonds. This plan was already floated a few years ago, according to Handelsblatt, but the election of Prime Minister Alexis Tsipras and his efforts to escape bailout terms led to the approach being suspended. There are some €1.6 billion frozen funds from this time alone that could be paid out to Greece. Further interest would be repaid going forward. This solution would give the Eurogroup leverage to keep Greece in line on its reforms. • At the same time, creditors are working on a way to provide more relief if Greece’s economic growth falters. The idea is to reduce Greece’s debt service if the economy turns downwards. It would also cap the impact from interest payments, so that foreign investors would have the confidence that Greece would not once again be driven to the brink of bankruptcy. • Bloomberg's Viktoria Dendrinou wrote an article on April 21 that stated : "Greece’s creditors are getting closer on a deal to ease the country’s debt burden, according to Eurogroup President Mario Centeno. Greece’s 86-billion Euro ($106 billion) bailout program is set to run out in August, and creditors are working on finding a compromise on debt repayments that would help to manage the country’s financing needs after it stops receiving international aid. A debt deal would also allow the International Monetary Fund to participate in the current bailout. 'The positions today are much closer than they used to be before,' Centeno, who is Portugal’s finance minister and chairs the meetings of his Eurozone counterparts, said in an interview in Washington. 'We still have a final mile to go but there is a positive sentiment around the table so I think that reflects a true willingness to be part of the program.' ” • The key message in Centeno's comments is that easing the Greek debt burden is a precondition for IMF participation in the country’s program going forward. Debt sustainability is key because the participation of the IMF is important for some countries including Germany, who see the IMF participation as a seal of approval that will offer credibility to the bailout. Centeno said as much : "A 'committed presence' by the IMF will also help with market confidence." • But, all is not resolved, Bloomberg says : "Key differences among creditors on the scope and type of debt relief persist. The IMF would like to see wide-scale debt relief on all of Greece’s Eurozone loans -- including those from other countries and the bloc’s bailout fund. That demand is facing resistance by many European creditors who are only willing to discuss easing the terms of some loans. Other disagreements have to do with whether the debt relief will be granted to Greece unconditionally or whether it should be tied to budget discipline and further economic reforms....In order for the IMF to have sufficient time to activate its bailout for Greece before it runs out in August, an agreement on all these parameters will likely need to be struck by the end of next month. For Centeno, the key is that any conditions attached to debt relief come from Greece’s own plans for growth. “We all want debt conditionality to be embedded in the growth strategy for Greece,” he said, referring to the country’s plans for the economy in its post-bailout life. “Ownership is the single word that may and should define the process in the coming months.” • • • IMPOSSIBLE TO SEPARATE GREECE'S ECONOMIC TROUBLES FROM ITS MIGRANT PROBLEMS. Reuters published an article on April 18 that reported : "A top Greek court ruled on Wednesday that migrants landing on Greek islands should no longer be held there while asylum claims are assessed, a decision raising alarm among EU officials in Brussels. The prospect of new arrivals, often fleeing violence in the Middle East via Turkey, being able to quickly reach mainland Europe from the islands could undermine EU efforts to discourage people leaving Turkey. An EU official described the ruling as a 'big worry.' " • Stopping migrants from making the short crossing from Turkey to nearby Greek islands is a key part of the EU's policy aimed at avoiding a repeat of the crisis of 2015 when over a million migrants, many of them Syrian refugees, made it to Germany. Reuters says : "Asylum-seekers have been prohibited from traveling beyond five Greek islands since March 2016, when the EU [largely Chancellor Merkel, who negotiated directly with Erdogan] agreed a deal with Ankara to seal the sea route, offering cash to improve conditions for Syrians staying in non-EU member Turkey. The restriction on leaving the islands, imposed by Greece’s Asylum Service, has resulted in severely overcrowded camps and violent protests over delays in asylum decisions. More than 15,000 asylum-seekers are living in five island camps [7,000 on Lesbos alone], more than double their capacity, according to government data." • So, the Council of State, Greece’s top administrative court, annulled the EU-Turkey decision, finding no “serious and overriding reasons of public interest and migration policy to justify the imposition of restriction on movement.” The ruling, effective immediately, applies to new arrivals only and not to asylum-seekers who are already on the islands. The EU said it was aware of the ruling but not its details : “It is in any case for the Greek authorities to study and analyze the implications of this decision,” a spokeswoman for the Commission said. Greece’s Migration Ministry said it too would study the court’s decision and that there was a provision “regulating the matter” in a bill which has been sent to parliament. • Although the number of migrants and refugees crossing by boat between the Turkish coast and the Greek islands remains well below 2015 levels, arrivals are up 27% this year compared with the same period in 2017, according to UN data. • The Greek judges noted specifically that the Greek islands had to manage a significant number of people seeking international protection while dealing with Greece’s financial crisis. There were also risks of social tensions that could hurt the local economy because the islands are also tourist destinations. The Greek Council for Refugees, which had taken the issue to court, said the decision was a “an important victory for all those who defend the rights of refugees.” • • • THE EU THROWS MONEY TO KEEP REFUGEES IN GREECE. Earlier, a European Commission press release dated April 2 stated : "The European Commission has announced today new funding of €180 million for aid projects in Greece, including to scale up the flagship 'Emergency Support to Integration & Accommodation' (ESTIA) program which helps get refugees into urban accommodation and out of camps and provides them with regular cash assistance. The funding comes as Commissioner for Humanitarian Aid and Crisis Management Christos Stylianides met today with Greek Prime Minister Alexis Tsipras in Athens. Launched in July 2017 with the UN Refugee Agency, ESTIA is the biggest EU aid operation in the country and works in line with the Greek government's 'out of camps' policy. So far it has created more than 23,000 urban accommodation places and set up a cash assistance scheme serving more than 41,000 refugees and asylum seekers. 'Our humanitarian programs for refugees in Greece are a clear and loud signal of European solidarity. We continue to deliver on our strong commitment to help refugees in Greece live more secure, normal and dignified lives, and facilitate their integration into the local economy and society. Our ESTIA programme is achieving real results to change people's lives for the better. I pay special tribute to the Greek citizens and mayors who have welcomed refugees in their municipalities with great empathy and care,' said Commissioner for Humanitarian Aid and Crisis Management Christos Stylianides." Overall, the European Commission states that it has made available over €1.5 billion of support for Greece to help manage the humanitarian situation, migration and the external borders, through various kinds of funding : "In urgent and exceptional circumstances such as the increased influx of refugees in Europe, the European Commission can fund humanitarian aid for people in need within the EU territory through the Emergency Support Instrument, activated for the first time in March 2016. • EU humanitarian assistance disbursed so far to Greece through this instrument amounts to €605.3 million....The bulk of the rented apartments will be in cities and towns on the Greek mainland while up to 2,000 places will be located on the Greek islands. Several municipalities in Greece are also part of this scheme. The ESTIA cash assistance scheme aims to reach 45,000 people by mid-2018. Refugees and asylum seekers receive pre-defined monthly cash allocations through a dedicated card. This provides choice and enables them to meet their basic needs with dignity, while supporting the local economy. Making cash assistance more efficient remains a priority for the EU. The Commission's humanitarian support complements other EU funding instruments which have already been providing significant financial resources for assistance in Greece such as the Asylum, Migration and Integration Fund, the Internal Security Fund, the European Fund for the Most Deprived, and the EU Health Programme. It is also complementary to the voluntary offers for material assistance initially provided by states participating in the EU Civil Protection Mechanism." • Much of the above EC press release may be labeled as EU Fake news propaganda aimed at the non-Greek world. The Greek daily newspaper Ekathimerini wrote on Tuesday : "Concerns have peaked over tensions on the Aegean islands following clashes between residents of Lesbos and migrants in Mytilene port which led to several injuries. Riot police were forced to intervene early Monday morning after dozens of local residents started protesting the presence of migrants in the main square of Mytilene. The migrants, who had been camping in the square since last Tuesday demanding to be allowed to leave the island, were put onto buses and taken back to overcrowded state facilities. According to local reports, the protesters threw flares, firecrackers and stones at the migrants who surrounded women and children to protect them. Some protesters chanted 'Burn them alive,' according to reports which suggested that members of far-right groups were involved. Police detained 122 people -- all but two of whom were Afghan migrants -- while 28 people were transferred to the hospital for first-aid treatment. Political parties issued statements blaming the attack on far-right groups. The mayor of Lesvos, Spyros Galinos, did not rule out the presence of extremists on the island but pointed to broader frustration among locals. 'Society is reacting as a whole,' said Galinos. More than 15,500 migrants are living in cramped conditions in state-run centers on the eastern Aegean islands, which have seen an uptick in arrivals in recent weeks. According to Migration Ministry sources, there have been virtually no arrivals in the past couple of days, a fact that some attribute to a letter sent by Migration Minister Dimitris Vitsas to Turkish authorities at the end of last week asking them to honor a deal Ankara signed with the EU in 2016 to curb human smuggling across the Aegean. In a related development, meanwhile, the new head of the Greek Asylum Service, Markos Karavias, signed an agreement effectively restricting migrants arriving on the Aegean islands from traveling on to the mainland. A Council of State ruling last week overturned previous asylum service restrictions on migrants leaving the islands. The government’s proposed changes to asylum laws -- aimed at speeding up the slow pace at which applications are processed -- are to be discussed in Parliament on Tuesday." That is the Real News. • • • GREECE TODAY. The Brookings Institution had this to say on March 1 : "As Greece seemingly returns to normal, everybody in Athens, Washington, and Brussels hopes to put the whole affair in the rear view mirror, possibly because they know that, at the height of the crisis, neither Greece nor Europe dealt with their respective weaknesses." AuthorsTheodore Pelagidis and Michael Mitsopoulos ask : "But how can this be, when so much has been done -- so many pieces of legislation adopted in Europe to deal with the crisis, so many mechanisms created, and so many measures imposed on the mostly reluctant Greeks?' Their answer is simply this : "Europe has done rather little to update the structure of its governance to deal with the core issues that exposed it to the crisis, whether in terms of the shakiness of the European Union or with respect to the struggle to enforce EU law evenly in all member states to facilitate 'convergence in institutions.' And, Greece has done little to offer quality governance to the Greeks in line with an idealized European state. Which brings us to the inconvenient truths about the supposed 'Greek success story.' The average size of Greek firms remains small, a product of many longstanding structural weaknesses at the national level that served as an almost insurmountable barrier to growth. The fallout from this can still be observed in the weak private sector job market, weak innovation and export activity, the 'missing tax base,' and a persistently high consumption to GDP ratio. The adjustment programs have failed to put Greece on a trajectory that clearly separates it from these negative metrics that characterize the years until the eruption of the crisis." • The Brookings writers indirectly blame Germany's insistence on an austerity program for Greece : "So maybe simply enforcing austerity does not suffice. Maybe the way day-to-day economic and social activity is organized, from licensing to policy debates, from the rule of law and court decisions to the protection of the freedom of the press, are more important after all. They determine the extent to which people take initiatives, create economic activity, and thus generate taxable income....On the contrary, through the imposition of ever higher and more progressive taxation, [austerity] amplified the barriers to growth. Greece has turned into a small shopkeeper’s economy. If anybody thought that clientelism would be exiled from the country as a result of the list of structural reforms, which lagged always behind the list of fiscal measures, they should think twice. As people became poorer, they became more politically radical, as has happened so many times before in history. The combination of weak institutions and unchecked executive power meant that in such an environment populism did not decrease, but rather flourished and even took some interesting turns. Nationalism, radical left, and radical right united under the watch of the institutions as they prioritized the achievement of short-term fiscal goals, regardless of how the fiscal milestones were achieved." • The Brookings conclusion is stark : "Everybody seems to sigh with relief as the fiscal targets are met, willfully overlooking the inconvenient fact that the private economy has largely been decimated, to an extent that it will not be able to mend itself. The further erosion of already weak political institutions essentially rendered the country incapable of designing and implementing viable policies. This was not because of a failure of the lazy and tax evading Greeks, but simply because they have been broken and corrupted to an extent that they also cannot mend themselves. Surprisingly, austerity has not made Greeks more frugal, but rather disgruntled and more prone to listen to political sirens. The fact that Greece has now a parliamentary system with a newly acquired purely proportional electoral system, just as the Weimar Republic had, surely adds no comfort." • So much for the EU's vaunted Greek "success story." • • • LOOKING AT GREECE FROM THE GREEK VIEWPOINT. The Greek Ekathimerini news outlet wrote on April 14 about "Why Greece's debt continued to rise since 2010." The article said : "At the end of 2009, as Greek bondholders were beginning to worry about a possible debt crisis, Greece’s central government debt stood at about 300 billion Euros, roughly 130% of gross domestic product. Its fiscal deficit for the same year had been over 15% of GDP. A few months later, Greece lost market access and entered an adjustment program, financed by the European Union and the International Monetary Fund (IMF), aimed at gradually eliminating its deficit and restoring the sustainability of Greece’s public debts. By 2016, Greece had achieved a small fiscal surplus. But its central government debt continued to rise -- by about 10% in nominal terms, and much more dramatically as a share of GDP, before stabilizing at around 180% of GDP. This happened despite three successive economic adjustment and reform programs and several rounds of debt relief -- including a 2012 bond restructuring that cut the face value of Greece’s debt by 107 billion Euros." Ekathimerini asks how this was possible. it's answer is : "First, Greece’s bond restructuring came far too late. Rather than reducing Greece’s debt burden upfront, the Greek government and its official creditors tried to tackle the debt problem by cutting the deficit as hard and quickly as possible. This drove the economy into a deep depression, which in turn made it much harder to reduce the deficit. It also meant that between the start of the first program and the 2012 restructuring, about 45 billion Euros of Greek bonds were repaid in full, financed by official debt that burdens Greece today. Second, mistakes were made in implementing the first and second programs. In addition to imposing austerity, these programs also attempted to stimulate growth by reforming markets and institutions. But these reforms were not properly implemented, or only with considerable delay. Finally, political and social upheaval, arising out of the failure of the first and second programs and the pain that this inflicted on the Greek population, led to the 2015 stand-off between the Greek government and its official creditors -- which nearly resulted in Greece’s exit from the Eurozone. The economic costs of that stand-off were high, raising the deficit and delaying the recovery." • Ekathimerini says the Greek economy has finally started to recover. But Greece’s debt remains unsustainable. In a recent PIIE Policy Brief, the Ekathimerini writers argue that creditors "should offer Greece year-by-year face value debt relief, conditional on maintaining primary surpluses above 1.5% of GDP beyond 2022. Without an agreement of this type, the next Greek debt crisis will be just a matter of time." • • • WHAT DO GREEK POLLS SAY? Again, we turn to the Greek source, Ekathimerini. On March 27, it published an article by Pavlos Papadopoulos about a survey by the DiaNEOsis nonprofit think tank, published exclusively by Ekathimerini. The survey (the first three were conducted in April and November 2015 and December 2016) titled “What Greeks Believe,” shows that, despite the ambivalence which continues to prevail, three elements are already emerging that could mark the beginning of a new era. Papadopoulos says : "Acceptance of the Euro is stronger compared to last year, while the number of those who believe Greece will still be in the European Union in a decade’s time has increased significantly. Based on this belief, there is an almost unanimous desire to accept responsibility for the economic crisis, mainly as a result of our 'own weaknesses.' This admittance is accompanied by a strong demand to wean society off the state. We are now pushing for a smaller state with less intervention in the economy. We are focusing on Europe, developing a sense of responsibility and demanding a different growth model....an era of self-confidence and creativity has started to dawn." The survey results show that an overwhelming 68% (from 53.5% in December 2016) said that Greece’s participation in the EU has been positive. At the same time, acceptance of the single currency, which stands at 66% (from 60%), is on the rise. But, 26% of people want an exit from the Euro, 28% insist Greece should leave the European Union AND 48.9%, under the strain of the economic hardships of the past few years, say Greece has been hurt by its participation in the EU, particularly in terms of economic development and prosperity, while 57% believe that Greece’s entry into the Eurozone was a mistake and 58.2% claim that the EU benefited the most from Greece’s membership of the bloc. The vast majority of participants (78%) still maintain that “the bailouts damaged, rather than helped the country’s growth,” that it was “an invention by Europeans to take advantage of us” (71%) and that Greece could have overcome the crisis on its own, without aid from Europe (57.7%). At the same time, 75% state that the prolonged crisis is mainly due to “our weaknesses,” which are specified as the “inefficiency and corruption of Greek governments” (92.6%), society’s addiction to “borrowing and consuming beyond its means” (77.1%), and vested interests and trade unions (66%). Interestingly, 2/3 of respondents believe the state has too much involvement in the private sector, while 65% demand tax cuts, even if that means restricting state welfare. This is a complete reversal of the views that prevailed on the same subject three years ago. One could argue that the Tsipras government transformed citizens from champions of statism into supporters of the free economy. The austerity-forced government tax raid has led 40.7% of citizens to state that tax evasion is a “legitimate defense,” and dissatisfaction with the way the state apparatus functions led 66% of respondents to declare that permanence in the civil service must be abolished, while economic stagnation has sent the percentage of those in favor of foreign investment soaring to 82.7%. The liberal trend is seen in the demand for the establishment of private universities (60.2%) and wide support of “teacher evaluation” (89.5%) across all educational levels. • • • DEAR READERS, Portfolio wrote on Tuesday that 33 million people in the European Union were severely materially deprived in 2017, that is, 6.7% of the EU population, according to a preliminary estimate by Eurostat, the statistical office of the EU. The situation is the worst in Bulgaria, Greece, Hungary and Romania, while the smallest share of the population living among such conditions was the lowest in Sweden, Luxembourg, Finland and the Netherlands. The 6.7% share of severely materially deprived people in the EU in 2017 means that these people cannot afford at least four of the following items, which are considered by most people to be desirable or necessary to lead an adequate life : pay their bills on time; keep their home adequately warm; face unexpected expenses; eat meat (or fish or the vegetarian equivalent) regularly; take a one week holiday away from home; a TV; a washing machine; a car; a telephone. Across EU member states, Bulgaria (30.0%), Greece (21.1%), Romania (19.4%) and Hungary (14.5%) register the highest shares of severe material deprivation. • That situation led Ekathimerini to write : "A serious study presented recently estimated that Greece will need at least 110 billion Euros in business investments in the next five years so that its economy can return to pre-crisis levels. The real question, however, is : does anyone in the government right now have any sort of plan for achieving this objective? A recent proposal presented by the leftist-led administration was described by experts as being as amateurish as a high-school essay. Nine years after the outbreak of the financial crisis, the debt-battered country still appears mostly paralyzed and incapable of solving the deeper structural problems that have been driving foreign investors away. The country is in desperate need of a well-thought out growth plan that will put the economy back on its feet; a plan that will set out clear priorities and that will deprive the local critics of entrepreneurship and investment the usual arguments that they have used for decades -- ostensibly in the name of the public interest." • As the alphabet soup of the ESM, IMF, ECB and EU decide on the next moves for Greece -- in the best of all worlds a complete or rolling complete debt relief -- Greece itself seems to have digested the lessons of the Germany-led austerity bailout -- be independent, be proud, accept the need to manage their country honorably, and beware of the EU even while acknowledging the likely inevitability of being part of it. Greece is the best case available for all the weaknesses of the EU and its un-elected autocratic bureaucrats. It is also the perfect case study for the rise of liberal, pro-democracy people-first government championed by populist groups that the EU fears. • And, the debate is far from over.

4 comments:

  1. If the EU and IMF would leave Greece alone for a while they would solve their their own problems.

    Every problem solution isn’t solved by throwing more money at it.

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  2. “I mean that the father grows accustomed to descend to the level of his sons and to fear them, and the son is on a level with his father, he having no respect or reverence for either of his parents . . . the master fears and flatters his scholars, and the scholars despise their masters and tutors; young and old are all alike; and the young man is on a level with the old, and is ready to compete with him in word or deed; and old men condescend to the young and are full of pleasantry and gaiety; they are loth to be thought morose and authoritative, and therefore they adopt the manners of the young”. - Plato

    An admirable quality of the Greeks, both then and now, is their commitment to university education. Unfortunately, when such education breeds arrogance in the young and a craven sense of inferiority in the old, it hastens the collapse of democratic society.

    Ancient Athens lost her sense of respect, shame, decorum, and proportion, and it led to her dissolution. She became her own worst enemy, her own executioner. The parallels between Plato’s analysis in Book VIII of the Republic and what has been playing out in Greece today are disturbing indeed.

    What is more disturbing is that we can see the beginning of the same process of social-political decay in our own country.

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  3. Truth is, Europe stopped listening to Greece a long time ago.

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  4. No serious economist believes Greece will ever crawl out from under its more than €300 billion debt without significant forgiveness from its creditors. That means convincing Germany, the country to which Greece owes the most.

    For much of Greece’s nearly decade-long depression, the country was hostage to its domestic politics. Now, it’s hostage to Germany’s.

    The ECB quantitative easing hasn’t been of any help to Greece at all. Delay isn’t help it’s hinderance.

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