I closed my previous post (Greece’s collapse and the EU Titanic) writing that “As far as Germany, the captain of the Titanic, does not change its behavior, even if Greeks manage to do their best, they will manage to collapse as first class passengers”.
Well, I was wrong. According the discussions between troika and the greek goverment even if Greeks do their best they are going to collapse in extreme poverty. Because here are the terms and conditions offered by Germany (and consequently EU) and IMF (apologies for not listing other actors like the French and the Dutch prime minister – they are simply members of the cast with secondary roles).
The rescue package consists of a new 130 billions € loan, which will replace the almost 80 billions € that will be cut by the “haircut” applied to private sector debt holders. Actually the Greek debt will be much higher as soon as the “Rescue package” will be agreed. Someone could say that’s fine because the new bonds will be with a better interest rate and with longer pay-back period. But this is just the top of the iceberg, because the new bonds will be ruled by the British Law and not (as the current ones) by the Greek law, which means that any haircut will be almost impossible. So Greece will exchange 80 billions € of debt controlled by the Greek Law with 130 billions € of debt controlled by the British Law!
Even so, I could discuss such an investment made by our European partners as a form of support to a struggling economy. But it is really disgusting to notice that during last 40 days, every time the Greek government was close to finalize an agreement with the so called Troika (EU, ECB and IMF representatives), the Troika put new terms and conditions, worst than it has asked 10 days ago.
Such a behavior can be explained in only one way: it seems that Troika’s order was to test the limits of our society and make an agreement not as a partner but as a financial Dictator.
This has resulted to unbelievable terms and conditions offered and not negotiated. Here are some of them:
- 20% reduction of the minimum salary, which will drive in a downward spiral all salaries and will make recession much deeper
- 25% reduction in all pensions, which are already very low in most of the cases
- Massive and blind dismissals through the public sector which will boost unemployment from 18% to 25%
And the best: 95% of the new 130 billion € bailout will be used just to ensure pay-back of the new and the remaining (after the rescue) loans! Merkozy proposed that a specially supervised bank account should be used in order to ensure that no money of the bailout funds will be used for non-approved activities like pensions, education and healthcare system.
Well, I am not complaining – the blame is put firstly to the ridiculous and completely incapable Greek political system, but also to all of us who finally left our country to become a pariah like this. We have to find the way out of the crisis and we will do it, sooner or later. After all, we have survived during much more difficult periods and we still have huge resources of creativity and imagination. And last year, we managed to have a primary budgetary surplus, for the first time after many years.
|Burning German flags |
outside the Greek Parliament (7/2/2012)
But on the other hand, I do not believe that the only way out of the current Euro crisis is to drive some societies to collapse. I wonder if the EU officers and politicians do understand that they create long-term anti – EU feelings and feed nationalist movements. I revolt when I understand that Banks are above all, the top-priority of the EU policy. And I understand that the recent humiliations against Greece are a clever way to draw our attention away of the real problem: the banking system that is the real cancer of Europe.
I believe that Greece has no other option than to make an agreement with its EU partners. This agreement will create huge negative long-term impacts to Greek society, but who knows, maybe EU policies will change later. If this will not happen, Germany and its colleagues create the playground to push Greece (and not only) out the Eurozone, in order to secure their economies.
I have to say that they will be proved wrong once again.
Two years ago, they fought against any “haircut” option. Now they are obliged to do it.
One year ago, they were predicting the success of the austerity programs applied to Greece, Portugal and Ireland. Now they admit that they are not enough and new rescue plans are required.
Few months ago, at the end of October 2011, they said (more or less) the crisis is over because they found out a long-term solution regarding Euro debt crisis. Two weeks later the markets sent Euro at the bottom and few weeks later France (and others) lost the AAA rating.
Simply, you can’t stop a fire just closing the door of the room which is on – fire.
As it was written recently (7/2/2012) in Spiegel:
“But it is already clear that this aid package will not save the country. It appears it will only delay a Greek insolvency -- and it will serve to create new hardships for the country's population. It is time for politicians to admit that their carrot and stick strategy has failed. The idea that the country can be freed from its debt quagmire though austerity programs and aid pledges tied to conditions just isn't going to work. It won't even work if private creditors forgive part of the country's debt”.
By the way, the title of the above mentioned article was “It's Time to End the Greek Rescue Farce”.