Bearing Gifts to the Greeks

[steepholm]

So, what is the new plan vis-a-vis Greece? There seem to be two stories, which could be summarized thus:

a) the bail-out will keep the Greek government able to service its debt while it works to balance the books more sustainably, at least to the extent of reducing its deficit to the "manageable" figure of 121% of GDP by 2020.

The trouble with this story is that there are two sides to that 121% equation, and while it's possible to see the Government getting spending down further (though not without causing a lot of misery in the process), it's far less obvious how they're going to grow GDP at the same time. In fact, it looks like a race to the bottom. The economy of the Mariana Trench is perfectly balanced, but no one wants to live there.

b) The bail-out money is there to keep Greece ticking over for two or three more years, giving the rich countries in the Eurozone time to build up their own defences and loosen ties to Greece, so that the eventual effects on them will be less disastrous. In this scenario, the people of Greece are being made to suffer now, only so that they can be abandoned to their fate a little further down the line.

I wonder which is nearer the truth? Is there another interpretation?

Comments

[cmcmck.livejournal.com]

You don't mention the potential for Greece to collapse into anarchy and rebellion- a heady combo of rightist nationalism (what price the neo colonels?) and leftist/anarchist street protest. It's already out there wondering which way to jump.

And if that's the way it goes, what does the EU do?

[steepholm.livejournal.com]

That's certainly a possible outcome, although I hope it's not the plan!

[cmcmck.livejournal.com]

Well, the first part of the plan- bringing down a democratically elected government (as was also managed somewhere I have somewhat closer ties- Italy, not that I held any brief for darling Sylvio) obviously worked well. It could be seen that the scenario I mention is precisely part of the plan.

Am I alone in beginning to find EU fiscal policy distinctly anti democratic?

[steepholm.livejournal.com]

Far from alone! At least, I don't think the underlying aim is to destroy democracy, but democracy certainly seems to be regarded as a dispensable luxury. And it's notable that the Italian and Greek satraps are an ex-EU Commissioner and a banker respectively - neither of them professions that have inspired much confidence in recent years.

[wolfinthewood.livejournal.com]

I think the underlying aim is to destroy democracy in any effective form.

After leaving the EC, incidentally, Mario Monti was an advisor to Goldman Sachs.

[mount-oregano.livejournal.com]

I don't think that The Powers That Be (the Germans, and they're the ones running the Eurozone right now, a de facto dictatorship) have a plan. I don't think they understand economics well enough to see into the future. That's the only explanation for the stupid things Germany is demanding: German politicians simply don't understand why it's so obviously disastrous.

But I do know they have imposed conditions on Greece far harsher than the reparations Germany had to make after World War I -- and we all know how well that worked in the long run.

I also don't like the provision in the bailout that requires Greece to amend its constitution so that debt paid to banks takes precedence over all other debts that the government holds. Among other serious problems, I think this is a moral hazard. If banks are assured of being paid back, they have no reason to avoid risk. They were fools to led money to Greece in the first place, but now the system is fool-proofed in their favor for further profit-taking.

[steepholm.livejournal.com]

You're right, I should have added the absence of a plan as option c).

Does that constitutional amendment cover future lending as well as what's owed at the moment? If so, it's madness. (Actually, it's probably madness anyway.)

[mount-oregano.livejournal.com]

Yes, future lending as well as present and past lending -- that is, loans made in 2011 that come due in 2014. And every new loan from here to eternity. Perhaps even if they leave the eurozone.

Madness, yes.

[communicator.livejournal.com]

Yes, I agree with this option. The model of economics which is being used has failed again and again. Very interesting point about reparations.