Greece isn’t fixed

Greece isn’t fixed

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Don’t take my word for it. Here are four opinions that come to the same conclusion; the euronauts are living in cloud cuckoo land.

‘It seems to us that the plan rests on initial forecasts for the economy and public finances which are little short of fantasy. Recent survey evidence suggests that the economic impact of capital controls has been catastrophic, with measures of activity collapsing to levels way below those seen even when the economy was contracting at annual rates of 9pc in 2010-11. Of course, such extreme weakness may end when the controls are lifted. But it is not clear that will be very soon. And even if it is, GDP could still fall much more sharply this year than the 2.1pc to 2.3pc estimate reportedly factored into the bailout’s fiscal projections. We expect a contraction of about 4pc or worse. And lasting damage to Greece’s economy and financial system, as well as its fundamental lack of competitiveness, could prolong the slump into next year and beyond. 

This, in turn, suggests that even the amended fiscal targets will prove extremely demanding, if not utterly unachievable. Indeed, the downturn in the economy looks likely to push the primary budget sharply back into deficit in the coming quarters. That would leave the surplus targets requiring considerable extra austerity, with corresponding further damage on the economy.’  – Jonathan Loynes from Capital Economics

Even before the latest damage registered, the European Commission and the European Central Bank were forced to revise downward their forecast for Greece’s growth. From 0.5 percent predicted for 2015 in their spring forecast, they now expect a decline of 2.0 percent to 4.0 percent, according to a July 10 report. It concluded that Greece was expected to have a funding gap of more than 74 billion euros from July 2015 to July 2018.

The I.M.F. put the figure even higher, at 85 billion euros. Negotiations are for a loan of about 86 billion euros, but with banks in such serious trouble (they may require up to 25 billion euros more for recapitalization) and a severe shortfall in revenues, it is difficult to know what Greece’s true needs will be.

The Bank of Greece (the country’s central bank) noted in a June report that nonperforming loans came to 100 billion euros; in the same month, tax arrears amounted to 78.37 billion euros, or 42.39 percent of G.D.P., according to the General Secretariat for Public Revenues. The first half of 2015 showed a 2.36-billion-euro shortfall in revenues. With more debt and a still-unknown impact on G.D.P., even the European Commission’s “adverse scenario” of debt amounting to 187 percent of G.D.P. in 2020 could be optimistic.’  – New York Times

‘Having spent the last week in Athens talking to ordinary citizens, young and old, as well as current and past officials, I’ve come to the view that this is about far more than just Greece and the euro.

Some of the basic laws demanded by the Troika deal with taxes and expenditures, and the balance between the two, and some deal with the rules and regulations affecting specific markets. What is striking about the new program (called ‘the third Memorandum’) is that on both scores it makes no sense either for Greece or for its creditors. 

Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina….It’s like a 19th-century debtors’ prison. I strongly believe that the policies being imposed will not work, that they will result in depression without end, unacceptable levels of unemployment and ever-growing inequality.’  – Joseph Stiglitz

‘Nobody wants this deal…What Syriza tried to do, which I thought was very honourable, was try to negotiate a better deal within the euro…[I was]…asked to look into the problems and challenges that could be faced. Questions of liquidity, payments systems, transitions and so on...The requirement in the current bailout plan for Greece to build up sizeable primary budget surpluses over the next few years looks extremely demanding, if not utterly fantastical.’  – James Galbraith

The Germans, the Dutch, the Finns and the Croatians (their respective finance ministers that is, not the people at large) are adamant that there will be no debt forgiveness. Yet that is exactly what will happen by default; quite literally. The bail out is a cynical ruse, not to benefit Greece as a whole, but to benefit the banks and other creditors (the ECB and the IMF) who should take their medicine and move on. The one thing keeping the whole blighted euro project in place is an arrogant denial of the facts. A loss of political face now is a small price to pay for a much better outcome that will disadvantage far fewer people than the disorganised chaos into which Euroland will descend if the current bunch of lunatics are not put back in the asylum. Is this a Europe we want to be part of?

There is no need for a referendum; any sane government would have had us out by now. Why was there no debate over Europe in the run up to the General Election in May? `To keep the people out of the picture? It’s a farce to say we need to be in the EU to have any influence over economic affairs. We have precious little any way and Herr Shambles & Co would remove even more of our sovereignty until there was nothing left. There is nothing to negotiate. The Greeks say they have achieved a result by negotiation, but they are as barking as the rest. The bailout won’t work. Any negotiations with this bunch of serial deniers of reality won’t work either. Mr Cameron can you please find the door marked exit soon? Thank you.

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