Home | Friday 24th June 2011 | Issue 776

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GREEK CHORUS OF DOOM

Next Tuesday (28th) the perilous Greek parliament will vote on whether to impose new, even more savage EU-IMF austerity measures in return for being loaned the next €12bn instalment of a bailout agreed last year. If they don’t, and the loans are withheld, they will default on loan payments in July, sparking economic chaos in European finance markets. If they do, more and more of the Greek public are likely to come out in open revolt (see SchNEWS 775, 771).  

Greece are €350bn in debt. This is 150% of GDP – all the money they get in each year, before spending anything at all on government, the public sector, defence, law, health etc. etc. And they currently spend 110% of GDP on all that. This not only leaves them unable to make debt repayments, it means they need to borrow more just to stand still. And the debt mountain just keeps rising – and faster than any foreseeable future scenario could ever start paying it off.

A leading economist this week claimed just this, having run a model where Greece successfully imposed all austerity and enforced privatisation measures, and somehow managed to get ‘highly optimistic’ 3% growth (even the rich countries are predicting levels of less 2% anywhere in Europe). By 2015 their debt mountain will be near €400bn. Meanwhile in reality, all the public sector cuts and collapse of services are reducing the size of the economy and GDP, actually increasing the spiral of unserviceable debt.    

This all means that without a different approach one thing is inevitable. Greece will default. But when?

Sooner will mean that the other Eurozone countries (mainly Germany and France) and will have to swallow up to €250bn of losses (Greek banks have around 25% of the debt) and deal with the political turmoil and fallout. Would contagion bring down Ireland, Portugal or Spain? Would it push the Eurozone into recession, would the masses in all these countries start thinking ‘if Greece, why not us...?’

Later and Eurozone countries will merely face ever larger losses and all the same problems as above.

But nonetheless the EU’s major interests just can’t seem to agree that major debt restructuring is the best bet forward, and seem paralysed into merely committing more and more of their taxpayers cash to loanshark bailouts that can never be repayed.

Whatever happens this coming week, Greece is a simmering pot ready to boil over - either financially or socially. Will the power elite find a radical way out of the crazy financial system death-slide in time?  

How ironic if the ‘birth place of democracy’ is where the final downfall of the liberal democracy Euro-cartel begins. We for one will welcome abject poverty and our new Chinese overlords with humble gratitude and servility.   

May EU live in interesting times...



 

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