“And now the end is near
And so I face the final curtain
My friend I’ll say it clear
I’ll state my case of which I’m certain...”
The plain truth is this:
- Greece cannot pay its current debts back. Ever.
- More money is NOT the answer.
- Greece cannot even begin to recover while still chained to the Euro and unable to devalue.
- Greek citizens will NOT suddenly decide to pay their taxes.
- Greece’s exit from the EU will be incredibly painful and the country will likely go into a depression.
But:
- Greece is NOT the first country to default (just the first in the EU)
- Greece WILL be able to get back on its feet eventually through devaluation
- The sooner this process starts, the sooner it finishes - look at Iceland
If Greece makes the necessary promises to secure the bailout (which it will), the rest of the EU will be forced to pony up another €120 billion (assuming the rumours about the IMF wanting to take a smaller part in the latest bailout are true) and, with the confidence supplied by the belief that a default is now manageable, that suddenly seems like a lot of money again.
Even if the Troika get the written assurances of PASOK and New Democracy leaders, it is by now glaringly obvious that at some point in the near future, a party will be swept into power in Greece on a platform of tearing up any agreements put in place to secure the bailout money. I know it. The Greeks know it. The rest of the EU knows it.
Greek budget revenues are already a cool €1billion behind targets after just ONE MONTH of 2012, and, in that time, contracted by 7% versus an expected expansion of 8.9%.
Read that again.
Does anybody else find it as staggering as I do that, knowing what they know, the people making these targets could be THAT far off? This demonstrates one of three things:
They are either completely in denial about how bad the situation is in Greece, the figures being touted as likely are designed to reflect that absolute BEST case scenario so as not to frighten people or the Greek economy is collapsing at a rate beyond their wildest projections. Either way, throwing another €100+ billion at them is a ridiculous waste considering the financial health of the majority of contributors to it.
Greece is burning as disgruntled workers take to the streets in violent protest and the latest plan calls for another 150,000 public sector job cuts over the next three years. To put that into perspective, ac- cording to Open Europe:
Proportionately, as a share of population, that is the same as cutting over 800,000 jobs from the UK public sector, more than current UK plans and at a faster rate. Greek public workers and unions have no intention of giving in without a fight. Meanwhile, the increasing exasperation of the eu- rozone with the Greek proposals for cutting the deficit will probably lead to an increasing demand for oversight and eurozone control in Greece – a politically undesirable development likely only to inflame the issues mentioned above.
This will end badly.
But what would the aftermath of a Greek exit look like? Well, Jim Jubak has a pretty good idea of how HE sees playing out and I find it hard to disagree with his roadmap...
