If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.
So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.
.. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.
.. This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.
.. Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.
.. Greece cannot pay, therefore the debt must be restructured…end of story.
Let the banks eat their own losses this time... The global debt pyramid erected by the central bank cartel is imploding. States that cannot service debt when short term interest rates are zero are going to fold up like so much paper when interest rates shoot up as they’re doing in places like Spain, Portugal and Italy, today.
Again, *restructure* the debt and unwind the bad banks... But based on their behavior, not their words, it doesn’t seem the banks are truly interested in improving the situation, and are stuck in what B.F. Skinner called a “punishment syndrome.”
.. Skinner’s position was that punishment is not effective if the goal is to change behavior and resolve a problem. Punishment carries the risk of making a bad situation worse by creating a spiral of conflict. Emotions are heightened, & each aggrieved party loses focus, locks into its position, and the likelihood lessens of identifying alternative solutions & resolving the issue in a more constructive way.
A principal reason the punishment syndrome takes over is because the dominant party is more concerned about power and authority than about the well being of the other party.
The Next Few Days Have the Potential to Transform Greece and Europe
European leaders in Brussels and Frankfurt and Berlin may not be fair, or democratic, and there’s a good case that the economic policy they are advancing is not very sound. But they hold all the power in this situation, and are leaving Greeks to decide between two bad options.
.. For years Greece has muddled along with a depressed economy and an endless series of bailouts and austerity. It’s fine to play the blame game over how public debt got out of control in the country, but by the time 2010 came around what was done was done, and the human consequences of austerity have been grave.
The Greek government apparently agrees that the definition of insanity is doing the same thing over and over again.
.. Expect the E.C.B. and European institutions to deploy enormous financial firepower to prevent a Greek exit from spilling over to Portugal and Italy and Spain. But saying that this won’t be a Lehman Brothers-style economic catastrophe isn’t the same as saying it would be a good thing.
.. In a true federal system, the government cannot let a state fail, nor can it stop a specific state’s citizens from withdrawing their money from the banks. Germany and its partners are acting like de-facto feds with a gripe, more eager to teach the Greeks a lesson than to heal an already fragile union. Would Berlin let Bavaria or Saxony fail and fall prey to chaos? So why put the banks’ interests ahead of the common good and let Greece collapse? What kind of union is that? Clearly not the type of ‘in sickness and in health.’
If Europe Cannot Bend, It Will Break
When Mr Tsipras claimed that he had a democratic mandate to demand change in Europe, Wolfgang Schäuble, the German finance minister, is said to have responded: “I have also been elected.”
.. Elsewhere, the sight of a radical left party such as Syriza or Eurosceptic conservatives, such as Britain’s Tories, extracting concessions from the rest of Europe could boost similar parties across the continent, making the EU even harder to manage.
As a result key governments in Europe, in particular Germany, are more willing to contemplate Grexit and Brexit than the Greeks and British may have realised.
That 1914 Feeling
In some ways, what defenders of the euro should fear most is not a crisis this year, but what happens once Greece starts to recover and becomes a role model for anti-establishment forces across the continent.
.. Guess whose reckless lending mismanagement and business incompetence you’ve never seen in the paper since they drove Greece and half of Europe into lender-induced bankruptcy ?
Deutsche Bank
Commerzbank
Credit Agricole
Societe GeneraleStop bailing out the rich and punishing the poor for 0.1% bankster stupidity and greed.
.. The big mistake was made by the European governments (particularly Germany, France and the Netherlands) in guaranteeing and thereby nationalizing (the down side of) the loans made by rich people, big private insurers and banks to Greece. In my view, the private money-lenders should have been left to fend for themselves. They would have had to take “hair cuts” or cut interest rates or left to see their investments go belly up.
.. History seems to teach us we rarely solve any really big problems – or even many small ones – but rather simply push them off on someone else in the future. I expect that is how it will go in Greece just as it is going with regard to Climate Change and every other problem we face.