On Sunday, the European Central Bank capped its emergency credit line for Greek banks at €89 billion. Most if not all of that money has already been used to cover withdrawals by customers, and there is virtually no money available for new loans.
Joseph E. Stiglitz : Europe’s Attack on Greek Democracy
Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
.. We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems.
.. That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project.
.. what we are seeing now, 16 years after the eurozone institutionalized those relationships, is the antithesis of democracy: Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government.
.. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.
Can the United States Prevent a Grexit?
Over the weekend, I spoke to a couple of knowledgeable observers who both expressed the view that the European Union, and Germany in particular, had deliberately instigated a confrontation to bring about regime change in Athens.
Greece Over the Brink
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.