LEADING THE WAY OUT OF THE EU

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7 January 2017 

Even after all these years of ravaging, EU-imposed austerity, Greece still finds itself on the verge of bankruptcy according to an IMF report.

But where the IMF, as a non-EU actor is happy to spell out the truth the EU and Eurozone’s Member States are eager to paint a different picture. President of the Eurogroup, Jeroen Dijsselbloem described the state of Greece’s economic affairs as a “pretty good recovery at the moment”, when they are anything but, fake news indeed. Greece is due to transfer another €7bn to its creditors in July, cash it simply does not have at its disposal without yet another bailout.

IMF vs. Germany

Having joined in on the chorus of doom in the run-up to the referendum, the IMF has made it clear that it is no friend of the truth on all things Brexit, but in the context of the Greek debt crisis the fund stands out as a rational actor. In its report, the IMF described the state of Greece’s debt as ‘explosive’, the emotive language from such a stern institution heightens the seriousness of the present situation.

If Greece was to remain in the Eurozone, the prognosis from the outset of the crisis was clear: savage cuts in government spending and epic tax rises in exchange for low-cost loans to finance high-yield debts. None of the key actors administering the medicine has been more adamant of the lengths required than the IMF. The creditors now find themselves at an impasse triggered by the Greek Government’s decision to top up state pensions over the Christmas period.

Germany is reported to be at ease with Greece’s loosening of the austerity straitjacket. The IMF is alarmed and sees no alternative but for Greece to default on at least a portion of its debts if it is not to go full throttle on the reforms, following the election of the left-wing Syriza government in January 2015 that will never occur. The IMF predicts Greece’s economic growth to reach one percent, but no more over the next decade. Such anaemic growth will not be enough to provide enough public finance to see an end to this terminal crisis.

Like Greece, Germany must face political realities. Just as Greek voters are fed-up with the collapse in public services, Germans have little appetite to transfer more taxpayer cash to fund pensions that are more generous and delivered earlier than their own.

In this instance, Germany appears to be on board with the IMF in being reluctant to deliver another bailout, but that is all they agree on, leaving Greece’s fate in the balance.

Greece to Go

This sorry state of affairs between a number-crunching bureaucracy and a nation state adorned with many of the trappings of an imperial power reveal the crux of Greece’s plight.

The IMF’s report is nothing new. At the height of the financial crisis, its debt to GDP ratio stood at 170%, today it stands at 175%. It is now running a surplus, but only the most Spartan of reforms, politically unacceptable in a country used to a decent standard of living, together with an encouraging economic growth rate (i.e. above 3%) could expect to one day bring such a debt burden down to a manageable level.

Germany, the European Commission and the IMF knew then, what they know now, Greece will default. The truth of the matter is that at the time of the debt crisis’s emergence, Greece and its like represented a systemic threat to the sacred Euro. The bailouts were introduced only as a temporary measure until that threat subsided. Greece has now passed that baton over to Italy leaving the European Commission and particularly Germany to pay lip service to what remains a very serious crisis.

Throughout this whole period, the faceless men and women in suits in Brussels and Berlin have not for once considered the repercussions for the Greek people. The election of Syriza at the beginning of 2015 has proven to be a false down, it is time for the Balkan nation to take charge of its own destiny and re-adopt the Drachma.