Greece Still Facing Problems Despite Exiting Bailouts

By Patrick Brogan

 

“Nothing exists except atoms and empty space; everything else is just opinion.”                   -Democritus

I find days that start with ancient Greek quotes are the best. It’s fitting that it was a man named Democritus that coined this phrase, Democritus means chosen by the people. One thing that the Greek people didn’t choose were the austerity measures they have had to endure under the bailout programmes.

Everything else is just opinion. This is very clear in the worlds of economics and politics. Increasingly, they are becoming realms of perceptions rather than substance. It is to this background that the EU elite took to Twitter and the media to congratulate the Greek people (in a very condescending manner) and, more importantly, themselves, for avoiding a Greek tragedy. Sorry, couldn’t resist. However, despite the praise, Greece, and by extension, the rest of the EU, are not on a financially sound footing just yet.

The reality in Greece today is stark. The economy has shrunk by a quarter under the bailout programmes, unemployment is at 20% with youth nearly double this number and debt is at close to 180% of GDP. If this is what happens to a country after the bailouts, what is the point of entering the programme? If this is what the ECB sees as economic stability they are sadly mistaken.

After eight years and three bailouts, taxes are higher and wages are lower. On top of this, up until 2022, the Greek economy must produce a surplus of 3.5% of GDP as part of the bailout terms. Many parts of the Greek economy were sold off to the highest bidder and the brightest and best, some half a million of them, left Greece for pastures new. When taking all this into consideration, who would loan Greece money and expect to be paid back? Or maybe that’s the point. Leave them so weak another bailout is inevitable and the banks can carve open the country again.

Then we must look at the wider global picture. The US, under Trump, is creating trade wars. Neighbours Turkey are having their own financial difficulties due to not bowing to Trump and on the other flank, Italy’s current ruling class are suggesting the EU is not for them. And as Greece has found out the hard way, outside forces matter.

 

The ECB

 

The ECB inflicted these bailouts as a form of punishment. This was a warning. The mismanagement of the economy by successive Greek governments was undoubtedly the biggest factor in this collapse. However, the ECB also played a huge role. It oversaw the financial management of all the Eurozone countries, including Greece. Should their own criteria not be more stringent? The rules they created were not enforced. What of the other European banks lending to Greece? Should they not be punished, too?

Derivatives were exchanged into dollars and yen by international banks, including Goldman Sachs, to hide how much debt the Greeks actually held. While the ECB can use this as an excuse, I find it inconceivable they were not at least a bit suspicious of this and didn’t investigate this.

The troika agreed to a write-down of debt years into the bailout programmes. This should have been one of the first measures taken. More importantly, the buying of bonds by the ECB should have been the very first phase of dealing of the economic crisis. They waited until 2014 to start this. Greece was already in turmoil by then.

The result has seen the rise of Far-right parties like the Golden Dawn. If the EU is so concerned about the rise of such racist and extremist organisations maybe they should not create the conditions were these parties can grow. The bailout programmes have led to a humanitarian crisis in each of the countries they were enforced. No wonder people are angry.

 

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