HAS THE GREEK GOVERNMENT LEARNED ANYTHING?
I have witnessed the continued and misguided actions of the Greek government in dealing with the nation’s fiscal crisis and its naiveté in dealing with the Troika.
The assault of the Troika – the triumvirate of the European Commission, the International Monetary Fund, and the European Central Bank – on the sovereignty of Greece needs to be sharply rebuffed. I have maintained for years that Greece should unilaterally repudiate its debt as it stands and restructure existing bonds at no more than, say, 20%. Interest arrears would be off the table in my scenario. Clearly, easy credit fueled the socialist practices of current and previous Greek administrations and it is clear, as well, that no one was minding the shop as the nation ran up a tab of $400 billion. What is done is done. But, make no mistake about it; the longer a default is forestalled the greater the cost will be to both Greece and its European lenders.
“CONTAGION” IS SCAREMONGERING BY THE EUROPEAN UNION
The strongest expressed argument coming from the Eurozone against a voluntary default is that it would lead to “contagion” that would spread to other countries. But contagion is precisely what is being precipitated by straight-jacketing the Greek economy with austerity measures that will deepen an already deep recession. These austerity measures will almost guarantee that the growth needed to pay an increasing debt obligation is precluded. And, rest assured, the Greek economy is flat-lining if not eroding. No amount of debt relief will make up for a shrinking economy.
Furthermore, no bailout is worth the loss of sovereignty that is in the making at the hands of the bureaucrats in Brussels who already are making noises about not having enough control over a sovereign nation’s budget. The United Kingdom which had a lot less to lose than Greece voted 52% to 48% to exit the European Union in June precisely because they didn’t want Eurocrats calling the shots.
IS ARGENTINA THE MODEL?
There is no ignominy in being associated with an Argentine-styled default. Certainly no more scorn could possibly be heaped on Greece than by those who have taken to the airwaves and speak of the country’s “moral collapse.” There is life after default. Argentina is proof of that.
I would give the Eurozone lenders a take it or leave it offer. Either they take the proffered haircut at 80% or Greece returns to the drachma, converts existing debt at the old exchange rate, prints money and thus ends up in the same place but for the fact that credit-card-toting bureaucrats will not be telling Greece how it should run its internal affairs. This path of devaluing the currency will work by ratcheting down prices across the board and thus encouraging entrepreneurs to again take measured risks in lieu of running to offshore locations. It is true, the country will be excoriated in the European and American press and the economic, social, and political flak in the short term will be unceasing. Nerves of steel will be the order of the day.
The unarticulated reason for protecting Greek bond-holders throughout Europe, and the raison d’être for the Eurozone, in the first place, is that Germany covets as many captive, non-manufacturing markets for its products as it can stand on the backs of its own citizens. It is clear that what Germany did not accomplish with tanks during World War II it is accomplishing with the complicity of the euro. Lest there be any doubt in anyone’s mind about German designs, it is instructive to remember that beginning in the late nineteenth century prominent German economists, politicians, and scientists held the view that it fell to Germany to “organize” the continent of Europe. That is hardly a faded dream.
The roughly 50% write-down agreed to by Greek bondholders will prove to be a Faustian deal. Again, with little or no economic growth all the debt swaps in the world will fail to work miracles. And, for all of the talk about how Greece can not be trusted to pay its debts unless it puts up sufficient collateral – some countries have suggested including the Parthenon and some Greek islands as collateral – and mortgages its infrastructure – as it has begun doing with airports, seaports and highways – maybe negotiations between Greece and its lenders should start at the very beginning.
LET’S START AT THE BEGINNING
Maybe the point of departure for such negotiations should start with the Romans’ endless pillaging of Greece, or the savagery of the Franks during the Fourth Crusade, or the horrific raping of the Parthenon by the sadistic Venetian Morosini who was hailed at home for his bestiality, or by the thievery of Lord Elgin who to this day is defended by Britain for his actions, or the depredations of the Franco-British legations who attempted to destabilize the nation during the First World War, or the incalculable death and destruction suffered at the hands of the Germans and the Italians leading up to and during the Second World War.
I believe that if Greece calls in all of these IOU’s Greece and its European lenders will be all fair and square.
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