02-07-2017, 03:01 AM
The IMF agrees that Greece’s debt burden is far too high and the stipulation that the country should run an underlying budget surplus of 3.5% a year is unrealistic. The Fund is warning that the debt could become “highly explosive” and will not financially back the latest rescue attempt without meaningful debt relief. But it is also insisting that Greece sticks to a reform programme that the Fund believes will improve growth prospects. Europe, for its part, is less hardline when it comes to Greece’s reform programme and would be inclined to ignore any backsliding. But it thinks Greece should stick to its budget plan and is resistant to the idea of deeper debt relief. These are seemingly irreconcilable positions but unless they are reconciled Greece faces another period of turmoil. Politics is part of the problem.
Last week, the IMF delivered its gloomiest assessment yet of Greece’s debt burden, arguing that it was not only unsustainable but eventually likely to become “explosive”. The IMF’s board will formally discuss the issue on 6 February but has already hinted that without a commitment of debt relief from the EU it will be unable to contribute further loans. Germany, the biggest contributor to the nearly €300bn of emergency funds assigned to Greece, insists further aid depends exclusively on IMF participation... That is what worries Panagopoulos, the pollster, most. What was once a minority view is changing fast, with the majority of Greeks in a recent Alco survey saying it was wrong to have joined the euro.
Grexit? Greece again on the brink as debt crisis threatens break with EU | World news | The Guardian
Between 2000-7, Greece, Italy and Spain’s trade deficits with Germany doubled, while Portugal’s quadrupled. Germany’s trade surplus with the rest of the EU tripled in the same period. The Eurozone countries running a trade deficit with Germany no longer have recourse to monetary policy to protect themselves from a more competitive economy. In addition, Germany benefits as their creditor, recycling surplus Euros as loans to the deficit countries. The recycling of capital from Germany back to her Eurozone export markets was a major driver of the Spanish and Irish property asset bubbles. And it is no coincidence that when the Greek crisis broke in 2010 the majority of privately-owned Greek government debt was held by German banks.
Thanasis Maniatis, Associate Professor in Economics at the University of Athens (3), has shown that Greek Labour – defined as persons who earn or earned their livelihood from the sale of their labour power, whether currently active or retired, together with their dependents – is a net creditor to the Greek state. In other words, when you factor in all the income and benefit flows and discount all the tax flows, the working class give more to the state than they receive. In the course of this proof, Maniatis shows that, according to OECD figures for social expenditure as a percentage of GDP, Greece spent 10.3% in 1980, 19.3% in 2000 and 23.5% in 2011. The equivalent figures for Germany are 22.1%, 26.6% and 26.2%. The EU average in in 2011 was 24.9%. When it comes to social spending, far from being bloated, Greece has only just caught up.