Sunday, February 19, 2012

EU betrays Greece

Over the last couple of weeks the Greek leadership pushed through all the painful cuts demanded by the EU. I have written that this effort is misguided, and the enforcement of these austerity deals will require heavy-handed enforcement, because the majority of the public rejects (and resents) the EU diktats.

By the early February, the Greeks have agreed to virtually all of the cuts demanded by the troika, including a 22 per cent cut in the minimum wage (to less than 600 euros a month), firing 15,000 civil servants and an end to dozens of job guarantee provisions. They couldn't bring themselves to cut an estimated €300 million ($396 million) in pensions.

The EU Finance Ministers reacted with frustration and refused to sign off on the deal, demanding that Athens make up for a shortfall created by the refusal of political leaders to slash supplemental pensions — before their next meeting, which was scheduled for February 15th. "The agreement, as far as I understand, is not at a stage where it can be signed off," said the German Finance Minister Wolfgang Schaeuble leaving the bailout in limbo and the threat of bankruptcy high.

On Friday February 10th, the Greek cabinet agreed to the pension cuts and on Sunday the Parliament approved it. It was not an easy decision after two days of rioting and burning in Athens. The Parliament had to discipline (i.e. to fire) 40 members who refused to vote for the additional €325m of fiscal austerity.However, the troika demanded proof that the Greeks would would stick to the deal, and the mood has been poisoned by EU demands for an escrow account to seize Greek budget revenues at source.

Greece took a step closer to meeting those demands when George Papandreou, the former prime minister who remains head of Pasok, sent a letter to the EU leaders vowing to implement the austerity measures included in the €130bn bail-out. The letter, which came along with a similar missive from
Antonis Samaras, head of the centre-right New Democracy party and the presumptive next prime minister, was demanded by EU leaders as a condition of the deal. Mr. Samaras letter to European Union leaders reiterated his stance that “modifications might be required” to the bailout plan.

The pleas from the humiliated Greeks were received coolly in Brussels. Luc Frieden, Luxembourg's foreign minister, indicated that Greece is disposable for the EU: "If the Greek people or the Greek political elite do not apply all of these conditions, I think they exclude themselves from the eurozone. The impact on other countries now will be less important than a year ago." Mr. Frieden even suggested a return to the drachma. "It might be something which would allow Greece also to get a new start, to create an economy that can create jobs," he said.

The tone of these comments, along with those from Germany, Holland and Finland suggest that the creditor powers have already decided to eject Greece, causing great bitterness in Athens. After the Greek politicians went again the popular will to push through harsh austerity laws, they seem likely to walk away with nothing.

There are rumors that a “Secret Troika Report” showed that even if the most optimistic scenarios are met, Greece will not achieve the desired debt ratio, nor get even close. I have long believed that allowing Greece to default is the best solution, but abrupt withdrawal of EU support is nothing short of a stab in the back.

The cards have been dealt - risks of 'contagion' have been minimized, and Greece is about to be ushered out of the EU. There is going to be an ordinary meeting of the Eurogroup tomorrow on Monday, 20 February. Will we hear the final rejection of the bailout, or will the drama drag on? The outcome is no longer in doubt, only the timing of its revelation.
German cartoon: 'Togetherness'/unity - this is it!

This breakup also belies the attempts of the EU project not to follow, but to generate political zusammenhalt. German people have become tired of this type of 'unity', and the cartoon above illustrates what they think of their role and they are about to take advice from the title of Ayn Rand's masterpiece 'Altas Shrugged' literally. Too bad about the dog.

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