A lack of trust is blighting Greece

February 20, 2017 (Link)
By, Lorenzo Bini Smaghi, Financial Times (whole article provided here, because you would otherwise have to pay to read the whole article on the FT website.)

Seven years after the start of the Greek crisis, it’s not easy to follow what’s going on between the International Monetary Fund, the eurogroup of finance ministers and the Greek government. The negotiating process is being impaired by so many contradictions and a Catch-22.

First, the IMF wants Greece to implement a milder fiscal adjustment programme than the eurogroup, which insists on a primary surplus — which excludes debt interest payments — of 3.5 per cent of gross domestic product. The IMF is probably right, at least on paper, as the country’s dire economic situation leaves it ill-equipped to deal with more austerity. Last year’s primary surplus was close to 1 per cent, and can hardly be increased in the current environment. On the other hand, experience has shown that Greece has often fallen short of its targets, not only concerning the budget but also structural reforms. Given such a record, a more ambitious target may be necessary to ensure that Athens keeps up to minimum commitments.

[Lets start here. First you say “Last years’s primary surplus was close to 1 percent, and can hardly be increased in the current environment.” 

Then you say:  “On the other hand, experience has shown that Greece has often fallen short of its targets”

That is not another hand. That is THE hand. These “two” points you have identified are not only connected, not only related, they have a cause and effect relationship – Greece has only managed to bring in a 1 percent surplus after all the austerity, wage and public spending cuts, depression level unemployment levels, and all resources being put into paying back “bailout” debt before, or even replacing payment for, any other of Greece’s needs. This means, since there is little to no investment in ANY part of the Greek economy, improvement in decaying civil structures, help for disabled and elderly and unemployed, and job creation in a country with a ~23% unemployment rate. Meanwhile, businesses are taxed so heavily in order try to make the targets demanded by the eurogroups, that they are forced to lay off even more workers, and invest in even less of everything, in order to afford just the basics of their business to keep them running. ]

Second, the IMF wants the eurogroup to concede more debt relief to Greece, given that debt is likely to be on an rising trend again by the end of the next decade. The fund is certainly right on paper, as all analyses show that Greece will not be able to repay its debt. The eurogroup has already committed to debt relief, as recognised by the IMF, but is reluctant to be more specific lest the pressure eases on the Greek government to continue implementing the programme. Indeed, experience has shown that debt restructuring tends to relax the reform effort.

[Yes, because these “reforms” being demanded by the Eurogroups are to sell off extremely valuable assets that could and have been major sources of revenue for the Greek economy, just to obtain the short term gain from the sale in order to pay off debt – not to mention austerity measure contribute to plateauing at best, though rising at times, unemployment rate. And a minimum wage that has been going down since the financial crisis in 2008, and is the only EU country who’s minimum wage is actually LOWER than it was in 2008. Public transportation infrastructure is breaking down with no money to pay for its maintenance, and those who run the public transportation have had their salaries cut over and over and over. This includes trains and trams and busses and AIRLINES and metros. This underpaying trend of civil workers in present in all other areas of civil servants and employees. Overall, wages have dropped dramatically, and taxes increased exponentially. So if debt restructuring “tends to relax reform effort,” it’s because the level of “reform effort” is INSANE!!!]

Third, the IMF wants Greece to implement a series of measures immediately, to reduce the eurogroup’s doubts about the required reforms. These requests are certainly legitimate, but Athens considers them unfeasible in the current economic and political environment.

[WHY DON’T YOU LISTEN TO ATHENS!!! THEY ARE TELL YOU THAT THEY CANNOT DO IT! THEY CANNOT CUT ANY MORE, THEY CANNOT MAKE ANYMORE “REFORMS,” THEY’RE NOT LYING, THEY’RE NOT TRYING TO SLINK OUT OF PAYING BACK THE MONEY, THEY JUST CANNOOOOTTT DOO ITTTT]

Fourth, the IMF has indicated that it will not endorse the programme unless its requests, both to Greece concerning the adjustment programme and to the eurogroup on debt relief, are accepted. For their part, Germany and other European countries have signalled that unless the IMF signs up, they themselves cannot support the programme, even though they disagree with the fund on its contents, in terms of both fiscal adjustment and debt relief.

[Germany, you are a fucking asshole, and we get you think you’re making a big ass sacrifice, but no one is going to pat you on the head for this one.]

In the end, it’s all a question of trust, which has been seriously eroded over the past seven years. [FUCKKKKK YOUUU] The IMF continues to put too much trust into its numerical calculations about debt sustainability [so your fault, not Greece’s], assuming that when policy measures are adopted, they are effective and cannot be reversed. [When has Austerity only ever worked. EVER?] The Greek case over recent years has proved the contrary. [Again, give me one example where only Austerity ever brought an economy back from depression] The IMF doesn’t seem to trust eurozone countries either to deliver on debt relief when the time comes, even though debt relief has been provided in the past. Eurozone ministers, in turn, do not trust Greece to pursue its fiscal adjustment and reform path, if they give in too early on debt reduction. [Sociopaths. You’re Sociopaths.] The Greek government does not trust that it will obtain sufficient relief if it implements the conditions requested by the IMF.  [Now THAT’s something that has a grounding in history for fucking real] Some eurozone ministers do not trust European institutions to be tough enough with the Greek government, and have made their agreement conditional on the IMF.

[TOUGH ENOUGH? TOUGH ENOUGH? TOUGH ENOUGH? Are you on Mars? Do little ants bring your crumbs and arrange them on your kitchen counter and you interpret their patterns and that’s how you learn about what’s going on in Greece?]

The consequence of this lack of trust is that the Greek economy continues to underperform, [no, it’s because those demands on Greece are impossible to perform] the Greek people are losing faith and international investors are reluctant to put capital in a country that may be forced out of the eurozone.   [That’s all on the Eurogroup. Thank, you fucked up the possibility of bringing in non-IMF non-EU sources of income into Greece with your fuck up. Con-fucking-grats. ]

As in the past, the solution is likely to be found in the end, with some concessions on each side. The Greek government will get some last-minute measure through parliament, the eurogroup will agree on a slightly lower primary deficit and to being more specific on debt relief, and the IMF will provide some reassurance about debt sustainability. Nobody would benefit from a failure to agree. But whatever agreement is reached, it will not solve the issue definitively.

[Greece has not gained shit by any of the recent bailout agreements.]

It will be a long time before mutual trust [Fuck Off] is restored. This may require some of the people around the negotiating table to pass the hand to others.  

Lorenzo Bini Smaghi is a former member of the executive board of the European Central Bank and currently visiting scholar at Harvard’s Weatherhead Center for International Affairs and LUISS School of European Political Economy in Rome

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. [screw you]