Ex-Bank of England boss: Greece's crisis is 'almost a deliberate act of policy'

A protester shouts slogans during a rally against the government's decision to ask for an economic aid package in Athens April 23, 2010.

Πηγή: Business Insider
By Oscar Williams-Grut
March 2 2016


Former Bank of England Governor Lord Mervyn King is continuing his vocal criticism of Europe, claiming Greece's current economic, social, and political crises have been created "almost as a deliberate act of policy."

The Telegraph reports that Lord King, who was Governor of the Bank of England between 2003 and 2013, made the comments at a launch event for his new book, "The End of Alchemy", at the London School of Economics.

The Telegraph quotes Lord King as saying:

In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.

I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that's what's happened in Greece.

It is appalling and it has happened almost as a deliberate act of policy which makes it even worse.

Greece has been in a contracted depression since 2008 but many observers believe bailouts from the IMF and other central bankers have exacerbated the problem by forcing harsh austerity measures on the country that depress growth. Greece's outspoken former Finance Minister Yanis Varoufakis compared the bailout reforms to being "fiscally waterboarded."

Lord King appears to echo this sentiment and The Telegraph says he argued that "the only way to plot a route back to economic growth and full employment" is for Greece and other weak eurozone states to readopt their national currencies, effectively leaving the eurozone.

Lord King makes a similar argument in his new book, extracts of which have been published in The Telegraph. He makes the radical suggestion that Germany should leave the European Union to herald its breakup.

King, who oversaw the UK's bailouts of Royal Bank of Scotland and Lloyds Bank as the 2008 financial crisis struck, also believes "another crisis is certain" and says that central bankers need to have the "courage to undertake bold reforms" to safeguard against it.

Milton Friedman, Irving Fisher, and Greece

Πηγή: New York Times
By Paul Krugman
July 7 2015


I continue to be amazed by how many people regard debt relief and devaluation as wild-eyed radical ideas; of course, it matters most that so many influential people in Europe share this ignorance. Anyway, for the record (and for my own future reference) I thought it would be helpful to post what Milton Friedman and Irving Fishe rhad to say about the Greek disaster. OK, they weren’t writing specifically about Greece — Friedman was writing in 1950, Fisher in 1933. But their analyses ring truer than ever.

First, Friedman (why oh why isn’t there a full electronic copy of this essay online?):



That tells you everything you need to know about why “internal devaluation” has been such a costly strategy — and why the ECB’s failure to move aggressively early on to achieve and if possible surpass its 2 percent inflation target was a major contributing factor to this disaster.

Then Fisher on why austerity hasn’t even helped on the debt:

The basic story of the European periphery — not just Greece — is one of a poisonous interaction between Friedman and Fisher, which has produced incredible suffering while failing to reduce the debt/GDP ratio, which even in star pupils like Ireland and Spain is far higher than when austerity began; the only success has been in suffering long enough so that some growth has finally resumed, and they can call it vindication.

The bizarreness of the whole thing is how flaky, speculative ideas like expansionary austerity became orthodoxy, while applying the economics of Fisher and Friedman became heterodoxy bordering on Chavismo.

Rhodium Group » Greece: The Confrontational End-Game Is Here

Πηγή: Rhodium Group
By Jacob Funk Kirkegaard
June 12 2015

Now that Greek Prime Minister Alexis Tsipras has alienated the European Commission, which is his government’s only potential ally in the creditor group known as the Troika—European Commission, European Central Bank (ECB), and International Monetary Fund (IMF)—no credible bridge-builders are left to save Athens from itself. Further confrontation and escalation seem most likely (60 percent).

Tsipras’s angry denunciation of the Troika’s most recent proposals as “unacceptable, extreme, and illogical” effectively rules out concessions on his part. Striking a deal acceptable to the Troika would now be tantamount to performing the dreaded Greek political “somersault,” always denounced by Tsipras and Syriza.

The IMF’s appropriate decision to pull out of negotiations in Brussels this week makes it politically impossible for Chancellor Angela Merkel to give Greece a better deal. Greece may be able to meet its next payment to the IMF in late June by cobbling enough cash together by not paying suppliers and confiscating working capital at state-owned enterprises (SOEs) and local governments. But without an enforceable deal with Athens, an eventual nonpayment to the ECB in July now looks increasingly likely.

Such a nonpayment, as discussed previously, would scale back emergency lending to the Greek banking system, precipitating a banking holiday or immediate controls on access to the €133.7 billion in bank deposits,1 dooming the summer tourist season and plunging the economy into a severe recession, with obvious political impact on Syriza itself.

Default cannot be declared without a political decision by the IMF Board or the ECB, which the Obama administration and the IMF Board dominated by the Europeans would likely oppose. Instead, Greece’s creditors are likely to sit back and watch political turmoil engulf Greece.

Sorry to say, Syriza deserves such a fate. It has never presented a credible alternative set of reforms and policies to the proposals it has rejected. Had Syriza struck a deal in March by agreeing to a goal of a primary surplus of 1 percent, it would have been able to get through 2015 with extra money to spend. Agreeing to a 1 percent primary surplus target now would require more fiscal consolidation than a few months ago, as the economy has been allowed to deteriorate dramatically.

Syriza’s diplomacy in Europe (and beyond) has only isolated Athens further. Combining leftist rhetorical antiausterity with a right-wing nationalist coalition partner, and making overtures to Russia and Vladimir Putin, have not delivered one euro to its books. Even fellow far leftist parties around Europe now avoid Syriza and its model. Tsipras’threatening assertion that a Greek bankruptcy “would be the beginning of the end for the eurozone” and roil markets in Spain and Italyis seen as noncredible trash talk. It has only played into the hands of German finance minister Wolfgang Schäuble, who correctly said recently that Greece had removed any doubt that its own conduct is to blame for its predicament.

Three scenarios appear possible in this situation.

Spread the Blame. Theoretically Tsipras could submit a package acceptable to the Troika to the full Greek Parliament, inviting the opposition to help secure its passage. Such a step would release Troika funds in a matter of weeks and normalize the country’s financial system. Tsipras could remain prime minister in this scenario, despite the economic costs, though it would divide Syriza. Any such deal would also require more intrusive creditor inspections, undercutting Syriza’s nationalist credentials. Another crisis would be likely within a few months.

Unless, as part of this scenario, Tsipras reconfigures his governing coalition to include more centrist parties (or perhaps a national unity government), it is difficult to see the longer-term benefits of this solution.

Consult the People Directly. The Greek government might call a national referendum on a deal acceptable to the Troika in order to legitimize the political somersault its acceptance would represent. Any referendum would be de facto about whether the Greek people are willing to put up with the costs of staying in the euro. Such a referendum taking place in another accelerating economic emergency would most likely be approved (98 percent). But Greece’s economy would deteriorate in the weeks running up to the vote.

Syriza’s governing majority would almost certainly splinter in the process, with some MPs campaigning for and others against the referendum passing, so it is far from obvious whether Tsipras would have a governing parliamentary majority afterwards. As in the previous scenario, holding a referendum without also reconfiguring the governing coalition seems of limited long-term value.

Early Elections. Calling new parliamentary elections would be logical but unpredictable, and Syriza would probably be thrown out. On the other hand, with the main opposition New Democracy still led by the unconvincing former prime minister, Antonis Samaras, Tsipras might be able to convince voters that he remains their best option. New elections could empower some of the newer centrist parties. Given the ultimately risk-averse nature of aging electorates, however, a dramatic strengthening of the anti-euro fringe parties in KKE on the left and Golden Dawn on the right does not appear likely. There is therefore no real reason to fear new elections, due to the very small risk of “an even more extreme outcome.”

Through leadership control of electoral lists, new elections might produce a less radical group of Syriza MPs, but its smaller coalition partner ANEL (Independent Greeks) might falter in the voting. An election would thus result in prolonged haggling over formation of a government, causing more economic suffering. Once again, such a scenario would devastate the critical summer tourism season.

What are the options and costs for the euro area of these choices?

First, the deteriorating Greek economy will—eventually—require additional funding in the short term and likely a deeper further restructuring of the euro area’s Greek debt. Syriza has already cost other euro area taxpayers a lot.

Second, Tsipras’ failed personal diplomacy will have caused the scales to fall from the eyes of Merkel and French president Francois Hollande. They have no real incentive to spend domestic political capital to strike a deal advantageous to Greece to coax him toward the political center, now that it is increasingly obvious he is not even a closet centrist but largely seems to agree with the left wing of his party. The euro area thus has no real choice but to seek regime change in Athens.

Such a hard line would drive home the costs of Syriza’s failures to the Greek electorate, in the hope that new elections would deliver a new government in Athens, even if the cost is a deep recession from the ensuing deposit controls and financial chaos.

Would the Greek population then vote for parties more friendly to the euro area? Most likely, yes. The prospect of Greeks punishing Syriza for its deceitful promise to end austerity and reforms while other Europeans pay their bills is not guaranteed, of course. But Greeks are not likely to look kindly at leaders putting euro membership at risk.

The risk of a Greek crisis spreading contagion to other parts of Europe remains low. A regional recovery is under way, and the ECB is heavily intervening in bond markets. Syriza does not seem to have understood the hollowness of its threats to bring Europe down with it. In some ways there has never been a better time for Brussels, Paris, Berlin, and Frankfurt to nail a recalcitrant member state like Greece than now. The risks associated with more lasting instability in Greece will arise only as the end of the ECB’s asset purchase program draws closer in September 2016. The ECB’s exit from its quantitative easing (QE) bond purchases will become more tricky, as markets may at that time price new risks into other euro area bonds, however.

What are the risks of the so-called Grexident—something going wrong and Greece exits the eurozone and adopts a new currency in this confrontational scenario? Not zero for sure, but actually very close to zero. Introducing a new currency is no trivial matter, especially for an incompetent government like Syriza, but the threat of massive capital flight would likely stop the process before it started. As discussed before here, Greek public sector workers and retirees are not likely to accept being paid in a piece a paper (IOU) signed by Finance Minister Yanis Varoufakis. And certainly the foreign suppliers of essentials like food, medicine, and energy to the Greek economy would balk.

The most likely “Grexident scenario” is therefore not a new Drachma, but Montenegro—i.e., Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy. In Montenegro, the euro has been the only legal tender since 2002. But Montenegro has no access to the ECB or the EU budget and has a GDP per capita of just over €5,000—less than a third of Greece’s. Whatever the appeal to national dignity, the Greek electorate is not likely to allow such a calamity. Of course, the Greek people might democratically choose to become much poorer. But even this extremely unlikely scenario (2 percent) would not necessarily doom the euro area. Other euro members would suffer large financial losses (from loans to Greece and the losses on now-defaulted Greek collateral held by the ECB), which is the main political reason that departing from theEuropean System of Central Bankswould invariably mean also an exit from the European Union. Electorates elsewhere in the euro area would demand it. Such large and certain financial losses might, however, be acceptable, though it would obviously be irresponsible of Merkel and Hollande to even allow the slightest risk of a euro collapse.

Many academics and non-European central bankers assume that a “Grexident” would destabilize the euro and encourage more countries to drop out, turning Europe’s common currency into just another fixed exchange rate regime. Euro area politics would work to prevent such a development, however, because the remaining 18 members and their central bank would move to make it impossible for more members to quit. The economic devastation within Greece resulting from an exit from euro area institutions (but not as mentioned the euro currency itself) would by itself dissuade other countries from following its example. More likely, the remaining 18 members would opt for a new integrationist “Euro Area Treaty” for themselves. Such a salvaging effort would be difficult, but the experience of the last five years suggests that euro area countries would pull together and save their union. Had Greece been pushed out of the euro area, instead of leaving voluntarily against the will of other members, a new drive for euro area integration would probably fail.

More such integration could include conversion of the European Stability Mechanism (ESM) into a euro area budgetary entity with limited direct taxation powers. The ECB could decide to exit QE only by selling some longer-dated sovereign bond holdings back to the market as outright eurobonds, rather than as individual country bonds.

These steps add up to the likelihood of Europe pushing Greece to make the hard decisions about what they really want.

Greece’s poor are back to where they were in 1980

Πηγή: WP
By Matt O'Brien
April 10 2015


In the last seven years, Greece's economic collapse has wiped out all the progress its poor had made in the 28 years before that.

Now there are a lot of ways to think about how historic Greece's recession has been. Its economy has fallen about as much as the U.S.'s did during the Great Depression. Its unemployment rate peaked at 28 percent. And, as Derek Thompson points out, its cities have become filled with smog during the winters, because its people can't afford to heat their homes any other way than burning whatever they can get their hands on. But think about this last one. It probably gets us the closest to having a real idea what it's been like to live through Greece's slump.

Well, other than the chart above. It shows how much money Greek people from the richest to the poorest 10 percent have had after accounting for taxes and inflation the past 40 years. The simple story, as you can see, is that there was a big jump for everybody after the junta was pushed out in 1974, a big stagnation from the mid-80s to the mid-90s, an even bigger jump, especially for the rich, after that, and then a big crash that's erased 30 years of gains—or more. Greece's rich have done a little better than the rest, with their real disposable incomes "only" falling to 1985 levels. But its poor have fallen even further, all the way back to where they were in 1980.

That's why it's no exaggeration to say that Greece really does have a humanitarian crisis on its hands. The left-wing Syriza government has made this a priority—they want food stamps for the hungry, healthcare for the sick, and electricity for people who can't afford to keep on the lights—but even with a limited victory in its first round of negotiations with Europe, it's not clear where the money's going to come from. Or if it will even have what it needs to pay back its creditors. It hasn't helped that all this political uncertainty has killed what was a nascent recovery—which in this case, was a very relative term—and sent its economy back down again.

It's going to be a long, long time before Greece is back to where it was in 2008. But at some point it will, right?

Poverty and Homelessness in Athens: Governance and the Rise of an Emergency Model of Social Crisis Management

By Vassilis Arapoglou and Kostas Gounis
March 2015


ABSTRACT

This paper presents findings from the study “Caring for the homeless and the poor in Greece: implications for the future of social protection and social inclusion”. First, we offer an overview on the types of existing provisions for the homeless and the poor in Athens. Second, a wider concern of this paper is to discuss whether changes in social and urban policies in Greece enhance or inhibit access of the poor to secure housing, employment, and good quality of care. We identify key elements of an ‘emergency’ model for managing the social crisis associated with the sovereign debt crisis and austerity, offer some interpretation about the processes of its formation, and highlight its criticisms and alternatives suggested by service providers and civil society organizations.

Poverty and Homelessness in Athens: Governance and the Rise of an Emergency Model of Social Crisis Manageme...

Greece: Solidarity and Adjustment in Times of Crisis

By Tassos Giannitsis and Stavros Zografakis
March 2015


Abstract

This report attempts to examine the impact of the crisis and crisis policies on incomes, inequality and poverty in Greece. Based on extensive income and tax data, it investigates changes in incomes, direct, indirect and property taxation and their incidence between 2008 and 2012-13, their impact on pre- and post-tax inequality and the resulting social reclassifications within the Greek society. The report is distinguishing income by sources at the deciles level, including the top 1% and 0.1%, household and individual income while focusing also on the sub-groups of the ‘same households’ and the ‘same individuals’. Furthermore, the analysis combines unemployment and income data and uses an ‘index of despair’ reflecting the pressure felt by households hit from salary drop and unemployment. The findings suggest that pauperisation hit large parts of the society, that policies had very differentiated effects on different groups and that, therefore, average values obscure contrasting changes in inequality regarding particular sub-groups, that during the crisis all income classes comprise winners and losers and last, but not least, that many macro-variables and social indicators were the result of a deficient crisis management approach and ideological inflexibility coupled to established political interests, making the exit from the crisis more complicated and painful. The findings of this analysis should be assessed in the light of the severe economic depression caused by the Troika‘s policies.

GREECE: SOLIDARITY AND ADJUSTMENT IN TIMES OF CRISIS

Suicide rates soar in Greece as economic cuts bite

Apostolos Polyzonis, 55, out of work and out of money, set himself on fire outside a bank in Thessaloniki, Greece in 2011.

Πηγή: MedicalXpress
Apr 22 2014

The effect of economic cuts on debt ravaged Greece included a dramatic rise in the number of men committing suicide, according to new research.

The research, by Dr Nikolaos Antonakakis and Professor Alan Collins at the University of Portsmouth, is the first to examine the direct impact of fiscal austerity on suicide rates in any country.
The two economists are now calling for governments and agencies to find ways of stopping people being broken by harsh economic cuts.

The research is published in the journal Social Science and Medicine.

According to the research, every one per cent fall in government spending in Greece leads to a 0.43 per cent rise in suicides among men. Put simply, 551 men committed suicide between 2009 and 2010 in Greece solely due to fiscal austerity.

Dr Antonakakis said: "We were surprised, this is a huge number, but the results were very clear – more men commit suicide as economic conditions worsen.

"Interestingly, the effects of fiscal austerity and economic growth are gender-specific, with no obvious rise in the number of women committing suicide."

Men aged 45-89 are the most likely to commit suicide in response to harsh economic cuts because they are most likely to suffer drastic cuts to their salaries and pensions.

Surprisingly, the study – which examined suicides and the economy over more than four decades – also found an increase in alcohol consumption and divorce helped reduce suicide rates among the over-45s.

Dr Antonakakis, a Senior Lecturer in Portsmouth Business School and an Assistant Professor in Vienna University of Economics and Business, said: "Despite its legal obligation to assess the health effects of EU policies, the Directorate-General for Health and Consumer Protection of the European Commission has been rather passive in terms of assessing the impact of the troika's push for austerity, and has rather limited EU commentary to advise how health ministries should cut their budgets.

"Only recently has the European Commission begun measures to release structural funds to support access to health care for those otherwise without cover.

"Euro zone leaders should put greater emphasis on stimulating debt-stricken economies to mitigate or even eliminate the negative effects of fiscal consolidation and austerity on suicides."

The authors are also calling for specialised suicide prevention programmes to be set up in Greece to help the most distressed and vulnerable.

The researchers studied the number of suicides in Greece from 1968-2011.

The results provide the most comprehensive and up to date picture of the effect of the economic downturn on Greece, which received its first bailout of €110 billion in 2010 with strict conditions including tough austerity measures; privatisation of government assets; and dramatic changes to the country's industries and government. The effects of these measures include soaring unemployment rates and a sharp decline in growth.

The researchers found:

• As growth fell and unemployment rose, suicides among men rose by between 1.4 and 2.2 per cent, respectively;
• Negative economic growth and rising unemployment lead to significantly increased likelihood of younger men, aged 25-44, committing suicide, with a one per cent increase in unemployment leading to a 3.5 per cent rise in suicides among this age group, though migration and receiving money from family members who had migrated is found to reduce suicides among both the youth and female population.
• A decline in fertility rates of women aged 25-64 leads to an increase in suicides rates among men. This may be because fertility rate usually serves as proxy for the degree of social integration and a decline in fertility can be interpreted as an increase in social disintegration and exclusion;
• And that alcohol consumption and divorce reduce the suicide risk among men aged 45 and older.

The outlook for Greece in the short to medium term does not look encouraging, Dr Antonakakis said.

"The situation in Greece is improving and the country recently returned to the bond markets to get self-financed for the first time since it needed international rescue loans in 2010. However, the road is still very steep. Unemployment is at 27 per cent, and among youth, it is 60 per cent, and the country's debt is still at an unsustainable 170 per cent, which cannot be self-served."

The researchers are calling for more research to discover if the effects of fiscal austerity found in Greece apply also to other countries.

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Explore further: Financial crisis drives up Greek suicide rate

More information: Social Science and Medicine, "The Impact of Fiscal Austerity on Suicide: On the Empirics of a Modern Greek Tragedy." Nikolaos Antonakakisa and Alan Collins (in press)

Journal reference: Social Science and Medicine

Greece grapples with soaring numbers of abandoned children and babies

A protester runs to escape from riot police during clashes over austerity measures at Syntagma square, central Athens, Wednesday, June 29, 2011. 

Πηγή: Washington Post
BY ANTHEE CARASSAVA
Feb 14 2013

ATHENS — First came the rising rates of homelessness. Then, the explosive growth of suicides. Now, four years into a devastating financial crisis, Greece’s youngest citizens are falling through the cracks of the country’s disheveled society.

Either deserted at maternity wards days after their birth, bundled inside pillowcases, or packed in cardboard boxes dumped on the doorsteps of churches, clinics and charity centers, abandoned babies are turning up all over the country.

Hard statistics are difficult to come by. But in a telling tale of the trend and an admission of the devastating effects of austerity on young children, Health Minister Adonis Georgiadis told parliament recently that the number of abandoned infants had soared by 336 percent alone in the state’s flagship pediatrics hospital since the start of the financial crisis.

Four other children’s hospitals and maternity clinics in the capital, home to half of Greece’s population of 11 million, showed similar spikes. State orphanages and charity centers, meantime, are teeming with unwanted children — many of them neglected and increasingly malnourished since the economy skid off the fiscal cliff in 2010, sinking Greece deep into a recession.

“It is the most tragic human consequence of the [financial] crisis,” says Stelios Sifnos, Director of Social Work and Research at the SOS Children’s Villages charity. “There is urgent need for action.”

“We’re talking about children here, not cars,” he adds.

Social care has never been a forte of the Greek state. In fact, whatever semblance of it that did exist ahead of the financial crisis, now stands hollow, leaving the country’s family-first society to mitigate social plagues like abandonment and neglect.

“The question,” says Kostas Yannopoulos, founder of the Smile of the Child charity, “is how much more the Greek family can endure — if at all.”

“Just the other day I had a mother with nine children — from infants to teenagers — begging me to take them all in because she no longer had the means to cope.”

That same week, Yannopoulos and his aides, who care for more than 330 children in a bevy of hostels set up across the country, scrambled to accommodate a baby whose 35-year-old father had taken a gun to his head after losing his job. His wife, also unemployed, was left distraught, unable to take care of their 8-month-old girl.

Days prior, a local prosecutor ordered social workers to place another baby girl into the care of a state children’s hospital after neighbors of the impoverished family spotted the child neglected, having been bitten by roaches and rodents.

For generations, most abandoned babies and neglected children came from battered neighborhoods, abusive parents and drug-infested homes. They still do so today, only now the scope of the problem, the severity of the cases, and the lack of social services have been amplified by austerity and growing middle-class poverty.

“This is no longer a plight of the poor,” says Ilias Zagoreas, the capital’s leading district attorney handling cases involving minors. “The line has been clearly crossed.”

In 2013 alone, Mr. Zagoreas said, his office dealt with more than 1,000 cases of abandoned and neglected minors, mainly babies, in Athens and the port city of Pireaus. That’s 30 percent more than 2012, but significantly less than the overall extent of the problem.

“While I am obligated to look into each and every case and complaint,” he explained, “my ability to do so has been limited because of state budget cuts. So, if I once had the ability to send two social workers a week to probe a case, that same procedure, now, may take four to five months because of cutbacks in personnel.”

Meantime, Zagoreas warns, the child in question is “in peril.”

Since the start of the financial crisis, more than 1,000 families have asked SOS Children’s Villages alone to place children in their homes. “That’s an amazing 1,000 percent rise from the 42 cases recorded ahead of the crisis,” Sifnios said.

With unemployment nearing 30 percent, incomes crushed by 25 percent, and bank accounts depleted by unrelenting taxation, child advocates, social workers and judicial officials fear that the country’s prolonged austerity will put families under further strain, pushing greater numbers of young children to the sidelines of neglect and abandonment.

Struggling families, though, are fighting back, trying to keep their units intact.

Recently, as I walked through the gloomy green corridors of a public pediatrics ward, peeking at the rows of unwanted newborns, I noticed a mother cradled next to her two babies in a separate hospital room. With the consent of a prosecutor, the mother and her husband placed their 18-month daughter and four-year old son in the care of the hospital for financial reasons.

Since then, both parents have been alternating shifts, looking for work by day, spending time with their children and sleeping beside them at night.

For a nation as proud and family-centred as Greece, the plight of such families strikes a collective nerve. But underfunded and understaffed, hospital administrators seem unsympathetic.

“I do not have the luxury to use up resources and personnel on healthy children,” says Manolis Papasavvas, director of the Aglaia Kyriakou Children’s Hospital, in Athens. “This isn’t a hostel, it’s a hospital, and a hospital is no place to rear a child.”

Health minister Georgiadis said a special hostel will open in March to relieve state hospitals of the added task of tending to deserted children. Repeated requests for clarifications went unheeded, and children’s agencies already seem skeptical of the plan.

“The fear is that they [health ministry planners] may sweep this plague under the rug, relocating the infants without addressing the root of the problem and coming to the aid of struggling families before they are broken and children are abandoned,” Sifnios of the SOS Children’s Village.

“If this does not happen… then the Greece of today is setting itself up for an angry and resentful generation in the future.”

Greece On the Edge

A ghastly new dawn

Πηγή: The Economist
Sept 21 2013

A WHIFF of tear gas, the first in the city centre for almost a year, signalled the start of a new round of protests led by Greek teachers, school and university administrators, and members of the capital’s recently disbanded municipal police. All face being laid off in a long-awaited cull of public-sector workers. Riot police resorted to firing the tear gas on September 16th to dissuade a group of school guards from occupying the ministry of public administration.

Kyriakos Mitsotakis, the minister in charge, has been scrambling to find another 1,500 candidates to complete a quota of 12,500 workers, who will be transferred to a “mobility reserve” at the end of September. University rectors objected to his last-minute proposal to include secretaries, laboratory technicians and computer support staff. Mr Mitsotakis had to cast around half a dozen ministries to try to make up the numbers days before the “troika” of officials from the European Commission, European Central Bank and IMF arrive to check up on Greece’s progress.

Another 12,500 jobs must be cut by the end of 2013. Workers dumped in the reserve on 75% of their pay will be given eight months to find a new public-sector job. The striking teachers are backed by Alexis Tsipras, leader of the radical Syriza party, the main opposition, who wants to bring down the government.

The mood is edgy. Middle-class Greeks are struggling to pay three years’ worth of property taxes. Rumours are rife of another cut in pensions to help plug a widening deficit at IKA, the biggest social-security fund. Mr Samaras’s New Democracy party has fallen a point behind Syriza in some recent polls.

Greece is on track to achieve a primary budget surplus this year before debt repayments, but will still need an extra €4.4 billion ($5.9 billion) from its creditors next year and €6.5 billion in 2015. Some indicators suggest that this year’s recession will be shallower than forecast and that the economy will grow by 0.8% next year. Athens officials hope to begin discussing debt relief, perhaps involving another reduction of interest rates, and an extension of loan maturities, once Eurostat, the EU’s statistical arm, confirms the primary surplus in April.

Despite this encouraging news, Mr Samaras worries about a political “blind spot” that extremists can exploit when the economy has begun to improve but ordinary Greeks feel nothing has changed. Opinion poll support for Golden Dawn, the thuggish neo-Nazi party, has jumped from 10% to 15% since June. On September 18th a hip-hop artist was murdered by a man claiming allegiance to Golden Dawn. Violence erupted once again on the streets as demonstrators expressed their outrage. A return of the old strife between left and right now seems all too possible.

A Promise to Protect Pensions Will Test Greece’s Red Line on Austerity

Teachers in Athens protested against job cuts and other austerity measures on Wednesday.

Πηγή: New York Times
By NIKI KITSANTONIS
Sept 18 2013

ATHENS — With a fresh inspection by Greece’s foreign creditors looming next week and labor unions leading a new wave of strikes, the government here has drawn a red line: it will keep pushing economic reforms but vows to impose no more austerity measures on Greeks already battered from three years of tax increases and pension cuts.

That could prove a hard promise to keep.

There is an estimated shortfall of 2.5 billion euros, or $3.3 billion, in the country’s social security funds for the year. And Greece is peering into an even larger chasm, an 11 billion euro financing gap that its international creditors have said the country will face as its debt payments come due over the next two years.

A third foreign bailout, on top of the total 240 billion euro in bailouts given to Greece since 2010, is now assumed to be necessary.

No wonder Greek trade unions and labor experts are warning that, despite the supposed red line, further pension cuts are likely. The concerns brought thousands of Greeks to the streets of Athens on Wednesday, calling attention to a two-day strike by civil servants, whose salaries and pensions have already been cut by 30 percent over the last three years. The strike was called to protest the government’s plans for thousands of forced transfers and layoffs in the Civil Service, but fears about pensions were in the air.

“Just let them try and cut our pensions again,” said Maria Vassilopoulou, a 45-year-old nurse taking part in the protest. “They’ll have a riot on their hands.”

The Greek labor minister, Yiannis Vroutsis, denied over the weekend that pensions would be withheld or cut. “I want to reassure people that their pensions will not be touched,” he said. “Families can make their plans feeling safe and secure.”

But retirees are on edge. Stathis Meltakis, a 65-year-old car mechanic who retired this year, has been counting on a monthly payment of 850 euros from the country’s biggest pension fund for private sector workers, IKA, which provides health coverage to 5.5 million people and pensions to more than 800,000. But last week, the union representing IKA workers warned of cuts of 10 to 30 percent in pensions next year.

“I’ve no idea when I’ll get it or how long the checks will keep coming,” Mr. Meltakis said. “You can’t be sure of anything anymore.”

With Greece still not meeting the financial targets set by its international creditors, labor unions and economists worry that public pensions and state social security spending, which this year will total 18 billion euros, could be reduced again.

“Basically, the pension system is collapsing,” said Savas Robolis, a prominent Greek labor economist who leads the research institute of the private workers’ union, the General Confederation of Greek Workers. He said that the funds’ decline was long in the making, after years of mismanagement, but that the country’s debt crisis dealt the final blow.

With unemployment at a record 28 percent, fewer workers are paying into the funds, which have been sapped, too, by the early retirements of thousands of civil servants scrambling to escape forced transfers and layoffs.

Mr. Robolis’s report called for growth-enhancing measures to increase the size of the Greek work force. Currently, only one Greek works for every two who do not. He also warned of the need to find ways of bolstering social security revenue.

Of immediate concern is how to plug the social security funds’ estimated deficit for this year of 2.5 billion euros.

Unlike the country’s banks, Greece’s pension funds were not recapitalized after a 50 percent write-down of private Greek debt last year, part of the country’s second bailout. The funds, as a result, came out of the bailout with a loss of 12 billion euros.

Debts owed to IKA — mostly by employers delinquent on their social security contributions — ballooned to 8 billion euros, from 4.8 billion euros in 2010, the union representing IKA workers said. The union’s warning was followed by reports in the Greek media that IKA borrowed 150 million euros from the state to pay pensions in October.

Mr. Vroutsis, the labor minister, acknowledged over the summer that the country’s pension system was “not viable” and “in need of a fundamental overhaul.” Among the proposed measures is the creation of an electronic system for employers to declare their contributions. An estimated half-million self-employed Greeks are thought to be illegally avoiding their obligation to pay into the system.

At the same time, a crackdown on social security fraud — a problem considered as pernicious as the country’s widespread tax evasion — has seen some results. A unified payment system started operating in June and identified at least 50,000 false claimants, many of whom had been collecting the pensions of dead relatives for years.

“In a short period of time, we managed to put sturdy foundations in an old and rotten structure,” the Labor Ministry’s general secretary, Panagiotis Kokkoris, said.

While larger countries in the euro zone with debt problems, including Spain and Italy, have also cut benefits, the impact of the changes has been less acute than in Greece, where three years of austerity measures have deepened a recession and brought political and social upheaval.

The Greek pension problem is expected to be on the agenda next week when officials from the European Commission, the European Central Bank and the International Monetary Fund meet in Athens. Other points of discussion are expected to include additional forced transfers and layoffs in the Civil Service, lagging tax collection and a slow-moving privatization drive. Hanging over the meetings is that 11 billion euro funding gap, which could necessitate another bailout, albeit one much smaller than the previous two.

Despite the bleak numbers, Greece is predicting a primary surplus — revenue not counting debt payments for this year — chiefly because of a boom in tourism.

Prime Minister Antonis Samaras pledged last week to give 70 percent of any surplus to pensioners on low incomes, but political opponents accused him of making false promises.

Already, pressure is building on Mr. Samaras’s fragile coalition government. Teachers, hospital staff and other civil servants, as well as lawyers, are on strike this week.

“Pensions are the easy target,” said Mahi Triantafyllou, a 58-year-old high-school teacher, at one protest. “They’ll hit us again.”

A Marshall Plan for Greece

Πηγή: Reuters
By Ellen Freilich
July 30 2013

The spectacular failure of “expansionary austerity” policies has set Greece on a path worse than the Great Depression, according to a study from the Levy Economics Institute of Bard College.

Using their newly-constructed macroeconomic model for Greece, the Levy scholars recommend a recovery strategy similar to the Marshall Plan to increase public consumption and investment.

“A Marshall-type recovery plan directed at public consumption and investment is realistic and has worked in the past,” the authors of the report said.

Employment in Greece is in free fall, with more than one million jobs lost since October 2008 — a drop of more than 28 percent, leaving the “official” unemployment rate in March at 27.4 percent, the highest level seen in any industrialized country in the free world during the last 30 years, the Levy Institute scholars said.

The study argues the austerity policies espoused by the “troika,” the group of international lenders who funded Greece’s bailouts, have failed and that continuing those prescriptions will only worsen Greece’s jobs, growth, and deficit outlook.

“With joblessness in Greece now above 27 percent – a stark indicator of the troika’s failure to accurately project the consequences of their own policies, it’s astonishing that (European Commission) and (International Monetary Fund) officials continue to ask for more of the same,” Levy Institute President Dimitri Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza wrote in their analysis.

“The Greek Economic Crisis and the Experience of Austerity: A Strategic Analysis,” seeks answers to Greece’s downward spiral of lost growth and employment combined with higher public deficits and debt.

That spiral is the consequence of “foolish policy” enacted by the Greek government as it tried to comply with the terms of a fiscal consolidation program imposed by its international lenders, the economists said.

Using the Levy Institute macroeconomic model of the Greek economy, or LIMG – a stock-flow consistent model similar to the Institute’s model of the U.S. economy, the Levy scholars analyze the economic crisis in Greece and recommend policies to restore growth and increase employment.

Based on the LIMG simulations, the authors found that a continuation of austerity policies would lead to lower GDP and higher unemployment numbers than those forecast by the troika.

In their baseline scenario, the authors contend that, based on the troika’s projections for changes in government revenues and outlays, GDP will grow more slowly and the unemployment rate will rise more sharply (to near 34 percent by the end of 2016) than the troika contends they will.

The baseline scenario asserts that deficit targets will not be met, with the deficit-to-GDP ratio reaching 7.6 percent by 2016.

Meeting the troika’s deficit targets, the LIMG model shows, would cause GDP and employment to decline even further than in the baseline scenario – another example of the “faulty thinking” used to support the troika’s projections, which the Levy scholars call too optimistic.

“In addition to the errors in the values of the fiscal multipliers and the doctrine of ‘expansionary austerity,’ there are implicit supply-side effects emanating from market liberalization and internal devaluation, with all effects converging to produce higher output growth and employment, together with lower deficit-to-GDP ratios,” Papadimitriou, Nikiforos, and Zezza argue.

“These flaws help to explain why, in the absence of any level of economic stimulus, the troika projections are so optimistic,” they said.

The study’s authors conclude by recommending a recovery strategy centered on an expanded direct public-service job creation program.

Their projections show that, using funds from the European Investment Bank or other EU institution, a modest fiscal boost of $30 billion (used at a rate of about $2 billion each quarter) would fundamentally change the outlook for Greece’s economy.

GDP growth would exceed all previous scenarios. Jobs would increase more than 200,000 jobs over the baseline “troika” scenario, and the government deficit would be lower than their baseline and GDP-target scenarios.

“The simulations discussed show clearly that any form of fiscal austerity results in output growth and employment falling into a tailspin that becomes harder and harder to reverse,” the Levy scholars write.

“We have shown that a relatively modest fiscal boost funded by the appropriate European Union institutions could not only arrest the further declines in GDP and employment, but also reverse their trend and put them on the road to recovery,” the authors of the study said.

Prime Minister's 'Loose Cannon' Style Divides Greece

A year into his tenure as prime minister, Antonis Samaras is viewed with suspicion by many Greeks.

Πηγή: NPR
By JOANNA KAKISSIS
June 30 2013

Antonis Samaras became prime minister of Greece a year ago, when the world assumed his country, battered by debt and austerity, would exit the eurozone.

European leaders were openly relieved that Samaras' conservative, pro-bailout New Democracy Party eked out a victory in elections last June over the leftist, anti-bailout Syriza Party.

"Today, the Greek people express their will to stay anchored with the euro, remain an integral part of the eurozone, honor the country's commitments and foster growth," Samaras said that night. "This is a victory for all Europe."

European leaders believed Samaras, a 62-year-old, U.S.-educated economist from a well-connected family, would tow the line on austerity.

But he was also known as a loose cannon, says political analyst Thanos Veremis.

"He always leapt into the unknown and usually fell in the crevice," Veremis says.

As a young foreign minister in the early 1990s, Samaras took a leap that brought down the very government he was serving.

He ignited an embarrassing diplomatic crisis by refusing to let a newly independent Balkan country call itself Macedonia. The name, he declared, was historically Greek.

He expected nationalist outrage over protecting this special Greek identity to sweep him into power then, Veremis says.

"He thought he was riding a wave of patriotism which emerged at the time, but you know such waves don't last forever," he says. "They're here today, gone tomorrow."

A Rise, A Return, Then A Reversal

Samaras' nationalism has its origins in his own family. His great-grandmother was Penelope Delta, who wrote patriotic children's books and committed suicide in 1941, when Nazi troops entered Athens.

He graduated from Athens College, an elite private school established by Americans. Aristos Doxiadis, an entrepreneur who went to high school with Samaras,remembers him as a "cheerful guy who was very good at sports."

He attended Amherst College in Massachusetts in the early 1970s. He lived in the same dormitory as George Papandreou, the scion of Greece's most prominent political family and a future prime minister himself. He also got an MBA at Harvard.

Samaras was a rising star in Greek politics until the Macedonia debacle, which kept him out of politics for a dozen years. He returned as the leader of the New Democracy Party in 2009; the following year he rode another wave — this time, against popular outrage over austerity measures — to unseat Papandreou as prime minister.

Papandreou had shocked world markets by revealing the country was deeply in debt. To save Greece from bankruptcy, he asked for billions in bailout loans from the European Union and the International Monetary Fund, which demanded painful austerity measures in return.

Samaras accused Papandreou of destroying the country. He refused to negotiate with anyone, including German Chancellor Angela Merkel, now his ally.

"During the first year of the bailout, [Samaras] really stoked the fires of populism and was not constructive at all," Doxiadis says. "So when he took over the government and started actually implementing, with some zeal, measures that needed to be implemented, yes, I was pleasantly surprised, like quite a few people."

Failing To Please

But some see Samaras as hypocrite for supporting the austerity policy he used to blame for killing the Greek economy, now in its sixth year of recession.

The private sector has been especially hard-hit. Tens of thousands of businesses have gone under in the last three years.

Among the latest is Katselis, a well-known producer of baked goods. Nearly a thousand people there are set to lose their jobs, including 55-year-old Olga Dimitriadou, who has worked at the factory for 13 years.

"Politicians protect the public sector and let the private sector flounder," Dimitriadou says. "They only care about staying in power." She says politicians give their friends jobs in the public sector, where, until recently, the constitution forbade layoffs.

So earlier this month, Samaras hoped to appeal to reformers by abruptly shutting down the state-run Hellenic Broadcasting Corporation and firing its staff of more than 2,600 people.

He complained the staff there was always on strike and failed to broadcast good news about the country and his government.

Instead of embracing the shutdown, many Greeks saw it as dictatorial.

They joined the laid-off broadcast workers, who still occupy the network's suburban headquarters, at protest concerts outside the building.

Members of his own coalition government were also shocked. The Democratic Left, one of two parties supporting the Samaras government, which didn't win enough votes to govern alone, resigned from the coalition in protest.

"He only consulted us when he wanted laws passed," says Maria Yannakaki, a Democratic Left parliamentary deputy. "The rest of the time, he ignored us."

Samaras promised to reopen the broadcast network with a much smaller staff hired on merit, but his plan sounds vague, as if he had hatched it over a weekend, Veremis says.

"His shortcoming is that he's a man of checkers rather than chess," he says. "I mean, he makes a move, which is interesting, but there's no follow-up. And that is Samaras' personality."

Last week, he appointed a new cabinet of party loyalists after some members of his government resigned. As he takes his latest leap into the unknown, he vows to stay in office.

Attac study says where rescue funds for Greece end up

Πηγή: DW
June 17 2013

The anti-globalization pressure group Attac has published a study indicating that the bulk of the rescue funds made available for Greece have tended to go to help banks. Ordinary people haven't profited much, it said.

More than three quarters of all rescue funds for Greece went directly to banks and rich investors, German daily newspaper "Süddeutsche Zeitung" claimed Monday, quoting a fresh study by the anti-capitalist pressure alliance Attac.

The group said out of the 207 billion euros ($276 billion) earmarked so far by international creditors, 160 billion euros ended up with Greek lenders and investors.

"Political elites have not been trying to rescue the Greek population, but the finance sector," said Lisa Mittendrein from Attac Austria.

According to the calculations made by the pressure group, the government in Athens put 58 billion euros into the domestic bank's recapitalization program. Another 55 billion euros were used to pay back sovereign bonds and 11 billion euros more to buy back accumulated debt.

Berlin not amused

Attac maintained an additional 35 billion euros were spent with a view to sweeten the 2012 debt reduction scheme also known as the Greek haircut for affected insurance companies and investment funds.

The group also said that only a small proportion of the money that actually did reach the Greek state budget could be used do anything meaningful for the population, as 35 billion euros had to be spent on debt servicing for the holders of sovereign bond bills.

"The widespread belief supported by European politicians that the various rescue packages for Greece have helped ordinary people in the country is no longer tenable," Mittendrein commented. Instead, she argued, Greeks have been made to foot the bill in terms of harsh austerity measures with all the known drastic social consequences like record-high unemployment.

The German government rejected the conclusions made by Attac, arguing that Greeks have profited from the government in Athens having more time to implement reforms. Berlin also claimed that all Greeks had profited from saving lenders from bankruptcy.

A Chance to Do Better on Greece

Πηγή: New York Times
By THE EDITORIAL BOARD
June 14 2013

The International Monetary Fund now has a chance to show what it has learned from past policy mistakes on Greece, mistakes it acknowledged last week. This week a delegation from the fund, the European Central Bank and the European Commission was in Athens to review Greek compliance with the terms of the latest bailout agreement, a condition for releasing this month’s $4 billion installment. Greek officials said they hoped the European examiners would show new flexibility on changing the agreement’s more counterproductive requirements.

Adjustments are most needed on tourism taxes and privatization deadlines. Foreign tourism is one of the few bright spots in the Greek economy, with as many as 17 million foreign tourists expected this year. Athens wants to attract more tourist spending by lowering the value-added tax on restaurants and tavernas from the current 23 percent to a more tolerable 13 percent. This means fewer tax dollars in the short term for the Greek government, but more jobs and revenues for the struggling private sector. The three official lenders should agree to this.

And while the trio’s insistence that Athens sell off mismanaged state enterprises and real estate is sound, the rate of sales to the private sector depends on the willingness of qualified buyers to pay fair market prices.

That process hit a big snag this week when the only expected bidder for Greece’s natural gas monopoly, a subsidiary of Russia’s Gazprom, unexpectedly withdrew. The reasons are disputed, but Greek officials say European Union misgivings about Gazprom’s extending its stranglehold over the union’s natural gas market was a factor.

Gazprom’s withdrawal cost Athens more than $1 billion in expected privatization revenues. Under the terms of the current bailout agreement, devastating new government spending cuts must now replace 50 percent of those lost revenues. That provision should be suspended until new sales terms can be worked out.

Greece’s economy shrank 6 percent last year and continued contracting at a 5.6 percent rate in the first quarter of 2013. It is now more than 20 percent smaller than in 2007. Overall unemployment is 27 percent, and the rate is more than twice that for people under 25. Surely the three lenders’ economic experts understand that shrinking a shriveled economy and idling more of its potential work force will not help pay off Greece’s debts.

The stubborn insistence of European officials that nothing is wrong with this picture probably means these officials will not respond constructively to Athens’s reasonable requests for relief. But the I.M.F., having expressed some regret for past error, should see more clearly the harm being done.

Greece Shutting Down State Broadcaster to Cut Costs

Employees of the state broadcaster Net protest at the company's headquarters north of Athens.

Πηγή: New York Times
By NIKI KITSANTONIS
June 11 2013

ATHENS — In a surprise move, Greece’s conservative-led coalition government said Tuesday that it would shut down the state broadcaster Net as part of a cost-cutting drive imposed by the country’s foreign creditors, prompting protests from labor unions and the government’s increasingly alienated junior partners, which said they had not been consulted.

Describing Net as a “modern-day scandal” and “a unique case of lack of transparency and waste,” a government spokesman, Simos Kedikoglou, said Net would stop broadcasting at midnight on Tuesday and reopen soon as a “modern state organization” with a fraction of its 2,900 employees.

Net has not been implicated in corruption scandals any more than any other state organization, and Mr. Kedikoglou’s strong language was broadly seen as the government’s attempt to show creditors that it was boldly and decisively moving to cut waste in the public sector.

Following the broadcast of the spokesman’s remarks on Net, the station’s anchors and commentators engaged in a furious live discussion lamenting their fate.

Reacting to the news, unions representing the workers crowded outside the broadcaster’s headquarters, north of Athens, and told reporters that they would stage sit-ins to ensure that Net’s five state television channels — three broadcast, one satellite and one cable — and 29 radio stations remained on the air. (Net has 2,650 full-time employees and about 250 people on short-term contracts.)

Standing with the protesters, a spokesman for the main leftist opposition party, Syriza, accused the government of “extreme despotism” in closing Net.

Earlier in the day, the government submitted an emergency bill to Greece’s Parliament — a type of decree that does not require lawmakers’ approval — enabling the merging and abolition of state companies and paving the way for Net’s closure. The move prompted an angry response by the junior partners in the coalition government — the Socialist Party, known as Pasok, and the more moderate Democratic Left — which accused the dominant conservatives of failing to consult them, an increasingly common complaint.

“The public broadcaster cannot close,” Pasok said in a statement. “A three-party government cannot make decisions without the participation of all party leaders.”

The surprise announcement came a day after representatives of Greece’s troika of foreign lenders — the European Commission, the European Central Bank and the International Monetary Fund — returned to Athens for fresh talks on the progress of the country’s economic reform program. A focus of the talks is a Greek pledge to lay off 4,000 civil servants this year, including 2,000 over the summer. Speculation has been rife in recent weeks that the bloated state broadcaster could be a target for the first round of layoffs demanded by the troika.

Greece Slides Into The "Fourth World" - The Full Photo Album

Πηγή: Zerohedge

By Tyler Durdrn

June 6 2013

With Greek government bonds at multi-year highs (up 300% in the last year), the Athens Stock Index still up 100% in the last year, and leaders all over the Euro-zone proclaiming the crisis is over (and that Greece has "made big strides"); we thought it perhaps useful to look at the reality behind the propagandized talk and manipulation. The sad truth is Greece is rapidly dissolving into a 'fourth world' nation with unemployment rates (broad and youth) at unprecedented levels, poverty widespread, and homelessness rife. Perhaps, as Germany today stated that there will be no more debt reduction for Greece, it is 'math' in the first image that the TROIKA and the Greek representatives should pay special attention to...

A homeless scrap collector sleeps outside in central Athens May 26, 2013.

Stephanos became homeless in late 2012 when the clothes shop, where he had worked for over a decade, closed down and he had no income to pay for his flat. He now lives next to a church in central Athens and eats in soup kitchens. Stephanos smokes a cigarette as he sits on a rug in central Athens May 16, 2013.

36-year-old unemployed clerk Michael sits in the sun near a bridge in central Athens May 24, 2013. Michael worked as a hotel clerk for over fifteen years but when the hotel closed he was unable to find work and in late 2011 became homeless, two months later he was diagnosed with lymph node and thyroid cancer. He now lives outside a church.

51-year-old Romanian truck driver Adrian, who lost his job in 2010 when the lorry company he was working for closed down, sits with his head in his hands in central Athens January 18, 2013. Adrian survives by collecting scrap and lives in an abandoned warehouse in Athens central vegetable market.

40-year-old Yiorgos, who became homeless in 2010 after his grocery shop went out of business, sleeps outdoors in central Athens February 3, 2013.

42-year-old Alexandros, from Serres in northern Greece, sits in the abandoned car he lives in, at the port of Piareus near Athens April 10, 2013. Alexandros owned a plant shop in Athens until 2010, when it was forced to close, he became homeless soon after.

Homeless people sleep outdoors in central Athens April 14, 2013.

35-year-old Vassilis, who has been treated for severe physiological issues, sits in the afternoon sun under the bridge where he has lived for the last year and half in central Athens May 25, 2013.

58-year-old Matheos stands next to the makeshift shelter where he has lived since late 2011, on a hill in central Athens January 23, 2013.

50-year-old Giorgos sits with his belongings under a bridge, where he lives with a group of other homeless people, in central Athens May 25, 2013. Giorgos was forced to close down the billiard hall he owned in 2006, and spent time in prison for not paying his social security debts.

56-year-old Boris Potev, a Bulgarian immigrant, lies on a mattress amid garbage in an Athens suburb April 9, 2013.

Michael, a 36-year-old unemployed man, poses by an abandoned open-air cinema in central Athens February 8, 2013. Michael worked as a hotel clerk for over fifteen years but when the hotel closed he was unable to find work and in late 2011 became homeless. Two months later he was diagnosed with lymph node and thyroid cancer. He now lives outside a church.

Marialena, a former drug addict who is on a methadone rehabilitation program, pushes away her boyfriend Dimitrios who is trying to clean up her self-inflicted wounds, under a bridge in central Athens May 15, 2013.

42-year-old Marialena, a homeless AIDS sufferer and former drug addict who is on a methadone rehabilitation program, drinks coffee after waking up next to her boyfriend Dimitrios in central Athens May 26, 2013. Dimitrios, 51, was a dancer in a famous Greek folk dancing troupe until he lost his job three years ago and became homeless.

Source: Reuters

Olli Rehn should resign for crimes against Greece and against economics

The consequences of Greek austerity 

Πηγή: The Telegraph
By Ambrose Evans-Pritchard
June 6 2013

Nobody has taken responsibility for the disastrous errors made by the EU-IMF Troika in Greece, where youth unemployment has just reached 58.3pc.

Nobody has resigned, or missed a day’s pay, or faced any kind of censure from an elected body, despite the withering indictment just issued by the IMF.

Worse yet, the basic conceptual policy errors that led to this tragic episode have not been fully corrected.

With a little trimming here and there, the eurozone is sticking to the same mix of self-defeating contractionary policies that have tipped the region back into a double-dip recession, with seven quarters in a row of falling GDP, soaring unemployment, and an ever starker divergence with the United States.

Just to recap what our man Bruno Waterfield reported from Brussels, the IMF’s mea culpa admits that the Troika sacrificed Greece to save the euro.

It completely misjudged the ferocity of the downward spiral caused by austerity a l’outrance, and then blamed the victim by pretending that Greece was failing to comply with the terms.

The Troika recoiled from the standard IMF policy of debt restructuring for Greece in 2010 because it was “politically difficult” for countries (France? Germany?) whose banks held Greek bonds.

The report said the terms of the rescue violated three of the IMF’s four key rules for lending to insolvent countries, no small matter given that it was the biggest loan the Fund has ever made in proportion to a member’s quota, and given that staff were “unable to vouch that public debt was sustainable”.

It admitted that the 2010 package was a “holding operation” that “gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy”.

The European Commission defended itself yesterday, saying a debt restructuring in 2010 would have caused havoc in the bond markets and virulent contagion. This is true, but what kind of a defence is that?

Yes, everybody feared a chain-reaction of sovereign defaults reaching Italy and Spain, but this was entirely because the ECB was recklessly refusing to carry out its responsibility as a lender of last resort, the ultimate purpose of any central bank. In doing so, it was endangering the entire global financial system.

You can trace this paralysis to Maastricht and the nature of the ECB mandate, but as the Draghi (OMT) backstop for Italy and Spain has since demonstrated, what it really showed was that a lot of ECB governors were out of their depth, or pursuing naked national agendas, or both, and hiding behind what are in reality very elastic treaty clauses)

The IMF makes it crystal clear that the EU institutions and the leaders of EMU countries (still refusing to face up to the implications of EMU, or admit to their own voters that monetary union costs real money) were the chief villains in this saga.

What we see is a near perfect exhibit of what is wrong with the European Project. There is no mechanism of accountability. The buck stops nowhere.

I don’t wish to pick on Economics Commissioner Olli Rehn, although one’s patience runs out after listening to the Commission’s retort that the IMF is “plainly wrong”.

Mr Rehn is a decent man, with an impossible task, carrying responsibility without power. The politicians of the northern EMU states and the ECB are chiefly to blame.

I wrote at the time that Germany’s Wolfgang Schauble crossed a line by threatening to eject Greece from the euro and persistently vilifying the Greeks for failure to comply, when the essential failure was the policy itself. Greece kept missing deficit targets because the economy was collapsing, causing tax revenues to shrink.

Yet Mr Rehn is the titular official in charge. The Troika is “his” baby. If he were the finance minister of a democratic state he would surely have to resign after such blistering demolition of his tenure.

The fact that nobody ever resigns for botched policies in the EU system (Pace, the Santer Commission: the exception that proves the rule) should not deter Mr Rehn from falling on his sword from a high sense of honour. Such a gesture would clear the air, and mark a recognition that the policy formulae of EMU must be swept away to allow for recovery.

His director-general of economic and monetary affairs, Marco Butti, has admitted that the fiscal multiplier is higher than normal in a countries during a region-wide slump where the financial system has partially broken down and interest rates are near zero, and therefore that fiscal tightening does more economic damage.

But he admits it only in hindsight. The Commission now argues that the return to calm after the Draghi `Put’ has lowered the multiplier again, so there is no real need to change policy (other than letting the fiscal stabilizers do their work, avoiding the mistake of yet further tightening to chase missed deficit targets)

If no such resignation comes from Commissioner Rehn, we know the Rehn of Terror will go on. The regime will persist in destructive folly, adding 100,000 people to the jobless rolls each month.

Just a reminder of the scale of error, which I wrote about in this blog last year.

The Troika originally said that Greece’ economy would contract by 2.6pc in 2010 under the austerity regime, before recovering with growth of 1.1pc in 2011, and 2.1pc in 2012.

In fact, Greek GDP remained in an unbroken free-fall. It did not grow in either year. It contracted a further 7.1pc in 2011, 6.4pc in 2012.

Roughly speaking, the Troika misjudged the scale of economic decline over three years by 12pc of GDP. The total decline will be around 25pc, surely a Great Depression.

Don’t tell it was hard to foresee. The Greek Labour Institute and the think tank IOVE produced very accurate forecasts. The truth is that the Troika’s ideology of “expansionary fiscal contraction” is bunk, and doubly dangerous when compounded by tight money.

Like the Spartans, Thebans, and Thespians at the Pass of Thermopylae, the Greeks were sacrificed to buy time for the alliance.

Instead of applause, they were then vilified for their heroic efforts by ill-informed and self-interested Dutch, Finnish, Austrian, and German politicians. A squalid episode.