by John Ward
Twelve years of hard times…to get precisely nowhere
The Government of Antonis Samaras has signed up to a debt bailout plan that ensures it will have a bigger debt in 2022 than it had in 2009. This process has already cost the country billions, and is set to cost it even more – not to mention the socio-political cost of acute shortages, loss of services, unemployment, and the rise of extreme Parties. In this special essay, The Slog lays out the full hypocrisy of this futile attempt by the EU’s leaders to keep the single currency afloat.
The devious practices involved in saving the euro by raping Greece become ever-more complex and Machiavellian. The International Monetary Fund said yesterday that it would not disburse funds in the proposed EU-IMF package for Greece unless the eurozone delivers on a bond “buy-back” scheme, which is deemed ‘crucial for restoring long-term viability in the country’.
The precedent being sought by the IMF/Washington is that the eurozone members will step up to the plate bigtime, and European Central Bank will become the de facto sovereign for all practical purposes. This has been coming for a while now, but the proposition that Greece is ‘viable’ without massive debt forgiveness is a cynical sham.
The point isn’t to make Greece viable, it is to use Greece as a sovereign, human debt cork.
To put this into context, the eurozone’s Emergency Liquidity Assistance (ELA) scheme is a lifeline without which the Greek banks would collapse within a fortnight at the most. During October, those banks borrowed an eye-watering €123bn. That’s 30% of the entire debt Athens fessed up to three years ago….in one month. Put another way, Greek banks are borrowing a sum over three times what the original debt was every year.
There may be a few inhabitants of cloud-cuckoo land who think the ECB’s Mario Draghi is dispensing that money without printing new stuff, but as usual they’d be wrong. Just to add to the complication, by the way, Draghi is refusing to take Greek bonds at the moment, and thus the rate of growth of that ELA borrowing is rising at 20% per month compound.
Now, while for Mario this is called printing compromised paper without getting lumbered with worthless paper, it isn’t viable for Greece to carry on like this. It’s more what you’d call a seriously deranged thing to do. Yet everyone is getting excited about €48bn supposedly arriving in mid-December thanks to Samaras the Wizard…IMF willing. So let’s look at what the IMF wants to be sure is going to happen.
The ‘deal’ Samaras was mad (aka desperate) enough to accept would’ve been at home with the rates being charged by moneylenders in the Warsaw ghetto during 1942. But it’s possible the Greek Prime Minister just may – literally – not have understood the 3-card trick he’d just been conned by. The deal was announced last Tuesday: it’s taken me until now to feel even half-confident in posting about it.
In the foggy exhaustion of last Tuesday morning, Wolfgang Schäuble said that there would be no new loans for Greece to help it buy back bonds sold to its own heavily-borrowing banks. He said that Greece could raise the funds from a combination of reduced interest rates on existing loans (part of the package) and profits that Greece would “make from the European Central Bank’s bond-buying programme”. Um, except that the ECB isn’t buying bonds from Greece right now…and the interest rate reductions over say one year of the repayment are piddling.
The bottom line is this: already insolvent Greek commercial banks are to take a haircut at the level of 11% of outstanding debt, and the grand total of State debt reduction by 2022 will be just…..€11.6bn. But even this is based on Troika projections: and they are off with the fairies.
The numbers simply don’t tumble. A banking system borrowing 123 bn a month is being asked to give 11% of the debt it is owed back for nothing, to reduce the country’s debt burden by under 10% over ten years. This is March Hare meets Mad Hatter through the medium of a Dali dream landscape.
Except of course that it isn’t: it’s ‘do whatever it takes to keep the Titanic afloat…up to and including plugging the hole with steerage passengers’.
But this isn’t the first time Athens has been skewered and then roasted by the folks up North allegedly trying to help them.
Earlier this year, the Berlin-driven bondholder haircut (the pSI) was launched with the claim that it would achieve a Greek sovereign debt reduction of €110 Billion. However, the reality in practice looked considerably less philanthropic.
Greek bank assets were plundered to the tune of 55bn, followed by another 25bn of Greek social security/pension fund assets, and 30bn of assets held by foreign banks and financial institutions. That and that alone is how the debt was reduced. Basically, the Troika ran rings round the Athens Government: it cut Greece’s own debts by handing over real Hellenic assets.
But of course, because the debt reduction calculations were based on badly-forecast market rates and insane Greek gdp growth projections, the debt mountain wasn’t reduced at all. The total Greek sovereign debt at the end of 2011 stood at 356bn. The debt today stands at 304bn and, if one then adds the new tranche of 48bn, the total debt going into 2013 is about the same as it was in 2011.
As The Slog posted in May, ‘Under the terms of the 2012 Brussels Accord, Greece is doomed to sink deeper into debt even if the economy picks up….which it isn’t doing: every month, it contracts further….’
When Papandreou pitched up in Brussels during 2009 to give his masters the heads-up on Greek borrowing incontinence, the country’s debt was 127% of gdp. By the end of 2011 it was 170.6% of gdp. Now, even accepting that brainless Berlin’s ‘inspired’ austerity has shrunk the economy, the physical amount of wonga owed by Athens is pretty much the same.
The target debt level under the latest Troika fantasy for 2022 is 133% of gdp. By then, the People of Greece will have been suffering scorched-earth austerity for twelve years. The net result of their sacrifice will be a shattered economy and a bigger debt. And trust me, it won’t be 133% of gdp: there isn’t an official from Paris to Milan who believes that bollocks. Continuing austerity will take that number to at least 170%.
The situation in Greece isn’t a sideshow to its increasingly put-upon citizens, but it is only the warm-up act for what’s coming down the road. The analogy I find myself using to people is of the 1936 Spanish Civil War versus the Second World War. Weapons are being tested and reactions gauged, but the nastiness on show is merely a taster.
As long as we have a media set in thrall to immediate events and melodramatic midnight announcements, the asylum inmates will continue on their way until everything civilised is destroyed. We do not need a regulated press in the UK, we need a responsible one. All they are responsible for at the moment is working alongside the Establishments on the smoke-screen pump – be that half-baked communiques or tabloid celeb cobblers.
The internet needs to take on the MSM’s former responsibility, but as yet we are far from ready. Sorry to keep harping on this point, but unless the blogosphere organises to cooperate, we are heading for Churchill’s New Dark Age.
THE $67 TRILLION SHADOW BANKING SYSTEM (The Fiat Currency Control Block)
The Global Economy is approximately $70 Trillion. According to a just released report by the
Financial Stability Authority (FSA), charged with investigating it globally, the Global Shadow
Banking System was $67T in 2011.
the $637 Trillion SWAP market (also unregulated and offshore
trading currency, interest & credit default swaps)
image from antinews.gr