What Greece's Creditors Should Know
- Details
- Published on Wednesday, 17 June 2015 22:45
- Written by editor
~~~~~~~~~~~~~~(((( T h e B u l l e t ))))~~~~~~~~~~~~~~
A Socialist Project e-bulletin .... No. 1130 .... June 18, 2015
__________________________________________________
What Greece's Creditors Should Know
Vassilis K. Fouskas
In his recent article in Le Monde (31 May 2015), Greece's PM, Alexis Tsipras, said that if Greece were to implement the (failed) austerity policy of technocrats and bankers, then there would be no need to have elections in Greece, and indeed in any country following austerity programmes. He outlines two competing strategies that tend to shape current European politics: one that promotes unification and solidarity across the continent, and another that fights for division and separation.
Here, we take his thoughts a step further by suggesting what Greece's creditors should know in case the technocrats prevail in the current negotiations. Syriza's Greece cannot and will not default on its people by stopping paying wages and... pensions. If matters come to a head, it will default on its creditors because this is a matter of democracy and democratic principles are not negotiable.
Greece managed to make a recent payment of €750-million to the IMF by way of drawing down a special account Greece held at the fund. But early in June, a further payment of €300-million to the IMF is required, although the fund said that this can be met at the end of the month, allowing negotiators to strike a deal. It is almost impossible for Greece to meet further obligations to her creditors, given the fact that the most recent payments became possible after Greece's central government forced local authorities and public organizations to commit their reserves to servicing the country's debt.
Redemptions of €6.7-billion, which are held by the ECB and which have to be met in July and August are impossible to be paid. Since last October, the decline in bank deposits has been steady and the banking system kept operating thanks to emergency liquidity assistance (ELA) provided by the ECB via Greece's central bank. This is approved on a weekly basis by the ECB's governing council on the basis of a two-third majority and it can be cut-off at any point. Total bank deposits in Greece fell from €145-billion in March to €139.4-billion in April. Business and household deposits shrank by 3.5% to €133.6-billion. Growth shrank by 0.5% in the last quarter of 2014 and a further 0.2% in the first quarter of 2015.
The European Commission had forecast growth of 2.9% in November. Just before the Troika (ECB, IMF and the EU, now euphemistically called “institutions”) imposed the first bail-out deal in 2010-11, the debt/GDP ratio stood at 118%. Today, after five years of untold austerity measures it stands at 174%. The same goes for official unemployment. In 2010 unemployment stood at 9%. Today it is as high as 26%, with youth unemployment at 57%. This all speaks volumes of the failure of Brussels and Berlin to bridge the gap between centre and periphery in Europe via austerity programmes and fiscal discipline, which are recipes that the previous centre-right cabinets slavishly implemented in Greece from 2010 onwards.