Greece Before the Abyss: Only Bankruptcy Can Help Now

a commentary – Published on Spiegel Online International, by Stefan Kaiser, August 15, 2012.

… Officially, at least, everything is going according to plan. In September, officials with the troika — made up of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) — are planning to travel to Athens to check on the progress that Greece has made with its cost-cutting program. Then, according to the plan, they could disburse billions more in aid out of the second bailout package for Greece, which the euro-zone countries and the IMF agreed on in February.  

But, in reality, it is rather unlikely that all of the €130 billion ($160 billion) in the bailout package will ever be paid out. And what is even more unlikely is that the money would keep Greece from going bankrupt … //

… Delaying the Inevitable and Necessary:

If it was ever the goal of Merkel and her allies to rescue Greece from bankruptcy, then they have failed. The only thing the drastic austerity measures have done is to exacerbate the economic crisis and push Greece’s debts even higher. Nevertheless, the creditors have insisted on moving forward with their plan — even though it already became clear long ago where it was heading.

The end of this approach now appears to have been reached. Neither euro-zone countries nor the IMF can provide Greece with more aid without sacrificing their own credibility. Given these circumstances, there is only one option left: Greece must go broke.

European politicians have balked from taking this step — probably also because the new permanent bailout fund, the European Stability Mechanism (ESM), which is supposed to cushion the economic impacts of a Greek bankruptcy, has yet to enter into force.

Instead, they have tried to buy time with the help of a dangerous interim arrangement: The Greek government is supposed to borrow the money it needs from the ailing Greek banks. In return, the banks receive sovereign bonds that they can, in turn, provide as securities for new loans from Greece’s central bank. In this way, Greece’s central bank is financing the Greek state in what is really just a kind of shell game that gets riskier the longer it is played. In any case, all euro-zone countries will in the end be jointly on the hook for these liabilities.
A Greek bankruptcy would already be costly enough at the moment. Estimates say that it would cost Germany alone some €80 billion. Lest this figure climb any higher, the right thing to do would be to finally make that one fateful step.

No matter how unpredictable the consequences of a Greek bankruptcy might be, it appears to offer the only chance to resolve the messy situation. In this way, Greece would be free of its debts and would have a chance to make a fresh start — either as part of the euro zone or not. And the creditors in Berlin and Brussels could finally free themselves from the spiral of threats and rescue actions that they have gotten themselves into. (full text).

Links:

Resistance in Berlin: The Return of the Iron Chancellor, on Spiegel Online International, by Philipp Wittrock, August 15, 2012;

Troubled Times: Wave of Suicides Shocks Greece, on Spiegel Online International, by Barbara Hardinghaus and Julia Amalia Heyer in Athens, August 15, 2012: Greece, a country whose Orthodox Church does not condone suicide, has always had one of the lowest suicide rates in Europe. But now the economic crisis has triggered a disturbing increase in the number of people killing themselves. There were 350 suicide attempts and 50 deaths in Athens in June alone. This photo shows police and an ambulance at the scene of a suicide in the central Syntagma Square in Athens …

Silencing the outriders, silencing democracy, on rabble.ca, by KEITH REYNOLDS, AUGUST 15, 2012;

The Ecological Poverty of Liberal Economics, on ZNet, by Paul Street, August 12, 2012;

Board of Rabbis slams Harper government over Bill C-31, on rabble.ca, by KARL NERENBERG, JUNE 28, 2012.

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