Wither Greece?

It looks like today's Greek vote is moving toward rejection of the bailout deal, but whatever the outcome, what kind of insanity has taken over Greek's creditors? Don't they understand that their best shot at debt repayment is a healthy, vibrant Greek economy? The Eurozone cure for Greece is worse than the disease. They're like a slave owner who instead of treating his slaves well whips them into the hospital, benefiting no one.The solution is to put Greece on the road to a robust recovery, and to restructure the debts in a way that makes this possible. Only when the Greek economy recovers can Greece afford to begin repaying the debts. Greek's creditors are being strict to the point of hurting their own self-interest.--Percy

Yanis Varoufakis, the Greek finance minister, is detested by his European counterparts, but he seems to have gotten the core of the problem exactly right, having once said (paraphrasing), "This is like whipping a sick goat to get more milk." He resigned earlier today. For those other ministers who had emotional issues negotiating with him, maybe this will help.For those who don't recall how Greek got into this mess or who were wondering how much responsibility the Greek's bear, the answer is complete responsibility. They apparently lied about the true state of their finances for years (basically about tax revenue and entitlement payments) until finally a day came around six years ago when they couldn't make a loan payment, after which the truth gradually emerged. This is all just from memory, if someone knows better or more accurate details please fill them in.But six years of punishing austerity that seem to stretch unendingly into the future is not the answer. Greece voted no to more austerity, and it should be obvious to even the most anal finance and prime ministers that once Greece is all but dead there won't be any more loan repayments. The same goes for Italy, Portugal and Ireland. Helping them back on their feet is the best way to insure loan repayments. The current approach has all the sense of debtor's prison.--Percy

Paul Krugman in his editorial Ending Greece's Bleeding in today's New York Times writes: That about sums it up.--Percy

Godwin is striking early and unexpectedly in this thread as I reproduce this Yanis Varoufakis (recently resigned Greek financial minister) quote: I found the above quote in a wonderfully frank analysis of the crisis in this Newsweek article: Greece Gives Europe a Chance to AwakenAbE: This appears in the same article:

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On the same day, even the IMF conceded that Greece needs a large-scale debt relief to create a breathing space and get the economy moving (they propose a 20 years moratorium on debt payments)...

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Yes! Yes! The Eurotechnocrats response to this possibility isn't described in the article. Does anyone know the objections to a long term postponement of debt payments?--PercyEdited by Percy, : AbE.

Details are sparse at this point, but doesn't the latest bailout agreement with Greece just guarantee more austerity on into the indefinite future? There's a sale of 55 billion of Greek assets in the agreement, to be managed by an investment fund based in Athens, but it isn't clear whether those funds go to Greece to help keep their economy afloat or are targeted at debt repayment. The bailout package itself is 86 billion. This will keep the Greek economy going for a few years, but current Greek debt already totals 323 billion and the country is running a deficit that is 180% of GDP. With austerity grinding down Greek GDP year after year, just where does the Eurozone see Greek debt repayments coming from?In 2009 total Greek debt was 300 billion. Six years later it is 323 billion. What in the world convinces Europe that more austerity is the answer?The new agreement includes concessions by Greece that reform the tax and pension system, open up closed professions, relax Sunday trading laws, and deregulate many businesses, which sounds like same-old same-old to me. Nowhere have I seen mention of stimulus of the Greek economy. Again, what in the world convinces Europe that the same old bailout but "this time we're going to be really, really strict" is going to work this time?Here's a nice graph of the GDP's of Eurozone countries through 2014. Without looking at the key, guess which line is Greece? If the Eurozone technocrats truly believe this bailout deal means they're eventually going to see their money repaid then they are seriously deluded. They're just pushing the crisis off into the future because they just can't bear to admit to themselves that they're not going to see their money again, at least not all of it. And while they're taking their sweet time acknowledging reality Greece suffers under crushing austerity. Greek unemployment currently stands at 25%, and among young workers it is 60%. This is absurd.I know I've used the debtor's prison analogy already in this thread, but it's still the most apt. These bailout plans have as much chance of resulting in full debt repayment as does throwing a debtor in prison.--Percy

Yesterday's NYT contained an editorial (The Eurozone’s Damaging Deal for Greece) castigating the Eurozone for doing no more than guarantee that the Greek problem will rise again. Best excerpts:

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In the end, after trying every possible tactic, Prime Minister Alexis Tsipras of Greece threw in the towel and accepted the toughest demands yet made by creditors to extend life support for Greece and keep it in the eurozone. That may avert an immediate catastrophe, but there is little to celebrate since it will do little to address, much less repair, the slow-moving disaster of the Greek economy.
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The one advantage of the agreement reached early Monday is that it buys some time. But unless that time is used to discuss how to really reduce the Greek debt and restore its moribund economy to life, it will not be long before eurozone leaders are locked in another agonizing debate about what to do. Germany and its allies have driven a hard bargain, but in forcing Greece to submit they have not resolved the crisis of the monetary union or advanced the European project.

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In related news, the IMF has rejected the bailout plan (I.M.F. Demands Greece Debt Relief as Condition for its Participation in Bailout), insisting that it's not viable, that Greece will never be able to pay a debt that increases while the economy worsens, that the debt and will rise to 200% of GDP before it ever begins to decline, and that debt relief must be part of any plan. Since the Eurozone insisted that the IMF be included as part of the bailout plan, and since the IMF is rejecting that plan, it's anyone's guess what happens from here.--PercyEdited by Percy, : Wordsmithing.Edited by Percy, : More wordsmithing.