Greece defaulted on its loan from the ILF last night (Tuesday). Gosh.
The world didn’t stop turning; life went on; and if there was any mass hysteria, it was on the part of neoliberals who – it seems – will do anything to keep everyone else in line with their worldview.
The neoliberals at the IMF, ECB and EU want people to believe that Greece (and, in fact, any other country that takes out a loan from western banks) has the wherewithal to pay back its debts. Their way of life depends on it because without that belief, countries start demanding debt relief packages and the whole racket that – as Vox Political mentioned yesterday – returned around $5 for every $1 lent in 2011 will fall like the house of cards it is.
Fintan O’Toole had it right in the Irish Times: “The story must be maintained: Greece must keep punishing its people to pay back the money being borrowed to make the payments on the unpayable loans.
“In the upside-down world we inhabit, Syriza, which has called a halt to this fiction, is a bunch of mad fantasists, while the troika that goes on acting as if the fictions were real is the voice of hard-headed realism. Everything – from the lives of ordinary Greeks to the foundations of the European Union – must be sacrificed to the story.”
But nobody believes that story any more. Everyone knows that Greece doesn’t have the wherewithal to pay back its debts. In fact, increasingly harsh demands by the Troika have made the problem worse, rather than better.
Everybody knows that debt relief will have to happen.
The Guardian‘s economics editor, Larry Elliott, wrote: “Somehow or other, Greece’s debt burden will be reduced. It can happen through a deal in which Athens gets debt relief for economic reform. Or it can came through a default that would swiftly follow Greek exit from the single currency.”
Richard Murphy, of Tax Research UK, agrees: “This fact has been obvious for some time. Greece has rising debt that is well above any internationally recognised sustainable level and because of falling income, imposed on it by the EU and IMF, has not the remotest chance of paying that debt off.”
He continues: “What is left is unserviceable without radical reform of the Greek economy that permits it to grow again, and that reform is not possible unless existing debt is written off. That’s because without that write off all the money needed to invest for growth will instead go in debt servicing,” as Vox Political has also mentioned in the past.
“If Greece was a company a pre-packaged insolvency would probably solve most of its problems, in days. It is time we did the same for countries. But don’t hold your breath because bankers object to this, largely because the guarantee that countries won’t fail is what they think underpins their own risk, and the last thing they want to do is accept responsibility for that.”
But Greece has failed. It is precisely its membership of the Euro that made it inevitable. Without its own sovereign currency, Greece could not take measures to prevent that failure. So Mr Murphy is right again and the banks are wrong. Again.
Meanwhile the neoliberal attempt to rule Greece undemocratically from beyond that country’s borders continues. The current plan is to make wild claims about the purpose of the yes/no referendum on the new loan conditions, called by Alexis Tsipras, to take place on Sunday. Merkel, Hollande and Juncker want the Greek people to believe it is about whether they stay in the Euro – which is not an inevitable consequence of a ‘no’ result, and would not, in any case, be a disaster (see yesterday’s post).
They’ve already lost that one, though. You see, everybody knows what’s on the table isn’t their last offer. They already gave in on that one, several renegotiations ago. If they had pulled the plug the instant Greece started to demur, they would have had leverage when Greece came back to the table but they didn’t. Now they’re on the sliding scale. They’ve admitted they need Greece to be paying back something, which means that Greece is now in a position to decide what that something should be.
(I got the above from an episode of Doctor Who entitled Deep Breath; if someone threatens to kill you and then doesn’t, they have nothing left with which to threaten you, having foolishly gone to their most extreme option first. Good show, Doctor Who.)
Angela Merkel has said the Troika won’t negotiate on anything at all until after the referendum. This has given Mr Tsipras a chance to bring in a new offer – it doesn’t even matter what it is – making him look like the reasonable man at the table. Already Merkel is on the back foot. She can refuse, look unreasonable and face a ‘no’ vote on Sunday, or she can agree, look weak and – again – face a ‘no’ vote on Sunday.
What are the neoliberals going to do?
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