*TSIPRAS PUTS FORWARD VOTE ON AUSTERITY PACKAGE IN BID TO CLING TO POWER
*PARLIAMENT TO VOTE ON SUNDAY NIGHT ON TAX INCREASES WHICH WILL SEND COUNTRY DEEPER INTO DEBT DEATH SPIRAL, MAKING MORE AUSTERITY MEASURES NECESSARY SOON
*BIGGEST WAVE OF STRIKES YET HITS GREECE AHEAD OF VOTE AND EUROZONE MEETING ON MONDAY
*WILL THE EUROZONE FORCE TSIPRAS TO CALL NEW ELECTIONS?
*PRIZE MIGHT BE A MORE REASONABLE GOVERNMENT WHICH ALSO FINALLY CLOSES THE COUNTRIES BORDERS TO MIGRANTS
*TSIPRAS ALLOCATES 80 POLICE TO GUARD HIS “MENTOR”, CONSTRUCTION COMPANY OWNER LIKE HIS FATHER LINKED TO THE MILITARY JUNTA, BUT FEW POLICE AVAILABLE FOR BORDER CONTROLS OR MIGRANT CAMPS LIKE IDOMENI
*DEBT CRISIS WILL NOT END UNTIL THE EURZONE SWITCHES OVER TO SOVEREIGN MONEY AND ENDS MONOPOLY ON MONEY CREATION OF PRIVATE BANKERS
Greece’s unions today started a three-day general strike today in response to the sudden decision of Prime Minister Alexis Tispras to rush through legislation on a new round of tax and social security contribution increases ahead of a meeting of eurozone finance ministers on unlocking the next bailout tranche.
A new study by the European School of Management and Technology (ESMT) has shown that almost all the bailout money dispensed in the first two Greek bailouts, a staggering 215 billion euros, has gone to banks with only a small fraction of 9.5 billion going to the Greek budget.
Unions say the new measures are a “guillotine” for Greek society, which has seen its economy shrink by a fifth, household incomes cut by a third and unemployment soar to a quarter of the population during the past six years.
Farmers, just one group who could be bankrupted by the new measures, are planning a huge protest in Athens at the weekend.
The parliament is set to vote on Sunday night on the measures, which will send the country yet deeper into a debt death spiral as its overall debt increases as a percentage of its GDP, its interest payments obligations increase while its economy and tax base shrinks.
The IMF has recognized that the austerity measures, overwhelming made up of tax increases, will result in companies, farmers and businesses going bankrupt and, therefore, in a reduction of tax revenues in the coming years. It is, therefore, pressing the Greek government to legislate “contingency measures” worth 3.6 billion euros to plug the expected shortfall, including cutting pensions and salaries.
But the government of Alexis Tsipras is refusing to legislate for theses additional austerity for political reasons. Its core voters are pensioners and government officials. Tsipras is selling the latest austerity package on the lie that it will make public finances, pensions and salaries sustainable when the opposite is true.
Because of his disastrous record on the economy and migrants, Tsipras is desperate to cling to power and avoid new elections or a referendum, which would result if he does not persuade Eurozone ministers to unlock the next bailout tranche soon as the government runs out of money to pay salaries and pensions and make interest repayments.
Tsipras finds the funds to pay 80 police officers to protect the home of his political mentor, Alekos Flambouraris, a friend of his father and, like his father, a construction company owner who made his fortune under the military dictatorship.
But the police presence in migrant camps such as Idomeni is non existent, creating permanent tension with its neighbour as migrants seek to cross illegally.
This blog argued five years ago that Greece is insolvent and not illiquid, but no mechanism for putting Greece through an orderly insolvency has been created in the intervening years.
A German plan to introduce the Drachma to allow the country to regain competitiveness has been side lined by Alexis Tsipras.
That means, Greece is set to continue on its path, remarkable in modern economic terms, of internal economic collapse without a formal bankruptcy or default.
In the absence of a plan to return to the Drachma or put Greece through an orderly insolvency, the best approach from the economic point of view now is to try to save as much of the productive economy as possible by avoiding more tax hikes and cutting pensions and government salaries instead. But a change of government would be needed for that.
Any new government that also puts closing the country’s borders to migrants would surely also be welcome.
This approach of cutting government spending will help slow down the total collapse of the country’s economy as it drags out an insolvency or default.
In the six years and three bailouts, the massive debt burden of Greece has passed from private banks to public banks, specifically the ECB, creating a dilemma for eurozone countries as the ESMT notes in its conclusion.
If it offers Greece debt relief as the IMF wants, it means that the tax payers of eurozone countries have to pay twice over. Once for the interest on Greek debt in the form of multi billion contributions to bailouts and once again for the losses incurred by a write down.
A write down of Greek debt is, therefore, toxic for eurozone finance ministers, especially for Germany.
Also, as more and more of the indebted Greek economy is bought up by banks and foreign corporations, the main beneficiaries of any tax cuts in the future are set to be these entities, and not the Greek people.
Farmers, for example, are set to go bankrupt in huge numbers if the austerity measures pass on Sunday night, paving the way for their property to be bought for a pittance by foreign banks, who will be the main beneficiaries of future tax cuts.
Meanwhile, private banks are set to make more money on the merry go round. 40 billion euros of the bailout funds were spent on recapitalizing Greek banks saw their shares drop in value by 98%, only to be bought by private investors, and which are now expected to increase in value again as a result of the third bailout.
In addition, the reprivatisation of Greek banks was done in such a way as to allow the transfer of vast amounts of non performing loans, mortgage and company debts, to hedge funds.
Eurozone ministers need to consider a new approach to the Greek and eurozone debt problem. The entire financial system should be reset in a coordinated approach.
The euro needs to be issued as sovereign money.
A new long term economic strategy for Europe is needed.