Tuesday, February 21, 2012

All for nothing II

Eurozone Ministers are currently debating over the next stage of the Greek "bailout" in Brussels. Meanwhile, their own advice shows that its all for nothing, and that the austerity they are inflicting on Greeks as the price of bailing out their own banks has made the entire exercise pointless:

"There is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term," the report said.

"In this context, a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatisation implementation)," it said.

"This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," it said.

Which means we'll be going through this again in another two years, and the Germans will be demanding even harsher austerity (because obviously, that worked so well the first time).

Which is why Greece should just default. Debts that can't be repaid won't be repaid, and there is no point pretending otherwise. The EU's "debt relief" is an scam, targeted at shoring up their own banks and protecting themselves from "contagion" rather than actually helping the Greek people. It will simply mean that Greece is reduced to debt-slavery within the Euro. Default will remove all that in an instant. Yes, it will mean austerity - but at least it will end someday, and at least that pain from balancing their government budget will eventually benefit Greece, rather than foreign bankers.