August 21 – Greece’s ‘independence day’?


After eight years of emergency bailout loans, Greece from last Tuesday has been deemed strong enough to stand on its own feet. The international bailout programme that has provided Athens with emergency financial support has finally come to an end.

Aside from the tough budget rules already voted in place, that commit Greek governments to primary surpluses for decades to come so that the country can repay its creditors,  Greeks can wave goodbye to the troika of lenders – the International Monetary Fund, the European Central Bank and the European Union as represented by the Eurogroup – that has in effect been running the country since 2010.

‘Today we can safely conclude the ESM programme with no more follow-up rescue programmes, as for the first time since early 2010 Greece can stand on its own feet,’ said Eurogroup president Centeno.

More celebratory statements were made by EU commissioner Moscovici, (Greece on way to ‘sustainable recovery’,  EC president Junker  (“As the Greek people begin a new chapter in their history, they will always find in me an ally, a partner and a friend,”) Donald Tusk (You did it! Congratulations to Greece and its people on ending the programme of financial assistance) and  from ESM’s chief Klaus Regling: “(Great news! The Greek people should celebrate. From my visits to Athens, I have come to really appreciate Greek wines. But tomorrow, I will celebrate it with a good glass of ouzo)

Angela Merkel, the architect and devoted supporter of ‘austerity for Europe’  was  the most prominent European leader on Monday to comment on Greece’s official exit from the third  bailout, with the powerful German chancellor referring to a “good example of European solidarity.”  A good example of the solidarity the turned the Greek economy to ruins and impoverished a large proportion of the Greek population.

“Until 2022 Greece wants to achieve a primary budget surplus of 3.5 per cent of GDP, and to meet European fiscal rules … The successful completion of the ESM program marks a significant step for Greece, which in the future will be funded again by its own means,” her statement read.

Greek contraction compared with other major peacetime contractions- IMF via Forbes

Greece, after 8 years of being run by the Troika is emerging from the ‘Greatest Depression’ the longest, deepest recession any country has experienced in peacetime. The bailout programme that put the interests of the banks before the needs of people suspended economic common sense, in the belief that Jausterity will create growth.

The programme, from the beginning, has been a long tale of missed targets by both Greek governments reluctant to bear the political cost of ‘reforms’ and the lenders who over-estimated the capacity of the Greek economy for growth. In the early years of the crisis, the lenders had expected Greece to emerge from its crisis within a couple of years of applying strict austerity. When that was shown to fail, the lenders continued on the same path continuing to insist on the same methods thus driving the Greek economy into deeper recession.

Greece managed to remain in the eurozone but the internal devaluation that was forced on the economy in the interests of increasing competitiveness and stability had the exact same impoverishing outcome on a large section of the people in the country.

During the Axis Occupation (Germany, Italy, Bulgaria) – Greek GDP went down to 40% of what it was before the beginning of the war in 1940. By the end of 1945, one full year after the end of the WW II for Greece, Greek incomes were less than 60% of the prewar level.
During the Memorandum years run by the troika ( ECB, IMF, EU) Greek GDP went down 25% and average earners’ incomes went down by an estimated 40%
Conclusions: 1 . All good things go in threes 2. The military occupation was much worse

Greece now owes a total debt of €322-billion or over 180 per cent of its GDP, despite having €107-billion lopped off its debt by inflicting losses on private bondholders in 2012.

Recognising that this amount of debt cannot easily be paid back, the eurozone first made the promise to ‘haircut’ part of it in November 2012, provided Greece achieved significant budgetary surpluses over the following years. But, while Greece indeed managed to do so in 2013 and 2014 – at significant cost to its economy – Europeans avoided the topic as it was considered to be politically unacceptable in Germany, where the image of the ‘lazy Greek scrounging off the German taxpayer’ was created by elements of the German government itself.

But in fact, the vast majority of the bailout cash was used to pay back the bailout loans, recapitalise banks to cover exposure to government bonds and repay existing debts – at the start of the crisis Greek debt amounted to 116% of GDP – created mainly through excessive spending by successive Greek governments who borrowed heavily to fund generous spending on some pensions and create public sector jobs in exchange for political support, while tolerating widespread tax evasion and corruption. And all that with the tacit approval of Europe, whose biggest companies benefited from lucrative Greek contracts. But it all went unnoticed,  Greek election after Greek election and nobody at the time had even heard of that dirty word, ‘populism’,  now reserved for anyone outside the European political establishment.

Strangely enough, it was a ‘populist’ government that took the decision to quickly implement the lender’s demands quickly and to the letter so that the country would finally come out of the support programme. Wheather that was a better option to a Greek exit from the euro, is something that the Greek people were never given the chance to debate.

Greece turned a new page but the day after it is a much poorer country than it was at the beginning of the crisis. A country trying to rebuild its economy, as it did in the aftermath of WWII.

Free, but in the European financial shackles of an enhanced supervision in the foreseeable future but this time by the EC and not the Troika of lenders. (It is worth noting that all countries in the EU are subject to budgetary supervision under the SGP, but the rules are more flexible for some). And for the next forty years, Greek taxpayers will have to pay up, with interest, to their European partners every last cent of the huge debt incurred by the country to save the Euro.

But Greece rebuilt its economy before, after the WWII devastating occupation, and if the promises of solidarity by the European partners are this time anything more than just words,  – and barring another global financial meltdown or major downturn in the next forty years – Greece can do it again.