As he writes in his article, the former Minister of Finance of Greece Janis Varufakis, both messages have become another evidence of the establishment of the European Union amazing talent – never miss an opportunity to miss an opportunity.
It is no coincidence the two announcements were made on the same week. The Greek debt explosion in 2010 was a disgusting symptom of errors in the device of the Eurozone. That is why it caused a Domino effect throughout the continent.
The continuing insolvency of Greece is a result of deep divisions within the Franco-German axis on the plan restructuring of the Eurozone. While three of the French President and one Chancellor of Germany could not agree on the institutional changes that would make the Eurozone more sustainable, Greece asked quietly bleed to death.
In 2015, the Greeks staged a revolt that the establishment of Europe ruthlessly suppressed. No Brakcet nor the gradual delegitimization of the EU in the eyes of European voters are unable to convince the establishment to change course. The election of the President of France Emmanuel Makron seemed the last hope for reaching a new agreement between Berlin and Paris, which is necessary to avoid provoking a choking Italy’s new – and this time fatal – the Domino effect.
The former Minister of Finance of Greece Janis Varufakis
While Macron has launched a new, encouraging ideas: the total budget for the Eurozone; the creation of a new safe debt instrument and the emergence of a quasi-Federal capacity to collect taxes; General Fund unemployment insurance; a unified system of Bank Deposit insurance and a common pot from which to Finance the recapitalization of banks falling (that is, the creation of the missing is now the Foundation for a real banking Union).
“Good step forward” and “useful meeting”. So European leaders commented on the informal summit in Brussels, where he had discussed the issue of the migration crisis. Did something to negotiate?
Plus, a new investment Fund that will mobilize idle savings in Europe, thus avoiding additional pressure on the budgets of Eurozone countries. The government Rules seem to have accepted the proposal that I put forward in 2015, as Finance Minister of Greece: the restructuring of public debt with indexation to GDP. In this embodiment, the size of the total debt of Greece (and the speed of his payments) were tied to the size and rate of growth of nominal incomes of the country.
A year has passed (during which time Italy came out on a path of collision with the European Union) and German Chancellor Angela Merkel and the Makron has completed its Mesebetsi summit agreement on the reform of the Eurozone. A couple of days later, the Eurogroup consisting of Finance Ministers of the Eurozone countries, presented a “solution” to the Greek debt crisis.
In a decent universe, these two messages could be a signal of the end of the lost decade for Europe and the beginning of the era of restoration that would enable the Europeans – together to meet face to face the challenges posed by the US President Donald trump and will create the next economic downturn. Alas, it is not the universe in which we live.
Before Metabolsim summit macron have tempered the scope of their proposals almost to a complete surrender. A single system of Bank Deposit insurance and recapitalization Fund pushed in that unlikely future in which banks of peripheral Eurozone countries will have to get rid of bad loans before there is a real banking Union. A unified system of unemployment insurance was not even discussed.
And finally, the last (but not importance): the idea of one debt instrument for the maintenance of a Eurozone budget in the amount of 2-3% of the total income of its member countries (and this is the main condition for the emergence of a macroeconomically meaningful fiscal Union) was without ceremony sent to the basket.
Of course, Merkel suggested the Macron only thing that allowed him to imagine his humiliation as the alleged personal triumph. Before living in the ecstasy of the press, they solemnly announced the decision to establish a Eurozone budget, but it’s only a name, because in reality it is nothing more than a credit line from the European stability mechanism (ESM, a financial assistance Fund, which provided loans to Greece in 2015).
They also agreed to minor Fund “rainy day”, which will be funded by Eurozone countries and made-up tax on financial transactions and the digital economy – such “compromise” shouldn’t Merkel anything because countries like the Netherlands and Ireland, it is likely torpedo.
As regards the recapitalization of banks, the rules and Merkel praised the scheme, funded by the ESM. But any decisions by the ESM are subject to approval by the German Parliament, the Bundestag, therefore, will have the right to veto the recapitalization, for example, any Italian Bank. And the new government of Italy is hardly going to buy it all.
When the bankers try to hide bad loans on their balance sheets, they provide new loans to give borrowers the opportunity to pretend they serve the original debt. When a new loan is settled, the client allow you to suspend payments for a few years, while interest continues to accumulate. All this helps to keep the net present value of their asset (loan) constant and to postpone the final day of reckoning (at this point they will have to admit in front of their regulator, the loan cannot be returned).
Since 2010, Greece’s lenders have practiced this strategy of “extend and pretend” as active if they are trained to perform at the Olympics. Instead of a brave and therapeutic write-off of debt or a moderate variant of GDP-indexing, the Eurogroup took a decision (represented as “end the Greek debt crisis”), which, in fact, is the apotheosis of the cynical practices.
Technically speaking, the Central element of the new debt agreement is a transfer for ten years of payments for a total amount of 96,6 billion Euro ($112,5 billion), which was to begin in 2023. Thus, the Greek government has offered to facilitate the payment until 2033 in exchange for the continuation of the policy of strict reduction of government spending to infinity (the target level of primary surplus equal to 3.5% of national income until 2022 and 2.2% for 2023-2060 years); the impossible size of the annual debt payment in the period from 2033 to 2060 (approximately 60% of tax revenues to the state); and the increase in the ratio of debt to national income above 230% by 2060, provided that following the global recession set out in this plan over-ambitious target growth rate of the economy will become unattainable and of course, they will be
Any objective assessment of the new Eurogroup agreement on Greek public debt leads to the conclusion that the agreement dooms Greece into perpetual debt slavery. As an impartial observer Mezabella summit, Merkel and the Makron will come to the conclusion that the Eurozone remains the same macroeconomically unsustainable, as it was five years ago. However, the establishment of Europe, oblivious to the fact that the Nationalist Internationale is going to eat the EU, willingly giving him snacks.
