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Europe Now Doubts That Greece Can Reform

From an unfazed New York Times:

Homeless people at a New Year’s meal in Athens. Poverty is visibly growing in the capital, but European officials say Greece still has not put into effect needed austerity measures.

As Reforms Flag in Greece, Europe Aims to Limit Damage

January 15, 2012

ATHENS — As Greece and its lenders prepare for another week of tense negotiations, European officials now say that the task is less to help the country through its troubles than to avoid the sort of uncontrolled default that many experts fear could threaten the global financial system.

Officials from the so-called troika of foreign lenders to Greece — the European Central Bank, European Union and International Monetary Fund — have come to believe that the country has neither the ability nor the will to carry out the broad economic reforms it has promised in exchange for aid, people familiar with the talks say, and they say they are even prepared to withhold the next installment of aid in March.

What a shock. After all, when has Greece ever lied before? Except to get into the European Union and every other time since.

Adding to the anxieties in financial markets, talks broke down Friday between the Greek government and private lenders over a plan to reduce Greece’s debt by $130 billion, a “voluntary” default that the troika has demanded before extending more aid. Those negotiations, aimed at forcing hedge funds and other private holders of Greek debt to accept large losses in order to make the country’s debt load more manageable, will resume Wednesday amid rising concerns about the consequences of failure

Rather than actually cutting its spending, the Greek government is trying to force its lenders to take a 50% loss on the value of their bonds. This is what they call ‘social justice.’

Fanning those fears is a growing conviction among the Greek political establishment and the country’s lenders that the old dynamic — with Greece pretending to make structural changes and its lenders pretending to save it from default — has become untenable, people close to the talks say.

And yet the New York Times is happy to pretend that this will work for the United States.

As recently as November, Greece and its lenders were optimistic that the country’s newly installed prime minister, Lucas Papademos, a well-respected financial technocrat, would stabilize Greece’s soaring debt and help nurse the country back to health…

But since then, his interim government — stocked not with technocrats but with politicians gunning for national elections as soon as March — has been paralyzed. Although it passed the 2012 national budget, it has failed to put into effect most of the unpopular changes mandated by the loan agreement that the previous government made back in 2010, when the country first admitted it was broke

Greece’s dire economic condition can hardly be overstated. After two years of tax increases and wage cuts, Greek civil servants have seen their income shrink by 40 percent since 2010, and private-sector workers have suffered as well. More than $75 billion has left the country as people move their savings abroad. Some 68,000 businesses closed in 2010, and another 53,000 — out of 300,000 still active — are said to be close to bankruptcy, according to a report issued in the fall by the Greek Co-Federation of Chambers of Commerce

About a year ago, after missing earlier fiscal targets, Greece promised to sell off $65 billion in state assets as a condition for receiving emergency loans. So far, though, it has sold only about $2 billion worth, because of domestic opposition and a reluctance to part with assets at what the government says are fire-sale prices.

The country also pledged to lay off public-sector workers, overhaul tax collection, and make its economy more competitive. But it has fallen short in those areas as well. A law passed in the fall called for cutting 30,000 public jobs by shifting workers into a labor reserve at much lower pay, but only 1,000 workers have been so assigned

Take a good long hard look at Greece. This is what Obama and the Democrats want for our country. This is the goal they are pushing us toward. Except there won’t be anyone to bail us out.

The ‘rich’ US creditors, the bondholders, will be asked to take a 50% or worse loss on their investments. All in the name of ‘social justice.’

This article was posted by Steve on Monday, January 16th, 2012. Comments are currently closed.

6 Responses to “Europe Now Doubts That Greece Can Reform”

  1. Petronius says:

    “More than $75 billion has left the country [Greece] as people move their savings abroad.”

    Since Nerobama’s first day in office, he has taken various measures to prevent Americans from moving their wealth abroad. This has always been the first priority of communist regimes throughout history.

    There is no possible combination of austerity, tax hikes, and economic growth that can save Greece. The haggling there is over the terms and conditions of default in return for new aid from the ECB and IMF.

    This focus on Greece, Italy, and the rest of debt-ridden Europe has meant that attention has been diverted from serious problems in the USA, with the result that the US has not dealt with debt problems that Europe is being forced to confront. The President and Senate Democrats offer only demagoguery.

    As Steve notes, there won’t be anyone to bail us out.

    • Mithrandir says:

      “More than $75 billion has left the country as people move their savings abroad.”

      That’s really what this is about isn’t it? Biding time with worthless promises so the rich and the politicians can save themselves before they let the bottom fall out.

      Greece, like Detroit, is filled with unproductive people, and there is no tax base to make any improvements, so continued welfare payments (bailouts) are the only source of income. When Greece is forced to go back to the drachma, they will start issuing 1 trillion dollar bills just like Zimbabwe did. All this is just money flushed down the toilet to save a few rich folks in the process, and stave off all-out rioting for another month or two.

      I went to a tourism convention in 2010. There were about 70 countries with displays, tables, dancers, pamphlets, music shows, food, etc. GREECE was a total ghost-town. I didn’t see a single person pick up a pamphlet, watch one of their videos…..nothing.

      *UPDATE!!I was just thinking “Looks like they are going to have to sell the Parthenon to keep up!” Close!– just renting it out for now:http://www.google.com/hostednews/afp/article/ALeqM5jeUrA6jll-SsuqVTVwl6nmZRk4LA?docId=CNG.f8db7d69218339b9285abcf6567bb20c.471
      How ironic. The building that basically emptied the treasury thanks to Pericles, is now being used BECAUSE of an emptied treasury. Pretty good, thought of that myself!

  2. Reality Bytes says:

    “If Russia attacked Turkey from behind, would Greece help?”

    – Nipsey Russell

    (sorry – couldn’t help it).

  3. tranquil.night says:

    Yet another significantly terrible tribute to how well those who choose to be informed and are endeavoring to prevent the same from happening here understand current political and economic circumstances.

    Predictable and predicted.

    As with the downgrade of the overall bailout fund.

  4. proreason says:

    Here’s how it works.

    The elites pound away with their propaganda machines until whatever it is they want becomes the conventional wisdom and is accepted by everybody. Everybody that is except the kooks. By definition.

    Here we see it nonchalantly proclaimed that Greece is doomed. Another self-fulfilling prophecy.

    They are working on the US as well.

    And at a sub-level, there’s Mitt Romney. Inevitable. If you don’t accept it, by definition, you are a kook.

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