Monday, 23 July 2012
Last rites for Athens – Greek bankruptcy imminent
All efforts for nothing. Despite the ESM funds from the EU and the IMF, Greece is facing its imminent fiscal collapse. Even the latest parliamentary elections last month did not have any effect at all on the overall economic and financial situation, the country is drowning more and more in its own debts, the IMF and individual EU member states (e.g. Germany) even refuse to provide more rescue funds to Greece.
Time and patience are running out, and it is highly questionable if Greece will be granted more time. And even if Greece gets more time for reconciliation of its long-term austerity plan, it will require additional funds up to 50 billion Euros. Naturally, most governments in the Euro-Zone are no longer willing to grant these extra funds, also because single member states like the Netherlands and Finland only agreed on the ESM under the condition that the IMF is being entirely involved in the funding process. Now, with the IMF rejecting additional aids, also the ESM will no longer apply to Greece.
So, will it be an end with a big bang then?
Greece’s bankruptcy will certainly not be the end of the Euro crisis, but the beginning of the next stage, with the crises in Spain, Portugal, Cyprus and Italy to spin into the next critical level. With Spain being the next crucial candidate with a rapidly deteriorating economic downturn, and Spanish conservative government under Prime Minister Mariano Rajoy implementing a painful austerity programme, Greece’s imminent collapse will cause a Europe wide domino effect for the other crisis candidates to be dragged into the same path, and the last remaining Euro states which are not in crisis yet (such as Germany) to be pushed into a recession as well.
It would be the end of a long and painful odyssey, with Europe depending on the political outcome of the last Greek elections, and blocking all necessary policy making agendas on the national and European stage. And it seems to be that no one is longer scared to death in the view of an imminent Greek bankruptcy. According to German Minister for Economic Affairs, Philipp Rösler, a bankruptcy “has already lost all of its horror”.
But maybe this is a cynic plan of the European decision makers. As soon as the ESM is ready to be deployed by September 2012, there will be no need to rescue Greece anymore: a complete U-turn of the German government’s Greece policy.
On the other hand, it was clear that Greece won’t achieve the austerity goals anyway, and it was strongly assumed that all granted funds so far was just part of a strategy to buy some more time, to prolong the decease process. The achievements of this strategy were nearly nought, with a GDP downturn of nearly 20 per cent and an unemployment rate of 25 per cent, but the debts are still there. Our decision makers are facing the failure of their own desperate attempts to avoid bankruptcy and the spread of the crisis. Now, it seems that they cannot longer be bothered and even consider a break-up of Greece out of the Euro-Zone.
Even if Greece received funds until 2014 or even 2016, their effect would be useless as long as the recession goes on. Presumably, this recession is turning into a depression. But no matter if Greece receives more funds or not, it will be a monetary and fiscal adventure, something the German government under Chancellor Angela Merkel wanted to avoid in the first place.
The losers of this mess will be the Greek people. No one can predict which effects a bankruptcy will have on their lives, their jobs, and their economic situation. And no one can predict which consequences it will have on Europe and its EU’s member states. A dangerous attitude is already occurring: no one cares about the consequences anymore. And if no one cares about the fate of Greece, then people will stop to care about Europe.
A fatal attitude indeed. And we’re the ones who will pay for this behaviour.