Disclaimer: I am not an economist, finance expert or politician. Far from it. So you won’t see any statistics, graphs, academic references or even the slightest shred of evidence to back up my assertions and conclusions. What you will read however is my view of the current European (and global crisis) based on following a variety of news sources, discussions with people who are much smarter than I am, an ability to recognise bullshit and a healthy dose of scepticism.
Take one look at the current situation: Greece has had one bailout and is looking at a 2nd bailout, Ireland has had one bailout, Portugal is being bailed out and Spain will quite likely follow shortly. In each of the bailed out countries a series of austerity measures is being applied. Services are being cut, taxes are being increased, levies are being introduced etc. In short for the citizens of these countries the cost of living increases drastically. The main cause of the increase of cost of living is an increase in charges by the state for services provided to its citizens. Services that in principle should be funded by the already paid income taxes, sales taxes and social taxes. However the revenue from those sources has been squandered. Instead what we get now are higher & more taxes and fewer services. Private citizens and the private sector are being dealt hammer-blow after hammer-blow. Government deficits have grown to astronomical proportions but even bigger amounts of money are being used to rescue the banks. To what benefit one might ask?
That is indeed the biggest question in this whole twisted tale. Qui Bono? Will this period of austerity caused by fewer services, higher & more taxes and rapidly rising prices bring us to an eventual recovery? The answer is: probably. But another consideration is how long will this take? Will is take 5, 10 or even 25 years? My estimation is that it will most likely be 25 years or more before we see any actual benefits and economic stability if we keep walking down the austerity road. There is of course a different option. Forget about the “burning the bondholders” argument. Most bondholders have already been repaid. What we can do is restructure the loans, because that’s what they are, that have been forced upon us by the IMF/ECB. We can demand a longer running period, a lower interest rate or even a reduction in the capital. Because that is where the real truth is hidden, neither Ireland, not Greece, not Portugal will ever be able to pay of the loans forced upon them. The EU & the IMF are well aware of this and what we are witnessing is not an attempt to rescue the economies of these countries as it is wholesale asset stripping.
When the shit hit the fan in the world of global finance back in 2007/2008 and it became clear that banks all over the world would just fail overnight the people at the top of the financial foodchain decided that they could never let this happen. So these chose a devious and callous option. In the case of the EU this meant that governments would be strong-armed into accepting loans of an astronomical size and at sometimes punitive intrest rates simply to hand this money to the banks thereby ensuring the continued existence of the financial system. The fact that these loans could never and would never be repaid was not an issue for the (private) banking sector. It was for the IMF/ECB though. Hence they included clauses in the “bail-out agreements” that would hand control of the bailed out countries economic & financial policies over to them. The EU/ECB would dictate internal politics….
What we are witnessing now is wholesale assets stripping on a scale not witnessed since the Soviet armies occupied a large part of Western Europe at the end of WWI. At the direction of the EU bureaucrats formerly sovereign countries are being told to sell of state assets in order to fund loan repayments to the ECB/IMF. The fact that the sale of the these assets will quite possibly leave the country in economic ruination with no state-owned industry or other assets and still insurmountable foreign debts to repay does not seem to matter. It is a case of “get it while you can”. For example Greece has been strong-armed in selling 10% of the state-owned Telecoms company to Deutsche Telekom. It is no surprise that this is a German company. I expect more chunks to be sold of and also “suggestions” that Ireland sell off Aer Lingus, ESB, Coilte (oh wait that’s already happening) and more. Visions of the Soviets dismantling factories and shipping them lock, stock and barrel to the motherland come to mind. None of this is happening to the benefit of the individual countries or it’s citizens!
So what can be done? There is really only one option; stop playing ball. We need to step out of the EU to regain economic sovereignty and use this renewed independence to dictate the rules of the game. We need to state how much we are paying back, over what time-frame and at what rate. Nothing else will do. This will be a painful step to take as it will bring cause a period of economic hardship but this period will be significantly shorter than the one that will be caused by playing along with the ECB/IMF and whatsmore we will emerge out of this as a healthy economy.
It’s really a simple & straightforward solution but I do not think that any of the governments of the respective countries has the balls or willingness to implement it.