Greek Bailout: The Troika Seeks its Pound of Flesh

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Courtesy: Tom

By Ann-Marie de Veer
Saturday 23 May 2015

In late 2009 almost two years after the Global Financial Crisis began, an event prompted by the disastrous management of a few global financial institutions and the sub-prime housing market crash in the US, the Greek government debt crisis, aka. the Greek Depression, also began as evidence of its structural fiscal weakness became apparent: Greek government debt had grown at a greater rate than any other Eurozone country for nearly two decades before the beginning of the depression and its debt-to-GDP ratio was already greater than any of its fellow members of the monetary union.

In essence, prior to the Alexis Tsipras led Syriza government that took office on 25 January 2015, successive Greek regimes had not only been brazenly profligate and irresponsibly incompetent in their management of the country's finances but had also proven themselves to be woefully out of their depth in addressing the task of servicing the debt they had created. Of course, the current Greek Syriza government are not alone in being saddled with debts almost beyond their ability to service: the incompetent regimes of Ireland, Italy, Spain and Portugal are all in a similar position, to a lesser degree.

Nonetheless, it is Greece, with debts totalling €330bn and a debt-to-GDP ratio of almost 180% that is broadly acknowledged as the highest in the Eurozone, which remains the focus of attention for financial markets and so-called political pundits alike.

Clearly Greece is currently the target of, and being held to ransom by, the bankers Troika, aka. the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF): all of whom are intent on extracting their pound of flesh, and more if they can get away with it, from a nation they have reduced to abject poverty over the last five years by their over-zealous application of austerity measures in return for a bailout fund of €240bn.

However, Syriza, the newly appointed left-wing socialist government, have other ideas.

Over the last four months Tsipras, and the Syriza finance minister, Yanis Varoufakis, have been in almost constant negotiation with their creditors, the Troika, principally over the economic reforms the latter seeks in exchange for a final payment of €7.2bn from the €240bn bailout fund agreed by former Greek regimes. Both Tsipras and Varoufakis are vehemently opposed to the Troika's extreme austerity measures given the effects it has had, and will continue to have, on an already impoverished electorate who have suffered for six years as the nation tumbles further and deeper into recession.

Thus, the belligerents are engaged and battle has commenced.

Naturally, the Troika have sought to fight back against Tsipras and Varoufakis, who undoubtably represent the majority of the Greek people, by remaining mostly indifferent to the plight of the nation, intransigent in their negotiations for a rational and sustainable settlement and insufferable in their attempt at fiscal liquidity asphyxiation upon a country already starved of cash. The fact that the Troika tried to cut-off the Syriza governments access to cash, aka.liquidity, and bring about a coup d'état by default is common knowledge. The Troika is not only intent on having its pound of flesh but it also plans to bury the Greek cadaver, aka.Syriza, to finish it off completely.

The Syriza doctrine.

While the Troika may believe that it is in a strong position in being able to withhold the final tranche of funding that the Syriza government needs, if it is to remain in the Eurozone, and can therefore impose its austerity measures with impunity, Tsipras and Varoufakis are much more pragmatic. They are both acutely aware of the ramifications of a Greek exit from the European monetary union, not just for Greece who would initially experience severe financial difficulty but also the Eurozone, who, in a worst case scenario, is likely to implode as creditors seek to minimise their losses by focusing on the next weakest links in the fiscal chain, i.e. Ireland, Italy, Spain and Portugal. Similarly, they are also aware of the irreparable damage that a Greek exit from the Eurozone would have on the political reputation of the European Union (EU) worldwide: a situation that the EU and its member states are only just beginning to realise is an increasingly likely scenario and are becoming concerned about how this would affect their standing on issues of foreign policy and their diplomatic relations.

Should the Troika fail to compromise in its unrealistic demands as a precondition for the release of the final €7.2bn tranche of funds of the bailout agreement then a Greek exit from the Eurozone is highly likely. That the Syriza government have already quantified this scenario is obvious: as it is equally obvious that the EU have done no such thing.

For Greece, to stay, or not to stay, in the Eurozone, is not the question.

The question is, how are the Troika going to cut-off their pound of flesh without spilling a drop of Greek blood.

Tarry a little, there is something else.
This bond doth give thee here no jot of blood;
The words expressly are "a pound of flesh."
William Shakespeare: The Merchant of Venice, Act 4, Scene 1