Greek Bailout: Tsipras Takes the Troika to the Cleaners

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Courtesy: Chappetie

By Ann-Marie de Veer
Saturday 21 November 2015

On Tuesday 17 November 2015 the Greek Finance Minister, Euclid Tsakalotos of the Syriza government finally reached an agreement with the bankers Troika, aka. the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) for the first €12bn tranche of an €86bn bailout programme scheduled for disbursement from August 2015 through to August 2018. This third bailout, erroneously believed by many economists to be a fiscally poisoned chalice, will see only €2bn of this payment going to the Greek government while the remaining €10bn is earmarked for the recapitalisation of the country's four major banks, Alpha Bank, Eurobank Ergasias, National Bank of Greece and Piraeus Bank.

The agreement is the first of many that will ensue over the next 34 months in a Faustian pact between the Alexis Tsipras government and the international Troika: the schedule of payments to Greece from the Troika is wholly dependent on Tsipras's implementation of fiscally regressive policies that will further entrench an already moribund economy. Of course, the notion that the Greek economy will ever reach the escape velocity required for it to become a self-sustaining member of the Eurozone (EZ) during the bailout period is patently absurd: fiscally regressive policies, aka. austerity, drains the very lifeblood out of an economy, i.e. its liquidity and capital, creating an inescapable economic vicious circle that often results in stagflation.

As I have previously articulated, the Greek bailout, akin to the Cypriot, Irish, Italian, Spanish and Portuguese bailouts, is primarily designed to recapitalise the country's banks, largely at the expense of the European taxpayer. In other words, the Greek bankers, including their national and international investors, will be indemnified against their losses by the European Union (EU) via general taxation.

This approach to fiscal governance, of an economically failed state, is widely acknowledged as the extend and pretend policy: the Troika, is simply choosing to prolong, i.e. extend, the financial agony that EZ bailout recipients incur by pretending there are no banking, investor or regulatory issues to be addressed. Whilst it is widely acknowledged that the previous regimes of EZ bailout recipients have been woefully profligate and irresponsible, it is also common knowledge that the banks have been grossly incompetent and, on many occasions, defrauded their creditors, i.e. principally their depositors.

It is worth noting that no European politician, banker or apparatchik from the Troika have ever been held to account for their failures, unlike Iceland who has thrown politicians and bankers in jail.

While Cyprus, Ireland, Italy, Spain and Portugal are currently servicing their debts and will, more than likely, repay their loans from the Troika, the same cannot be said of Greece. The country will have accumulated a debt burden in excess of €420bn by 2018: more than double its current annual GDP.

Prime Minister Alexis Tsipras to the rescue.

The Greek Syriza government was elected to office on the 25 January 2015 and both Tsipras and his former Finance Minister, Yanis Varoufakis tried for the next five months to adopt a rational and reasonable approach to the financial situation they had inherited from their incompetent predecessors. In July 2015, reason and common sense gave way to the dictats of the Troika and, following a national plebiscite on the issue of austerity in which the Greek people overwhelmingly voted no, Varoufakis resigned, mainly because EZ apparatchiks had grown to dislike him. Soon thereafter, Tsipras was given an ultimatum by the Troika, austerity or else, and thus had no option but to acquiesce. A little over a month later, in August 2015, Tsipras held another General Election where he managed to hold on to power even though the Syriza party lost 4 of the 149 seats it had secured back in January 2015.

Subsequently, Tsipras and his new Finance Minister, Tsakalotos, have played the Troika's game: Syriza have worked with the Troika to implement what is euphemistically called structural reform, aka. the entrenchment of austerity, knowing full well that the policies they are adopting are merely dancing in the peripheral winds of a veritable maelstrom.

In other words, Tsipras, Tsakalotos, and the vast majority of the Greek people, are fully cognisant of the fact that Greece will never be able to repay its debts and that no amount of structural reform or debt restructuring will alleviate them from the burden they have accumulated. Thus, there is but one option: play the Eurozone game according the Troika's rules, take as much of their money as they are prepared to offer and then plan for the debt defaults and debt write-offs that are bound to occur in the fullness of time. Whatever happens, no one is going to end up in a court of law or in jail.

The stupidity of the Troika knows no bounds, clearly Tsipras is taking them to the cleaners.

The difference between stupidity and genius is that genius has its limits.
Albert Einstein