Troika's Fiscal Evisceration of Greece to Recapitalise Banks at Taxpayers Expense

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Courtesy: Duffy

By Ann-Marie de Veer
Saturday 1 August 2015

The notion that Greece needs the Euro to survive its current fiscal dilemma is patently false: it is the European Union (EU), the Eurozone in particular and the bankers that need Greece if they are to survive.

Greece currently represents approximately 1.5% of the Eurozone's GDP which equates to about 0.38% of Global GDP. The bulk of its public debt, now thought to be in excess of €330bn, is held by the European Central Bank (ECB) and the International Monetary Fund (IMF), the lions share being shouldered by Germany at over €85bn. While the systemic fiscal risk of a Greek exit (Grexit) from the Eurozone, similar to that of 2010 and 2012, has since abated due to the involvement of the ECB, who have effectively rendered the country into a form of 21st Century debt slavery and bondage, it is the European public's rejection of austerity and the political fallout that would ensue that drives the EU's desperation to retain Greece in the Euro and the Union.

The most often cited reason for the increase in public debt, not just in Greece but also in Finland, Ireland, Italy, Spain and Portugal, is the diverging trajectories of a European wide aspiration for a more egalitarian society and its diminishing economic growth. Economists and bankers routinely espouse these fiscal events, i.e. the Greek financial crisis, as the result of poor economic policies rather than articulate the causes for which they, the bankers, are largely responsible, namely: Europe, generally, with the notable exception of Germany who has an export driven economy, has off-shored most of its production and manufacturing activities to countries with much lower labour costs. This has led to the growth of multinational corporations who have both out-sourced their production facilities and off-shored their tax liabilities. Thus, not only has the personal tax base of many European nations been eroded as millions of people, now unemployed or under-employed, are no longer contributors but recipients of social welfare, the corporate tax base has equally been reduced as the multinationals declare their profits and pay their taxes in low-tax jurisdictions. That the tax receipts of most European countries for the last two decades, as a percentage of their GDP, have been in decline is common knowledge.

A Grexit then, would threaten the European wide imposition of austerity policies that are aimed at addressing the fiscal imbalances: the EU, the Eurozone, the Troika and the bankers, in focusing on the results of their ill-fated policies as implemented by successive incompetent apparatchiks, are determined that austerity should prevail. The fact that Finland, Ireland, Italy, Spain and Portugal are all in a similar position, represents a serious threat to the current status quo. That is, to varying degrees, the contagion of the left-wing socialist policies as articulated by Syriza in Greece are already taking hold in Finland (Vasemmisto), Ireland (Anti-Austerity Alliance), Italy (Five Star Movement), Spain (Podemos) and Portugal (Socialist Party), much to the alarm of the bankers and incumbent politicians who clearly see their institutions and positions as coming under threat.

Given that the fiscal imperative of a Grexit is largely negated by the size of its economy in relation to the Eurozone, there can be no doubt whatsoever that the EU, and the Eurozone in particular, are embarked on a policy that seeks to retain Greece in the Euro almost at any cost. Clearly the economic and political ramifications, i.e. a swathe of left-wing parties rising to office throughout Europe who go on to nationalise the banks and extend the reach of socialism in creating a more egalitarian society, is not only a realistic threat but a scenario that both bankers and politicians are desperate to avoid. That the Tsipras led Syriza government in Greece has grudgingly signed up to the European Commission (EC), the ECB and the IMF, aka. the Troika's, unsustainable fiscal policies, are now busy implementing them and eagerly await the next tranche of a financial bailout that would increase the country's debt beyond €420bn, i.e. more than 200% of its current GDP, is well known. The fact that the EU, the Eurozone and the Troika are actually going down this path when they know it is doomed to fail and is simply a prelude to the inevitable task of offering substantial debt restructuring and/or debt relief, i.e. delaying repayment and/or financial haircuts on the value of Greek Bonds and Equities, is yet further proof of their incompetence and a clear indication of exactly who they are setting up to pay for it in the future.

Of course, Greece is not immune to the issues that have affected most nations in the wake of the Global Financial Crisis (GFC) of 2008: the reduction of structural deficits and improvements in tax collection are two of the most common tasks that many nations have had to address following the disastrous event. Nonetheless, Greece is clearly being made the fiscal scapegoat for all that ails the Eurozone at the moment: a nation suffering at the hands of mostly non-elected apparatchiks from the EU, the Eurozone and the Troika, who have repeatedly failed to adequately and appropriately address the issues over the last five years.

However, the fiscal evisceration of Greece is not without purpose.

That is, akin to all previous Eurozone bailouts in Greece, as in Cyprus, Ireland, Italy, Spain and Portugal, the costs are largely borne by the EU taxpayer, not just Eurozone members, as will much of the costs of any financial debt restructuring or relief. Thus, the bankers will hardly lose a penny, the debt is to be underwritten by the taxpayer and the incompetent politicians of national governments and the EU who are responsible for the whole fiasco will retain their positions.

In other words, the fiscal evisceration of the Greek economy by the Troika is simply a tool for the recapitalisation of the banks at the taxpayers expense. In essence, the private sector debt of the bankers is to be transferred to the public sector by refilling their vaults with taxpayers money.

The dishonest will always seek to plunder the honest.
Ann-Marie de Veer