No peace inside the Eurozone for Greece

The unresolved Greek debt crisis has flared up again pitting the IMF against the German-led EU. Greece can never recover until it quits a single curreny that is out of kilter with its fundamentals. But La La Land Eurocrats will destroy Greece altogether before admittimg they are wrong

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Only a question of time before it happens again
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Jayne Adye
On 18 February 2017 12:01

Increasingly frantic talks are taking place as the Greek debt crisis flares up once again. Greece must meet another major debt repayment in July.

However, the pressure is on for a deal to be hashed out now, giving Greece the credit to meet their commitments by the time the Eurozone finance ministers meet again on Monday.

It is yet another chapter in one of the EU’s most destructive tragedies.

Holding up these negotiations at the moment is the fact the International Monetary Fund have finally clocked the status quo is totally unsustainable. The IMF believes Greece’s debts will balloon after 2030, as it struggles to pay off its high-interest loans, to eventually hit 275 percent of GDP by 2060 – almost three times the size of the Greek economy. Greece’s current debt level is an already catastrophic 177 percent of GDP.

The IMF recognises some of this debt must be restructured and forgiven in order to make it sustainable. They have said they will not take part in any new bailout unless this happens.

Unsurprisingly, Greece’s hard-left Government (a coalition between the socialist Syriza party and a small right-wing party called ANEL) agrees with the IMF, preferring restructuring and debt forgiveness to additional austerity measures. EU leaders, however, disagree. At present, they are not budging.

Greece has already endured several years of extreme austerity within the Eurozone, which has already immensely harmed Greece’s economy – as well as Greek lives - in the last decade.

Unemployment is at 23 percent and has been consistently above 20 percent for 6 years. Almost half of Greeks under 24 are jobless. Pensions are almost worthless. Greece has had to sell off dozens of billions of euros-worth of public assets as part of its most recent bailout agreement. It should come as no surprise, therefore, that over 400,000 Greeks have fled the country since the start of the crisis in 2008.

Normally a country would avoid this sort of disaster by devaluing its currency. This, in addition to facilitating exports, would make its debt (like every other amount of money in the currency) worth significantly less, and therefore easier to manage.

If, as is currently the case for Greece, its debt is largely owed in foreign currency to foreign creditors (mainly German banks, currently charging extremely high interest rates), then it would also default on much of that debt. Following this, a relatively responsible fiscal policy – and Greece is currently running a surplus – would allow the country to return to something approaching normality.

Greece could do all this if it had its own currency again (like the US Dollar, as is currently been mooted as a possibility for the country), or by reverting to the Drachma.

While it remains in the Eurozone, however, Greece cannot devalue its currency – or default – as their currency is obviously the Euro. So, their only option is to bring down their debt quickly by running a huge surplus. But this, of course, leaves them in a vicious circle.

To achieve such a surplus, they must massively raise taxes and attempt to cut spending even more than they have already done. This further stunts the country’s economic growth, which in turn limits their government’s revenue and increases expenditure -- as the fewer people who pay tax, more are left reliant on government support.

The surplus Greece would need to run to solve its debt crisis in this manner would be absurdly huge – and it would be virtually impossible to achieve, let alone sustain. Make no mistake – the problem is the Euro.

As long as Greece remains inside the Eurozone, it will not be able to see the light at the end of the tunnel. EU leaders – such as the German Finance Minister Wolfgang Schäuble – argue debt relief for Greece is impossible under the terms of the Lisbon Treaty.

However, this legal wrangling is not the issue. Fundamentally, it is very difficult to imagine Germany, in particular, agreeing to write off part of the dozens of billions of Euros it has ploughed into keeping Greece afloat so far – especially with elections just months away and German banks and taxpayers alike, liable for Greek debt.

Greece paying off its debt by running an enormous surplus will never happen. Germany – and others – agreeing to a restructuring involving a sizable chunk of Greek debt being forgiven, will never happen either. So few people involved are willing to accept these truths, let alone act upon them.

Sadly, the Greeks have been subject to several years of constant misery so far, and in all likelihood, they will be subject to several years more.

It is time for Greece to take the initiative and accept there is no solution to their crisis while they stay part of the EU. The powers that be in the EU have their own goals – mainly propping up the Eurozone and trying to protect taxpayers in northern Europe, giving little support to those in the south. Greece’s prosperity is nowhere to be seen on their radar.

Britain should be thankful it ignored the self-proclaimed ‘experts’ and never joined the Eurozone. We should also be thankful we are now leaving the EU, which clearly has so little regard for the welfare of some of its own members. This situation is truly astonishing.

To secure its future, we at Get Britain Out believe Greece must leave the Eurozone as quickly as possible. We believe it should be able to bring its debt down in the conventional manner -- by devaluing its new currency.

True, this might be chaotic in the short-term, and it’s understandable why Greek leaders might be reluctant to make this leap.

But in the long-term, it’s the only way they can break the vicious circle and have any hope of a return to pride and prosperity.

Jayne Adye is the Director of cross-party Eurosceptic campaign, Get Britain Out

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