Thread: Again on Greece
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Old May 19 2013, 08:51 PM   #1
stj
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Again on Greece

The thread about Greece seems to have been purged before I could return to such a complex topic. But it is still an interesting one, so here goes.

The IMF not so long ago released its Article IV consultation statement. As a key institution in the world capitalist system, this is very enlightening as to what our masters intend for us. So here's a little precis.

1. Greece is making progress, as show by government debt and wages being lower, yet banks are not going broke.

2. This is because other European governments have given large amounts of aid to limit the financial crisis from spreading, and support the euro by keeping Greece in the monetary system, and to limit the suffering from the budget cuts.

3. However the permanent changes have not been enough, and people are suffering needlessly in Greece because there hasn't been a solution to tax evasion by "rich people and the self employed, nor has there been enough deregulation, and there are still too many government workers.

4. Government debt still has not been lowered enough, therefore the goverment must complete tax reform, which requires the government to have new powers that make it "insulated" from "political interference"; to establish a credible commitment to fiscal reform by firing government workers, not just retiring them and not replacing them; addressing specific spending to the unemployed, job training and transfer payments. The Greek government can thereby avoid across-the-board budget cuts, as it promised.

5. The banks are getting lots of money from the government to keep from going broke but it is vital that the government does not exercise "undue government interfernce," but that it does work out a "framework" for distressed household borrowers. This will lead to a "gradual recovery in credit as deposts and wholesale market access returns."

6. A further permanent change must include elimination of "barriers to entry" for foreign companies, including licensing and privatization of state assets. "Achieving a critical mass of change will be possible only with a broad, forceful, and sustained political commitment."

7. Government should not use development banks, tax-free zones, tax subsidies or other unproven tools. "And in particular, Greece cannot afford a more complicated tax system, which would work directly against the crucial effort to improve tax collection."

8. The severity of the Greek crisis was due to a "progressive loss of confidence" about "euro exit," "political uncertainty" and a lack of "strong political resolve to stand up to vested interest fiercely opposed to reforms." There are two "crucial considerations" to moving forward.

First, "With fiscal adjustment set to remain a drag on GDP growth for several years to come, the key challenge is to generate the improvement in confidence needed for a recovery in investment to begin to more than offset this drag. This cannot happen unless Greece can secure broad domestic support for the program and the political stability that would come with this."

Secoond, "Greece’s public debt remains much too high, despite the restructuring of privately held bonds and recent support by official creditors. It is, therefore, very welcome that Greece’s European partners have now accepted that Greece could need significant exceptional support on below-market terms in order to restore debt sustainability and that they have committed to provide additional relief, if needed, to keep debt on the programmed path, i.e. to bring it substantially below 110 percent of GDP by 2022. With Greece’s debt now overwhelmingly held by the official sector, such a commitment is essential to assure creditors that a credible framework for dealing with Greece’s debt overhang is now in place."

9. "Adopting the necessary policies for the next leg of the adjustment effort, which may well mark a turning point for Greece, must take priority."

For those who are interested, here's the link: http://www.imf.org/external/np/ms/2013/050313.htm



Now, lengthy as that has been, it is not perfectly transparent, even though the IMF values transparency when it comes to Greek licensing procedures. So I must rephrase or expand a little as to what this means. Edit The rest is personal commentary and may safely be skipped if you wish. This warning is thanks to junxon
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1. Bankruptcy of insolvent banks is the rational, fair policy yet the IMF declares that its goal is the preservation of the financial sector.

2. The IMF is arguing that other European governments should support their banks by offering monetary support, lest their banking systems or the Euro itself be disrupted. Practically, that means some attention must be paid to the Greek population, although that is even officially a lower priority.

3. It is a moot question whether firing government workers is a net gain for "the people," inasmuch as government workers are also people. There is very little evidence to support the notion that deregulation helps the people in general. The insistence that the tax system catch the self-employed shows that the main goal is to increase revenues, even at the expense of lower-income self-employed. Even though the middle class professional self-employed man, such as a physician or lawyer, will suffer, increasing social inequality.

4. Firing government workers doesn't just cut government expenses, it decreases wages and breaks unions. The Greek government is currently misusing civic mobilization laws to break a teachers' strike. The insistence on new powers is meant to prevent any popular resistance via elected officials to these attacks.

5. Given the simultaneous insistence that the government not interfere in bank loans, this appears to call for a new bankruptcy law to liquidate the assets of insolvent households, which the IMF regards as expendable in a way banks are not.

6. Deregulating foreign companies is particularly important if the Greek state is to sell its assets to foreigners. Perhaps, as in Africa, Veolia can raise the water rates unhampered if the IMF is successful here.

7. This may be a call for a flat tax. A draconian policy on taxation collection, while it is implies progressivity is an obstacle is remarkable.

8. The Greek crisis was a little different from things like Occupy Wall Street or even the indignados in Spain, because the KKE, the Communist Party, has retained far more of its historical revolutionary heritage than most (partly because the main traitor to Greek Communism was Tito the revisionist, I suspect, not Stalin, while the capitalists were unusally forthright about being pro-fascist.)

The IMF is arguing that this poses a political threat that must be contained. It argues that palliatives on the worst must be applied, while simultaneously installing a government that will not otherwise respond to any of the needs or demands of the population at large. They admit that their policies will make the people's conditions worse, but argue that only appeasement of investors will restore the economy. Therefore, the effective abolition of any notion that democracy means ordinary people have a genuine say in economic arrangements must be forbidden.

There is no convincing evidence of this. The notion that "confidence" actually powers the economy is absurd. It plays a role in bursting bubbles. Second, they themselves tacitly admit that credit will only gradually recover. And they even believe that it will recover because the profitability of Greek business will increase bank deposits and market share in Europe, i.e., that the banks are currently hoarding. They don't admit that it's because the banks are basically insolvent, but there you are.

The link in the other thread to a Dr. Woodford's article tried to establish the IMF has changed its policies. I submit that its idea of change is not what ordinary people would accept as real change.
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Last edited by stj; May 20 2013 at 02:12 AM.
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