On Monday night, June 1, in Berlin, Greece's three bailout monitors representing the IMF, the European Commission and the ECB -- displaying fresh intransigence behind closed doors without any representatives from Greece -- agreed to push Athens to accept a tougher new rescue plan in return for releasing emergency finance for Greece.
Hardly conciliatory, the metamorphosis of Greece's partners, practically adopting an untimely "take it or leave it" attitude, also led to the rejection of the Greek counter-proposal, which had reasonably suggested moderately lower targets than those demanded, but higher than what Greece had originally proposed.
The presumption here must have been that the embattled Greek government would at this stage acquiesce even to the popular masochism implicit in the further drastic reforms its lenders demanded for the Greek economy to get back on track. Complying with established IMF procedure, however, Greece in response withheld a €300m debt repayment due -- exercising its right to pay the total sum owed, €1.6b, at the end of the month.
Last week the talks predictably collapsed. And fears of a default have consequently risen as possible capital controls now seem to be drawing even closer. This will certainly be food for thought at the imminent meeting this week of eurozone finance ministers -- short of pulling out of thin air another unpredictable hat-trick.
The stricter overhaul demanded could only have been realized, of course, in terms of multiple draconian cuts in public expenditure -- as if cultivating masochism in Greece were once again a prerequisite condition. On the one hand violating the "red lines" everyone in Greece thought were sacrosanct. And, on the other, thus starving the Greek economy into deeper recession by accelerating an already collapsing aggregate demand in the system.
Foremost among the "extra reforms" featured was the upward revised 3-5 percent target for a budget surplus by mid-term to be indiscriminately financed by additional cuts in pensions, wages and salaries already hovering at subsistence levels. Compounded by heavier sales-tax increases and even more far-reaching changes that would have to be enforced in collective bargaining laws summarily clearing the way for mass dismissals whenever presumed necessary. All at a time of sky-rocketing unemployment, particularly of younger persons in Greece, reaching by now a formidable level of 60 percent. But wouldn't this "offensive" also create in the end masses of freshly victimized Greek citizens practically sharing today the fate of many thousands of undocumented immigrants critically encumbering the country today?
Greece's creditors do not seem to have come across St. Mathew's classic defense of fair play in his celebrated question, "Why behold the mote in your brother's eye yet not considering the beam in your own eye?" Or else, why has it not occurred to the trio of lenders -- and remains instead political anathema in the EU -- that they should in fairness already have scaled-down the bulging Greek sovereign debt to reflect the extraordinary damage so far caused in financial, economic and social terms during the past five years of blind austerity? Imposed by their so-called adjustment program for Greece -- flawed both in design and execution.
Still missing, elementary economics suggests this fundamental rectification remains sine qua non for Greece to become capable to forge ahead with the serious reforms needed to emerge as a functioning member-state of the eurozone. An axiomatic truth that has yet to be comprehended. Isn't it, too, almost an indecent albeit dangerous spectacle of the European Union, a superpower, to go on threatening, when not cajoling, the government of a small member-state on its strategic southern periphery? And, still worse, expecting that government to preside over a humanitarian crisis poised to engulf the Greek people in even greater distress.
In remarkable contrast, the US Treasury Department's intensified and widely acknowledged efforts in recent months to dampen hostility and unnecessary confrontation between the two sides were a welcome relief worldwide. The United States, in fact, remains eminently placed to assume an even more significant role in galvanizing support for mediation before Europe's unchecked arrogance today leads us all to a point of no return next.
________________ Nicos E. Devletoglou, Emeritus Professor of Economics, University of Athens, is author of the books Academia in Anarchy: An Economic Diagnosis (Basic Books) written jointly with Nobel Prize Laureate in Economics James Buchanan; and Consumer Behaviour: An Experiment in Analytical Economics (Harper and Row).
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