Those debt negotiations between the various European groups and the Greek government keep rumbling along. On the one side we’ve the European Union, the Eurogroup, the International Monetary Fund and the European Central Bank. There are disagreements among them, most certainly. And on the other side we’ve got the Greek government. All all are looking warily over their shoulders at their own voters. Which is exactly what the basic problem is. The Greek populace want the debt reduced and the economic pain lifted. The other Europeans aren’t in the mood to lose their money even as the politicians in those various groupings of ECB, Eurogroup and so on know that the money has already been lost. Thus we have to keep going in this cycle of demanding changes in Greece in return for releasing the next tranche of money:
Greek lawmakers on Sunday adopted another batch of controversial spending cuts and tax hikes, two days before a crunch eurozone meeting expected to unlock the next tranche of much-needed bailout funds for the debt-ridden nation.
The 7,000-page bill that raises the sales tax cap and introduces a contingency mechanism to slash spending further in case of budget overruns was passed thanks to the Syriza-led coalition government’s slim majority in the 300-seat parliament, according to an AFP count.
There won’t really ever be an end to this process. Because it’s simply not possible for the Greek economy, under any reasonable at all set of circumstances, to ever repay all that money. Thus those who lent it, those other Europeans, are going to lose some to most of it:
The prior actions will ensure further support of lenders and the signing of a new deal on debt relief that will help restore growth, Greek Prime Minister Alexis Tsipras argued, addressing the assembly.“Today closes a difficult circle for the country and we are taking a final step in the completion of the first evaluation that will mark a new era of creation for Greece, an era that also has its difficulties but also perspective,”the Greek leader said.“Tonight European leaders are receiving a message that Greece complies with its promises and assumes its share of responsibilities. Tomorrow the other side should also fulfill the commitments undertaken under our agreement. And I believe that this will happen,” he stressed, pointing to the May 24 Euro Group meeting.
Debts that cannot be repaid simply will not be repaid. The only question left is how those European taxpayers will lose their money. The Greek government would prefer it to be by cutting the capital amount to be repaid: so called “debt relief”. Everyone else is horrified at that idea: because to do so would tell every European taxpayer that their elected representatives had just lost them their money. Thus everyone else would prefer extend and pretend. Cut the interest rate, extend the maturity terms and hope to be collecting a pension or dead by the time people work out what has happened. Economically these are the same thing: the debt burden is reduced, the taxpayer loses her money. Politically of course they’re not the same thing at all which is why the arguments.
It’s simply not going to work. There are no reforms that can be made that will make Greece able to pay that debt. Thus the debt will be cut in one of those two ways. That’s the plain economics of the matter: Greece cannot repay that debt therefore Greece will not repay that debt. All of this negotiation is just a cover, including the imposition of deep economic pain, for the manner in which that taxpayer money will be lost.Opposition parties voted against most of the measures in the bill and accused Tsipras of ruining the country’s economy. Kyriakos Mitsotakis, leader of the main opposition New Democracy party, said he wants a new “truth agreement” with Greece’s creditors to foresee a lower budget surplus and more structural economic overhauls that will foster growth.
http://www.forbes.com/sites/timworstall/2016/05/23/that-greek-debt-problem-keeps-rumbling-along/#3f6faa9c2fdc
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