Greek debt update

by
Michael Hudson
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Taken from a short interview with Greece’s Banking News.

According to the IMF, Greece’s debt isn’t manageable in the long-run without being either extended or forgiven. Where do you stand towards this claim? How important is the Greek debt relief?

The IMF’s European research staff staff was quite correct in stating some years ago that Greece’s debt was unpayable. The staff was so upset that the head of the IMF, Dominique Strauss-Kahn, made the bailout loan anyway that they resigned and became whistle-blowers. I describe this whole incident in detail in Killing the Host.
Strauss-Kahn wanted to be president of France, and therefore had to press to bail out French banks, which were the major holders of Greek bonds. Also, US President Obama and Treasury Secretary Geithner also told Angela Merkel that US banks had made big bets – derivative gambles – that Greece would pay its bondholders, and threatened to hurt European banks if they did not pressure the IMF to bail out Greece. Basically, the IMF is an agency of the U.S. State Dept. and Pentagon.

There is a basic moral principle at work: If debts cannot be paid without radically transferring property from debtors to creditors, the loan should be deemed “bad” and be written down to the ability to be paid while living a normal life.

That is why German reparations and Inter-Ally debts were written down after World War I. Greece’s foreign debt is what is known as an “odious debt,” taken on by fraud to finance capital flight by Greece’s One Percent.

The current bailout program is set to end in August of 2018. Is debt relief the only way to avoid another bailout? What other factors could help Greece to stand on its feet?

There is another way. Greece can sell off its entire public domain. It can stop pensions and pubic spending. But if it pays, the result will be continuing depopulation, emigration, shorter lifespans, worse health. And by selling public infrastructure, Greece is imposing future balance-of-payments outflows to the new buyers. This is what the IMF calls Equilibrium.

SYRIZA gained power because it was believed to be the only political force that could pull Greece from the depths of financial collapse. How effective was Mr Tsipras’ government in implementing reforms and restoring fiscal sustainability?

Mr. Tsipras obviously failed to carry through on his promises. He became a political opportunist, whose aim was simply to remain as president. He knows that as soon as there is an election, he’ll be voted out of office.

At present, he’s simply acting as an agent of the European banks and German arms sellers.

Other eurozone countries have experienced financial crises which rocked their economies and managed to exit bailout. Why for Greece did it get this hard? Why the Greek bailout went so wrong?

Greece is not alone. It is suffering from the same neoliberal financial austerityis that is depopulating Latvia. The “Baltic miracle” is emptying out these countries. It’s an old story. Latin American debtor countries experienced similar austerity for decades under IMF austerity plans, which they called “stabilization policies.” Germany was hit as hard in the 1920s as a result of unpayably high reparations debt.

We are living in a world where the financial sector is waging class war against al the rest of society. The aim is to transfer property from the public sector to foreign buyers, banks and bondholders.

Greece WAS being made an object lesson to convince Portugal, Spain and Italy not to stand up to Eurozone creditors and neoliberal financial planners. The message was that their economies would be wrecked just like that of Greece if they opposed IMF-US policy.

The Greek government says the country has turned a corner and wants a “clean exit” from the bailout program? What does this mean? And how possible is to achieve a “clean exit”?

By “clean exit” the EU means that Greece must sell off enough of its assets to pay the ECB for the money it used to bail out bad loans of French and German banks and bondholders who financed tax evasion and capital flight to Switzerland and elsewhere for over 25 years.

It also must commit to cutting back pensions and public spending by enough to step up its NATO spending to finance the bombing and destabilization of Syria and the Near East, and over and above this, to accept the cost of supporting all the refugees caused by US policy and its foreign legion in the form of ISIS, Al quaeda and Al Nusra.

Is it possible that Eurozone may shrink and/or collapse? Could you kindly attempt to make a prediction on the future of the monetary union? Are you a pessimist or an optimist?

The Eurozone has become an economic dead zone. That was inherent in the way that it was created, without a central bank to monetize national Treasury budget deficits and spend money into the economy to help it grow.

Therefore, the eurozone must collapse in the end. If it does not, the entire eurozone will end up looking like Greece looks like today. Greece is the eurozone’s future, if it is kept in place.

I’m optimistic that the crisis will be serious enough to break up the eurozone and create a new, more socialist order in which debts are written down – and with them, the “bad savings” of the financial elites that are seeking to do to Europe what the Roman Empire did when it reduced Western Europe to feudalism.

Ruth Enyedi