Greece Is Being Treated Like A Hostile Occupied State

[GliderGuider]

Greece Is Being Treated Like A Hostile Occupied State

Like the Neapolitan Bourbons – benign by comparison – the leaders of the eurozone have learned nothing, and forgotten nothing. The cruel capitulation forced upon Greece after 31 hours on the diplomatic rack offers no conceivable way out the country’s perpetual crisis. The terms are harsher by a full order of magnitude than those rejected by Greek voters in a landslide referendum a week ago, and therefore can never command democratic assent. They must be carried through by a Greek parliament still dominated by MPs from Left and Right who loathe every line of the summit statement, the infamous SN 4070/15, and have only agreed – if they have agreed – with a knife to their throats. EMU inspectors can veto legislation. The emasculation of the Greek parliament has been slipped into the text. All that is missing is a unit of EMU gendarmes.

Such terms are unenforceable. The creditors have sought to nail down the new memorandum by transferring €50bn of Greek assets to “an independent fund that will monetise the assets through privatisations and other means”. It will be used in part to pay off debts. This fund will be under EU “supervision”. The cosmetic niceties of sovereignty will be preserved by letting the Greek authorities manage its day to day affairs. Nobody is fooled. In other words, they are seizing Greece’s few remaining jewels at source. This is not really different from the International Committee for Greek Debt Management in 1898 imposed on Greece after the country went bankrupt following a disastrous Balkan war.

A six-power league of bondholders, led by British bankers, impounded customs duties in the Port of Piraeus, and seized revenues from stamp duty, tobacco, salt, kerosene, all the way down to playing cards. But at least there was no humbug about solidarity and helping Greece on that occasion. “It is the Versailles Treaty for the present age,” said Mr Varoufakis this morning, talking to me from from his island home in Aegina. Under the new terms, Greece must tighten fiscal policy by roughly 2pc of GDP by next year, pushing the country further into a debt-deflation spiral and into the next downwards leg of its six-year depression. This will cause the government to miss the budget targets yet again – probably by a large margin – in an exact repeat of the self-defeating policy that caused Greek debt dynamics to spin out of control in the last two Troika loan packages.

As the IMF acknowledged in its famous mea culpa, if you misjudge the fiscal multiplier and force austerity beyond the therapeutic dose, you make matters worse. The debt to GDP ratio rises despite the cuts. EMU leaders have an answer to this. Like Canute’s courtiers, they will simply command the waves to retreat. The text states that on top of pension cuts and tax increases there should be “quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets”,. In other words, they will be forced to implement pro-cyclical contractionary policies. The fiscal slippage that acted as a slight cushion over the last five years will be not be tolerated this time. And let us not forget that these primary surpluses never made any sense in the first place. They were not drawn up on the basis of macro-economic analysis. They were written into prior agreements because that is what would be needed – ceteris paribus – to pretend that debt is sustainable, and therefore that the IMF could sign off on the accords. What a charade.