May 17, 2011

Maley: IMF disgrace tempts a Greek default

The arrest of International Monetary Fund boss Dominique Strauss-Kahn, for allegedly assaulting a maid in a hotel, prompted howls of dismay from Greek newspapers, writes Karen Maley.

The weekend arrest of International Monetary Fund boss Dominique Strauss-Kahn, for allegedly assaulting a maid in a top New York hotel, prompted howls of dismay from Greek newspapers. "The maid blocks Greece", was the headline in the leftist daily newspaper Eleftherotypia, while the more conservative newspaper Kathimerini considered it a case of "Greece in doubt”. The strong personal relationship between DSK (as he’s referred to in the French media) and Greek Prime Minister George Papandreou -- both of whom are Socialists -- is generally considered to have been a key factor in the €110 billion bailout package that the IMF and the European Union cobbled together last May. It was to DSK that Papandreou first turned when he discovered the size of Greece’s budget deficit. While European politicians dithered, DSK quickly reached the decision that Greece needed a rescue package. But Greece’s position now looks dire. DSK is now being held without bail pending his trial, while European leaders remain at loggerheads over what to do about Greece’s deteriorating finances. A team from the IMF, the European Commission and the European Central Bank -- known in Greece as the "troika" -- is currently in Athens examining Greece’s progress in implementing its austerity measures. The early signs are that the country is not meeting its targets: its tax revenues are falling short, and the economy is shrinking, partly as a result of the austerity measures. Relations between the troika and the Greek government are becoming increasingly strained. At the same time, the eurozone’s two major economies are in disagreement over what course of action to take. Germany is arguing in favour of rescheduling of Greek debt, including that held by private investors, such as banks and pension funds. France, on the other hand, wants to provide additional rescue funds for Greece, and there’s talk of an extra €60 billion in emergency funding.  The only thing that the two sides agree on is that Greece needs to embark on further reforms, and find extra ways to cut government spending. The worry is that ordinary Greeks are becoming increasingly disenchanted with the country’s ongoing austerity measures, and are increasingly tempted by the idea of the country defaulting on its debts. According to the German publication, Der Spiegel, a new "I Won’t Pay" movement has sprung up in the country. "Its members are refusing to pay the price for the crisis. They are hampering the operation of toll booths on the expressway, taping over coin slots on ticket machines for buses and trains or simply dodging fares. They plan to call for resistance to a patient fee for visiting doctors and they want to organise a tax boycott. The movement already has at least 10,000 members, its organisers claim, noting that 'a new committee is added' every day." According to Der Spiegel, most of the membership of the "I Won’t Pay" movement consists of ordinary middle-class people, along with the unemployed. And this is why markets are so rattled by the situation in Greece at present. It is one thing for eurozone politicians and bureaucrats to prescribe more austerity measures for Greece, but if the Greek population rejects them, the measures simply won’t be implemented. Handled properly, Greece’s debts could be rescheduled, without roiling markets. The risk at the moment is that investors are beginning to question the ability of eurozone politicians and policy makers to be able to come up with a plan for rectifying Greece’s deteriorating finances. If investors ultimately lose confidence, we could be in for a complete re-rating of risk around the world, which would spark a huge sell-off in markets. *This article first appeared on Business Spectator.

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5 thoughts on “Maley: IMF disgrace tempts a Greek default

  1. Meski

    Hmmm. Greece and others seem determined to enact a Europe foreseen by Ayn Rand in Atlas Shrugged.

  2. AndyWare

    The Filthy Rich of Greece in collaboration with the previous Conservative government borrowed money from Golman Sachs then stole most of it. They refuse to pay taxes. But the people of Greece are now responsible for the debt. The EU should enact an inquiry to find the money. Will they. NO.

    When people are in debt it is easier to enslave them.

    Ayn Rand (real name Alisa Zinov’yevna Rosenbaum, born in Russia) who worked for the Bolshevik Alexander Kerensky to implement Communist policy is the type of person who helped create the Global Financial Crisis by advocating less and less government regulation.

  3. CML

    If you watch the demonstrations on TV in these countries which are in trouble, the reporters, almost without exception, translate the interviews/banners etc. as people saying that they will not pay back the debt because they don’t believe the ordinary citizens caused the problem. It is the strata at the top, of rich and greedy individuals who should pay – particularly, it would appear, anyone connected with banking and/or financial enterprises.
    Elsewhere in Crikey today, we are told that our own CBA is already back to playing games with house mortgages. As I understand it, if the CBA goes broke, the government (READ TAXPAYER) is already committed to bail it out – because it is one of the four banks in this country which are said to be “too big to fail”. Why is it my fault? And if it isn’t, why will my taxes be abused in this way?
    I think the people of Greece and other countries in this situation have a point. No wonder they are joining the “I won’t pay” movement(s).

  4. AR

    The old concept, “hostages to fortune”, meant that a man (stet.) had a wife & children he was less free and more likely to be obedient to his soi disant Betters.
    Massive mortgages on Mcmansions and credit card lifestyles perform the same function today in the Ponzi scheme that passes for a modern economy.
    Millions of people running madly on the spot, playing pass the parcel. Be afraid, be very afraid when the Muzak stops and the mallrats discover the implications of ‘just-in-time’ supply chains, esp. food supamarts.
    Civilisation or, in the modern sense, civil society, is a veneer only 4 missed meals thick.

  5. Meski

    How many of the people of Greece have rolling credit-card debt? How many go on strike to support subsidies and quotas?

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