With Europe behind it, Greece is being pushed into further peril

There is not the remotest prospect of that Athens can raise the money set out in the bailout terms, even with the enforced sale of national assets

Keynes never existed. The General Theory of Employment, Interest and Money was never written. Economic history ended on the day Franklin Roosevelt replaced Herbert Hoover as president of the United States.

That’s the gist of the deal that keeps Greece in the euro, an agreement that will deepen the country’s recession, makes its debt position less sustainable and virtually guarantees that its problems come bubbling back to the surface before too long.

At the insistence of Berlin, this sort of flexibility is not going to be open to Greece. Angela Merkel and Wolfgang Schäuble, her finance minister, have got everything they were seeking before Alexis Tsipras called the Greek referendum – and more.

Athens has been forced to accept the “streamlining” of its VAT system to raise more tax revenue. That means more goods and services included in the 23% main rate of VAT. It has also dropped its resistance to immediate changes to the pension system, which will mean higher health charges and an end to the solidarity supplement, a top-up payment to the poorest pensioners. The seemingly innocuous pledge to “reduce further the costs of the Greek administration” means sacking civil servants employed since Tsipras was elected in January.

Greece, to borrow Harold Macmillan’s phrase, will be forced to sell off the family silver (along with the airports, the ports and the banks) to pay for its bailout and to recapitalise its own banks. That’s the plan.

In truth, there is not the remotest prospect of Greece raising €50bn through privatisations in the next three years. The €50bn target was first announced back in 2011, since when the value of the Greek stock market has fallen by 40%, making its assets far less valuable. In the past four years, privatisation proceeds have raised just over €3bn.

For the moment, Greece remains in the euro but it should be obvious by now that there are only two ways of resolving the crisis. The first is to write off a large chunk of its debts. The other is to allow it grow at a pace that allows it to service its debts. This deal offers neither. Its one minor concession is that there will be talks about giving Greece longer to pay its debts provided it takes steps that are certain to lengthen and deepen the recession. This is not a solution. It is a chink of light filtering through the bars of the debtors’ prison.

Full article: With Europe behind it, Greece is being pushed into further peril (The Guardian)

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