By William K. Black
January 30, 2017 Bloomington, MN
The troika refers to the European Union (EU), European Central Bank (ECB), and the International Monetary Fund (IMF). The IMF, traditionally, was the greatest proponent of any international entity of inflicting extreme austerity on nations suffering economic crises. The IMF’s economists have increasingly reviewed the evidence and concluded that austerity reduces growth and that putting nations into inescapable debt traps is stupid and harmful. The EU and the ECB, however, have been impervious to these economic studies and intent on hammering the Greeks. The purported EU “bailout” of Greece is an exercise in EU propaganda. Overwhelmingly, EU aid involving Greece goes to Greek banks – and the bank bailout bails out the creditors of Greek banks. Those creditors, overwhelmingly, are EU banks.
The EU and the ECB have forbidden Greece to use stimulus and locked Greece into a debt trap that will crush the Greek economy for over a half-century.
The International Monetary Fund believes Greece’s debt is “highly unsustainable” and will reach 275% of gross domestic product by 2060 unless the country’s loans are significantly restructured, according to a draft confidential review of the country’s economy.
The Greek debt trap will worsen, not end, after 2060 absent major debt relief. The IMF predicts that the growth of Greek debt will “become explosive thereafter.” In the commercial sphere, creditors routinely grant major debt relief to corporations in analogous circumstances. Donald Trump brags relentlessly about his ability to induce his creditors to restructure his firms’ debt payments.
Germany and the Netherlands are leading the charge to inflict eternal austerity on the Greeks without substantial debt relief. They can continue to torture the Greeks through their policies, but the results will be horrific. The immediate result is the mass exodus of Greek university students when they graduate. The eventual result will be rebellion and the destruction or radical revision of the euro system.
The Shock Doctrine in action.
Hate to quote an overused non-nuanced saying but “definition of insanity is doing the same thing over and over again expecting a different result.”
Can these technocrats name a country in human history that uses austerity to get out of trouble like they claim the Greeks can? Just name one country…