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Thursday
Sep272012

Greece, Tell Brussels “To Take A Hike” And Let The Troika Bail Out The ECB Instead

Awful as Greece’s GDP has been, it doesn’t do justice to the economic fiasco. Take new vehicle registrations: in August, they plunged 46.7% from prior year. Only 3,886 new vehicles were sold. A collapse of 80% from August 2008 at the cusp of the crisis. For the first eight months of 2012, sales were down 42% from prior year, and 65% from 2008. People have stopped buying new cars. And not just cars.

“The situation continues to deteriorate,” wrote an acquaintance. “My normally honest friends and relatives have all begun to find ways to avoid the ever increasing taxes. The horrible bureaucracy worsens even in this small town of 5,000. It took a friend a month of running from office to office just to get a permit to repair, not construct, but repair an existing balcony. Hopeless.”

Ten years ago, he built a house in Southern Greece not far from Sparta—”with many fine workers, most of them Albanians and some excellent Greeks as well, but it took a long, long time.” The house is surrounded by citrus and olive groves. In the distance, mountains and the sea. He writes:

“I detest going to Athens because of the gridlock. Buildings built over the last twenty years have little or no dedicated parking. Why? Parking is low or no-revenue space that city planners have reserved for cronies with fakelos (envelopes with cash). Thus cars and scooters clog not only streets but sidewalks.”

Though the gridlock might be thinning out. Over the last two years, 68,000 businesses have shut down; another 63,000 might succumb next year, predicted Vassilis Korkidis, president of the National Confederation of Hellenic Commerce (ESEE). It infected the busiest shopping streets in Athens: on Panepistimiou, 34.7% of the shops were shuttered; on Akadimias, 42%!

So a new austerity package must be devised for the Troika—the bailout and austerity gang from the EU, the IMF, and the ECB—in return for more money so that Greece could service its debt that is rotting in some drawer at the ECB. As the coalition government was fighting over the provisions, a 24-hour general strike paralyzed parts of Greece on Wednesday. In Athens, 50,000 - 100,000 demonstrators streamed through the streets, shouting “enough is enough.”

Yet on Thursday, the leaders of the three coalition parties apparently agreed on the outlines of the austerity package, to be implemented in 2013 and 2014. It would include tax measures that might be applied to 2012 incomes. They’re even trying to go after the well-represented freelance professionals such as engineers, doctors, and architects. But my acquaintance remained cynical:

“There’s a popular saying here: ‘I threw him.’ Loosely it means, ‘I cheated him’ or ‘I was smarter than him.’ It’s considered a national sport to apply it to the taxman. Well, the taxman cometh—and he is fighting either 30 years or 2000 years of tradition. And he won’t win.”

As people refuse to pay taxes, the government is slowing disbursements. State-owned institutions have run out of money, and so have companies and individuals. And they stopped paying their bills. The ensuing circular absurdities push the country deeper into fiasco.

For example, the state-owned Social Insurance Foundation (IKA), itself out of money, hasn’t paid Saronikos Gulf Kidney Dialysis Center on Aegina Island in months for the treatment of its patients. So the center hasn’t paid its staff in six month, and couldn’t even pay its electricity bill. On Wednesday, Public Power Corporation (DEI), fighting its own liquidity crisis, cut power to the center. Instant media uproar. And power was restored. But still, the money hasn’t started flowing.

“Greece is a victim of the monetary union,” explained Czech President Vaclav Klaus. “It would be much better for them not to be in the straightjacket. It would be a victory for them.”

If the Greeks told the Troika “to take a hike,” as David Stockman said in his incomparable interview [The Emperor Is Naked], it would solve a host of problems. Greece would return to the drachma and regain control over its printing press. Troika members, and particularly taxpayers in Germany, who’re reluctant, very understandably, to throw good money after bad in Greece, would then have to look at the ECB. It owns most of the now worthless Greek debt. The Troika could then bail out the ECB directly rather than via Greece. It would be closer to home, and more honest—though it still wouldn’t solve the problem of taxpayers bailing out investors.

And then new money would start flowing because Greece would still be a member of the 27-nation EU and of NATO. That’s the difference between Greece and Argentina. Greece could restructure its government and society, or it could slide back into its old ways of doing things. It would be up to the Greeks, not the Troika.

It should look at Argentina, however. A perfect example of how not to run a post-default economy. And its policies are now taking on desperate and ugly forms. Read....  Not An Effective Capital Control, Import Control, Or Tax Measure – But An Effective People Control, by stilettos-on-the-ground economist Bianca Fernet.

And here is Jan Bennink, a Dutch columnist and self-described anti-EU populist, who wonders, “Is there anything more frightening than bureaucrats with a dream?” Read.... The New Great Dictators Are Gaining Momentum In Europe.

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Reader Comments (3)

The Czech President is right about this, and a lot of other things.

For me, the Greek tragedy was best summed up by a woman interviewed on the BBC yesterday.
"It is impossible to live with dignity in this country anymore."
September 27, 2012 | Unregistered Commenterblankfiend
The troika at the end of the day has them by their private parts. Greece simply doesnot have a primary surplus, or realistically a 2-3% primary surplus to deal with disappointments lower income and taxrevenue as you also cut local interest income. So the alternative is worse sunstantially worse. They should have got asap to a surplus at that stage you can blackmail much better, but Greece has simply overplayed its card.
The IMF also has the EZ in the same position . The EZ has to decide let Greece go now and face the Grexit and again burn a lot of political capital or or one or two term later and take cuts on the publicly held Greek debt and have budgetissues and burn a lot of political capital that way. But political capital will burn one way or another.
Likely Greece will at the end promise heaven and earth and miss the targets by the usual 70-80% next term. Same procedure as last time. However extension is always more money and also the IMF part has to be taken care off. So even if Greece makes its necessary standard u-turn it is still a 50/50 or so if the new cash comes up. Politicians are really starting to look like a bunch of buffoons every 3 to 6 months it is: 'this will save Greece' and one or two terms later it is 'guess what: disappointment, I never thought that would happen'. Completely uncredible (especially before an election).
September 28, 2012 | Unregistered CommenterRik
Greece telling Brussels go take a hike is telling Rothschild's take a hike. They better prepare an army.
jonkirby2012.wordpress.com
September 28, 2012 | Unregistered Commenterjonkirby2012.wordpress.com

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