Europe’s inspectors will henceforth establish an occupation office in Athens to ensure the “full implementation” of austerity policies, for as long as it takes. Greece has been stripped even of the pretence of sovereignty.
This country that freed itself from Ottoman control in the 1820s (with French help), is reduced to a Sanjak of the new imperial order.
The Greeks will find out soon whether these officials answering to one Horst Reichenbach – unfortunately named for this delicate assignment (couldn’t they find a Spaniard, or a Slovene?) – intend to foreclose on sovereign assets and transfer the proceeds to North European creditors. I do not think it would be wise for them to try.
This is the consequence of the deal hammered out last week in Brussels. But, will Ireland and Portugal receive the same treatment? If they don’t make their targets, the answer is yes. The full text of the EU summit statement last week contained the following passage about Portugal and Ireland:
We invite both countries to keep up their efforts, to stick to the agreed targets and stand ready to take any additional measure required to reach those targets.
Translation: continue fiscal austerity until you reduce your deficits significantly. If the depression this creates causes you to miss your fiscal targets, redouble your efforts under the watchful eye of the Troika.
Portugal is out making additional cuts and increasing taxes (link in Spanish). Nevertheless, Olli Rehn has already indicated that Portugal runs the risk of not making its 2011 fiscal targets (link in Portuguese). Even Spain, not under an IMF program, will miss fiscal targets.
So, it is only a matter of time before what is happening in Greece happens at a minimum in Portugal and probably in Ireland as well. How will the Portuguese react? There is less unfortunate history with Germany than in Greece, and so less anti-German animosity.
But there is real hardship. Lisbon’s Banco Alimentar, or food bank, the largest in Europe, distributes 12,000 tonnes of food a year to about 250 local charities, helping to feed up to 160,000 people last year. The number has been rising sharply over the past two years, said José Almeida, a retired mining engineer who helps run it. Those asking for food, he said, “are not the ones you’d usually expect”. He added: “Couples who both had good jobs, and a high standard of living … then one’s made redundant and they can’t keep up the cars, the mortgage, the school. They turn to charity.” Last year lawyers, engineers, even a judge sought help, he said.
So who do people blame? There’s anger, plainly, at the banks.
“They threw money at people,” said Martins. “They gave the impression it was Christmas every day.”
The austerity protests are now picking up in Portugal. The next big strikes are prepared for November 8th.
Austerity cuts demand too much to have the positive effects on deficits in the short-term that Europe wants it to have. All of these countries are likely to miss their targets. And then the Troika ‘occupations’ will commence. Will they hammer out a ‘voluntary’ debt reduction in Portugal too? Will they look to force periphery governments to sell assets to foreigners? Any way you look at it, this is a combustible scenario which awaits Europe. And at this point, I fail to see the upside.
Source: The two halves of the eurozone are locked in a broken marriage – The Telegraph
This post originally appeared at Credit Writedowns and is posted with permission.