By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
In Greece, three-quarters of the independent doctors, lawyers, and engineers declare taxable income below the existential minimum. Tax fraud amounts to €20 billion per year (8.5% of GDP). And tax dodgers owe €63 billion in unpaid taxes (27% of GDP). The country is bankrupt and has been kept afloat by the Troika (EU, ECB, and IMF), of which Germany is by far the largest contributor. And the numbers are staggering: the first bailout package of €110 billion, the current bailout package of €130 billion, and the debt swap of €107 billion, in total €347 billion, amount to a mindboggling 150% of Greece’s GDP!
And even that won’t be enough, apparently, according to a crescendo of German politicians, among them Finance Minister Wolfgang Schäuble who inserted these devastating words into his letter to the members of the Bundestag: “I cannot give any guarantees that the path taken will lead to success.” And: It’s possibly “not the last time that the German Bundestag will have to deal with financial aid for Greece.” Thus, he put a third bailout package on the table.
On Monday, the Bundestag will vote on the second bailout package of €130 billion plus €24.4 billion from the first package that hasn’t been paid yet, a total of €154.4 billion. There is resistance within the governing coalition. And the opposition SPD and Greens accused the government of deception. The documents they received were incomplete, they said. Though there were several hundred pieces of paper, they didn’t include the most important: an analysis of Greece’s ability to service its debt in the long term. Most likely, they said, Greece would need to be bailed out again after 2014 because it won’t get its finances in order by then, and won’t be able to fund itself in the capital markets. €50 billion would be needed, they estimated. And yet, the SPD and the Greens will largely vote for the bailout, which is expected to pass.
But it’s a theoretical approval. Theoretical, because in reality, payment of the tranches will be conditioned on the implementation of all promised measures down to the last iota, however Teutonic they may be—and it’s almost certain that Greece won’t be able or willing to comply with all of them. The latest iota is a leaked document that specified that 160 employees of the German Ministry of Finance were ready to head to Greece to help install a functional financial administration.
“The European Union is suffering under Germany,” said Georgios Karatzaferis, president of the right-wing LAOS party. He accused Chancellor Angela Merkel of trying to “impose her will on Southern Europeans.” And he wasn’t the only one lashing out. For the bitter turmoil inside Greece, read…. Greece at the Point of no Return.
In Germany, the chorus for strict implementation has been loud. While Greece cannot be forced to implement and stick to the austerity and reform package, Bundesbank President Jens Weidman said Friday evening, “it must be clear that more financial means cannot be made available if Greece does not adhere to the agreements.”
And Merkel’s coalition partner, the CSU, has been relentless. Among them, Hans Michelbach, who said that pressure for reform must be increased. Greece “overburdened to excess” the patience of the Troika, and that could not continue. “There can only be new money if all demands for the previous tranche have been met.” That would include privatizing its state-owned enterprises. And about the third bailout package that Schäuble couldn’t exclude? “We’re giving Athens an additional chance with the second package, but the country has to use that chance. One thing is clear: since Greece already didn’t use the first chance, there won’t be a third chance.”
So the plan becomes clear. And it is now politically correct to pronounce it in public: Greece should decide on its own to leave the Eurozone. This way, no politician outside Greece can be blamed.
“The chances for Greece to regenerate itself and become competitive are certainly greater outside the Monetary Union,” said Minister of the Interior Hans-Peter Friedrich (CSU). “I’m not talking about kicking Greece out, but creating incentives for an exit that it can’t refuse.”
Luxembourg Finance Minister Luc Frieden said it too: “If the Greek people or the Greek political elite do not apply all of these conditions, they exclude themselves from the Eurozone.” All of these conditions. Then the crucial words: “The impact on other countries will now be less important than a year ago.” And that’s has been the strategy all along. Read…. Firewalls Are in Place, Markets Are Ready: Now Greece Can Go to Heck.
This post appeared at naked capitalism and is posted with permission.
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