Holy austerity, Batman, Greece will be fleeced!
Greece has been forced to accept brutal and humiliating terms to obtain a third bailout loan of up to 86 billion euros ($95 billion) over three years. Macro Horizons summarizes the ‘deal.’
It looks like a deal’s been struck – subject to the Greek parliament legislating a raft of reforms over the coming couple of days. How long the deal sticks is another matter. Just over a week ago, a substantial majority of Greeks voting in a referendum said no to more austerity. Yet that’s exactly what they’re getting. Not just more austerity but a brutal and humiliating squeeze. Yes, it avoids Greek exit from the single currency region, but how long before the creditor-imposed conditions blow up into another domestic political crisis?
On top of big cuts in spending, 50 billion euros ($55 billion) worth of Greek state assets – including recapitalised banks – will have to be put into a trust fund beyond the government’s reach. They would then be sold off, primarily to pay down the national debt.
Yves Smith at Naked Capitalism describes the terms of the ‘deal,’
The major terms include:
Increasing and simplify VAT
Cutting pensions. More on that shortly. The terms here look to be vastly worse than the cuts Greece fought a few weeks ago
“Requesting” continued IMF “support” (monitoring as well as financing)
“Introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions”
Sequestering €50 billion of assets, nominally supervised by Greece but under strict oversight of the creditors. Half will go to recapitalizing the banking system
Implementing labor market “reforms” along the lines sought by the creditors
Not only is there no debt relief, there is no prospect of any debt relief unless Greece meets targets. And forget about principal reduction. From the letter:
…the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review.
The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.
This is not a deal. It’s a public flogging.
Creative Commons Licensed Photo from Flickr by Global Justice Now