Debt of Sisyphus: Greek economy’s coma is a misguided political experiment

Austerity is destroying the free part of the Greek economy, leaving government more dysfunctional than ever. Worse news: it will need yet another bailout…

Seasoned economic observers remain shocked by recent events. Greece will soon need another bailout. That’s not remotely surprising. What shocks is that there remains some semblance of an economy to bail out after 6 years of depression.

Greece is bust, the political system broken, the nation dysfunctional. Tax still isn’t being collected. Government remains a bloated legacy of political patronage. Workers left in the private sector are desperately clinging to the hope their business can survive the insanity of a Euro made in Germany applied to the Mediterranean.

Margaret Thatcher wisely noted that when politics and economics clash, you bet on the economics to triumph and the government to collapse. A sound rule; it held true when she helped accelerate the suicidal downfall of the Argentine military junta and, of course, the end of the Warsaw Pact. The tax-free bureaucrats of Brussels in the Berlaymont bubble have convinced themselves it can’t happen to them. Anybody reminded of the Ceausescu family preparing for Christmas 1989? The euro may have survived to date but Thatcher’s Law invariably proves correct.

Deluded eurozone leaders continue to prematurely claim that the crisis is over. Greece is stuck between a rock and a hard place. News of the bailout requirement comes just as Chancellor Merkel attempts to bore German voters into re-electing her on September 22nd. However, another Greek bailout plays badly with the German electorate, especially in the wealthy west where citizens paid to integrate (poorly) the ‘Ossis” and remain reluctant to subsidize generations of spendthrift Mediterranean incompetence. Then again Merkel’s latest remarks warn against further haircuts without explicitly ruling them out, so a third CDU term may mean debt relief for the Greeks regardless of her voters’ opposition.

A man walks past a burned store in central Athens (AFP Photo / Louisa Gouliamaki)

Meanwhile the Greeks aren’t exactly contrite: Finance Minister Yannis Stournaras has noted there will be no more austerity in return for another loan. Then again the Greeks have so far this year met one key term of their loans, running a primary surplus. The problem is a primary surplus doesn’t include interest accruing and when you owe as much as Greece does, the end result is that by next year they will probably owe as much as they did before Chancellor Merkel reluctantly permitted a small ‘haircut’ in October 2011. Therefore Stournaras may seek debt relief instead. The Greeks are keen to note a ‘mere’ 10 billion euros ($13.6 billion) will be required on top of the 240 billion euros advanced to the 11.3 million Greeks so far.

Euro coma

…Remember that traditionally bailouts involve suggesting a relatively minor figure then reach a number significantly above the original mooted level…

The EU is so desperate to hold their Ponzi currency scheme together they are now considering using core EU budget funds to bailout Greece. Britain and Sweden will therefore pay for the Eurofiasco they never endorsed.

Hellenic austerity has been a disaster because imposing restraint upon a dysfunctional state is a bit like expecting a walrus to make a good President so long as it wears a necktie. Greeks are, at best, haphazard in paying taxes. The bloated public sector exacerbates the need for reform but stymies the ability of austerity to solve anything by mainly hurting those whose support can be most easily cut: the poor, ill or young.

Greece lies in the abyss of economic damnation. Idiot corrupt politicians spent all the money and the current generation (having largely moved their own wealth offshore) lack the skills to reform the state. Pragmatic observers advocated default years ago but the Greek government caved in to EU pressure, stubbornly sticking with the euro.

True, national bankruptcy and the chaos of a new currency is no picnic but an economy kept in a coma by a political dogma driven by a misguided political experiment is not remotely worth living in for a month, let alone 6 years.

The euro remains on life support. Likewise Greece is living the myth of Sisyphus, sentenced for eternity to pushing a stone up a hill only for it to roll back down as the peak nears. Sooner or later this madness must end. It won’t be pretty but at least a rupture will allow a return to sustainable growth as opposed to a squandered generation.