IMF DOCUMENTS REVEAL EU'S AUSTERITY MEASURES

ARE NOT THE ANSWER FOR GREECE

austerity in greece

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On June 5th, 2015, The Greek people voted with a resounding "no" against the bailout offered by the Troika Creditors. As revealed in a set of IMF documents that leaked before the vote, the "austerity" measures put forth by the creditors would do almost nothing to solve the crisis.

To clarify, what the EU is offering Greece is not even real "austerity" to begin with. It's a series of harsh measures for the public and bailouts for the rich. So these policies haven't worked for the last five years, and now the IMF has stated that they won't work in the future. This truth was revealed in a set of six IMF documents obtained by the German newspaper Süddeutsche Zeitung and seen by The Guardian.

According to these documents, even if Greece accepted all of the measures demanded by its main creditors, the Troika, it would still not be able to make ends meet by 2030. Debt levels would remain at an estimated 118%.

Even the most optimistic scenario shows that Greece would still face an unsustainable debt in 2030, even if it agreed to the package of tax increases and spending cuts proposed by the European commission, the European Central Bank and the IMF in exchange for a five-month €15.5bn loan from its creditors.

These prospects were outlined in six documents that were part of the “final” proposal offered to Greece by the three main creditors on Friday.


IMF DOCUMENTS GIVE GREECE REASON NOT TO ACCEPT BAILOUT

The IMF's estimates gave Greece plenty of reason not to accept the bailout deal. In order for Greece to survive, they will need real debt relief measures and real debt restructuring - not more of EU's failed austerity. According to the IMF, Greece would be unable to sustain a debt level of 118% of GDP. In 2012, the IMF stated that 110% of the GDP was the highest debt threshold that the country could take on. Currently, Greece's debt level amounts to 175% of GDP, a percentage that could drastically rise if the country were to slip into a recession.

Even under the best of circumstances, if Greece somehow managed a stellar economic growth for 15 years, the debt level would still be higher than 110% of GDP, a target that Greece has no chance of meeting, and even if the economy managed to maintain a growth rate of 4% a year for the next five years, the national debt level would only decline to 124%.

“It is clear that the policy slippages and uncertainties of the last months have made the achievement of the 2012 targets impossible under any scenario,” states one of the six IMF documents: The Preliminary Debt Sustainability Analysis for Greece (IMF Document) The document also mentions a need for "significant concessions," but no specifics are stated. There is no clarity about what a debt relief package would look like, nor does the document provide any detail about a possible third bailout programme - assuming one would exist.

These "final" proposal documents were all sent to German MPs for review and approval, but a vote in the Bundestag never took place since Greek Prime Minister Alexis Tsipras rejected the proposal and called for a referendum.


GREECE DEFAULTS IN JUNE 2015

At the end of June, 2015, Greece became the first developed country to default on its international obligations after the IMF confirmed that they had failed to receive the €1.5 billion debt payment from Athens that was due by the end of June 30.

IMF spokesman Gerry Rice said in a statement that Greece had asked for a payment extension earlier on Tuesday and that the Fund’s board would consider it “in due course.” This was largely expected by the markets. Greek Finance Minister Yanis Varoufakis had warned earlier that Greece would not be able to make its IMF debt payment on time.


IN 2009 THE CRISIS COULD HAVE BEEN SOLVED QUICKLY

INSTEAD, PLUTOCRATS IMPOSE ECONOMIC SHOCK THERAPY - SITUATION SPINS OUT OF CONTROL

When the crisis originally began back in 2009, it may have been solved quickly if other EU governments bailed Greece out. But this did not happen, so the crisis got worse and the Greek bond market collapsed.

For any country that is part of the EU, there is an informal agreement that if one country goes under, the other EU countries will band together to bail that country out. Yet that is not what happened in Greece. As Tsipras stated at a forum in Columbia University, Greece became the guinea pig for "barbaric, violent neoliberal policies." If Germany had initially given Greece the money they needed to recover, the crisis would be over by now. Yet instead, the Greek people were subjected to a series of harsh spending cuts that their creditors like to call "austerity."

The so called "austerity" policies have been a failure in Europe. The neoliberal management of the economic crisis in Europe from 2008-2014 has resulted in record levels of unemployment and public debt.

So now this problem has spun out of control and there seems to be no easy solution in sight.


IMPLICATIONS OF JULY 5TH, 2015 REFERENDUM VOTE

On July 5th, Greeks were asked in a referendum whether they should accept or reject proposals made by creditors. Alexis Tsipras defiantly urged Greeks to reject an international bail out deal, which risks damaging relations with the EU.

European officials and Greek opposition parties have warned that a rejection of the creditor proposals in Sunday's popular vote could lead Greece out of the euro zone and potentially out of the European Union itself. The Greek government has responded that such rhetoric is scare mongering, and that the "no" vote will put the country in a better negotiating position.

But European Council President Donald Tusk has warned that will not be the case.

The crisis has already agitated global markets, as investors fret over the repercussions of a Greek debt default and exit from the euro - developments that could derail a fragile global economic recovery, as well as raise questions over the long-term viability of the euro currency itself.

What happens next could have very significant implications for the world of global finance. The global economy is an interconnected web, and when one strand becomes unraveled, the entire thing could be pulled apart. Greece's creditors need to tread carefully in regards to what they do next, because what happens in Greece will not stay in Greece. Punitive austerity hasn't worked for the last 5 years, and it won't work in the future. It is time for real solutions. It is time to forgive and restructure a good part of Greece's debt.


RELATED LINKS

IMF DOCUMENTS

Greece: Preliminary Draft Debt Sustainability Analysis

Reforms for the Completion of the Current Programme and Beyond (PDF)

 

DOCUMENT PUBLISHED BY THE EUROPEAN COMMISION

Information from the European Commission on the latest draft proposals in the context of negotiations with Greece

 

NEWS ABOUT IMF DOCUMENTS

Austerity not enough to save Greece - leaked IMF documents (RT, 7-1-15)

IMF Says Greece Needs Comprehensive Debt Restructuring by Eurozone (The Wall Street Journal, 7-2-15)

IMF: austerity measures would still leave Greece with unsustainable debt (The Guardian, 6-30-15)

Leaked IMF Documents (Suddeutsche Zeitung, 6-29-15)

 

NEWS ON GREEK VOTE

Greek Voters Turn Down Bailout Terms by Whopping 61 Percent “No” Vote - Off The Grid (Ora, 7-6-15)

Greece debt crisis: ECB tightens screw as Merkel warns time is running out - live updates (The Guardian, 7-6-15)

Kirchner on Greek Referendum: ‘Outright Victory of Democracy and Dignity’ (Sputnik News, 7-6-15)

Greeks Reject Bailout Terms in Rebuff to European Leaders (International New York Times, 7-5-15)

Greek referendum: what will a 'Yes' or 'No' vote mean? VIDEO (Telegraph, 7-2-15)

Deadlock over Greek debt crisis could play into Russia's hands (The Guardian, 3-17-15)