Eric Zuesse

A new IMF report on Greece, issued on Tuesday, July 14th, is titled “AN UPDATE OF IMF STAFF’S PRELIMINARY PUBLIC DEBT SUSTAINABILITY ANALYSIS,” and it says — these are quotations, not paraphrases — in summary:

Greece’s public debt has become highly unsustainable. … The financing need through end-2018 is now estimated at Euro 85 billion. … Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far. … Public debt cannot be assumed to migrate back onto the balance sheet of the private sector at interest rates consistent with debt sustainability until debt is much lower. Greece cannot return to markets anytime soon at interest rates that it can afford. … Medium-term primary surplus target: Greece is expected to maintain primary surpluses for the next several decades of 3.5 percent of GDP. Few countries have managed to do so.

Shortfalls in program implementation during the last year led to a significant increase in the financing need [which was] estimated only a few weeks ago. … The preliminary (mutually agreed) assessment of the three institutions is that total financing need through end-2018 will increase to Euro 85 billion, or some Euro 25 billion above what was projected in the IMF’s published DSA [Debt Sustainability Analysis] only two weeks ago. …

Debt would peak at close to 200 percent of GDP in the next two years. This contrasts with earlier projections that the peak in debt—at 177 percent of GDP in 2014—is already behind us.
By 2022, debt is now projected to be at 170 percent of GDP, compared to an estimate of 142 percent of GDP projected in our published DSA.
Gross financing needs would rise to levels well above what they were at the last review (and above the 15 percent of GDP threshold deemed safe) and continue rising in the long term.
Moreover, these projections remain subject to considerable downside risk, suggesting that there could be a need for additional further exceptional financing from Member States.

COMMENTARY:

Though this report revises the previous IMF estimates, which had been issued just two weeks ago, the new report was (according to the Wall Street Journal) "circulated to eurozone officials over the weekend and published more broadly Tuesday.” This would mean that when the Greek government and its creditors reached agreement on Sunday night, July 12th, they already knew that the estimates on which their deal was reached were unrealistically optimistic. They went ahead with it, anyway.

The Greek public had overwhelmingly voted a week earlier to reject a deal that was less draconian than the one which was reached on July 12th, and yet the Greek government, which had urged them to vote against it, promptly ignored that vote against it, which the Greek government had been calling for. And, now, it appears that both sides to the deal even knew that its terms are impossible, yet ignored that, and agreed to it.

The persistent and ongoing deceit here is hard to square with widespread allegations that the EU is at all democratic. The origin of this loan and earlier loans to Greece (euphemistically called ‘bailouts,’ as if it weren’t the banks which were being bailed out by the taxpayers, instead of the Greek public, who had never received the benefits of those loans anyway) had been private investors in Greek government bonds, receiving high interest rates on these junk bonds, which turn out to have been guaranteed by Western publics bailing out Western banks. Between 2010 and 2015, the IMF and other Western taxpayer-supported debt-transfer agents, bought those bum loans and thus transferred those risks from private investors onto taxpayers. And now, this continues, though with one major added poison pill for the Greek public: Greek government assets, including everything from highways to health care, will be sold off to investors at steeply depreciated prices, so that the Greek public will have not only skyrocketing taxes but also disappearing government services. Obviously, the youth-unemployment rate of near 50% will become much worse, and virtually all young Greeks will move elsewhere in Europe, while their parents will die, or even increasingly commit suicide, in the soaring poverty of the Greek ghost-town state. Greece’s essential tourist industry will collapse. But the banks, and the investors in the bank stocks, will be protected. This is socialism for the rich, capitalism for the poor. Call it fascism.

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Investigative historian Eric Zuesse is the author, most recently, of They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity, and of Feudalism, Fascism, Libertarianism and Economics.
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