What Happened In Greece?

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So far, the Greek police have continued to support the Government although the savage pay and pensions cuts imposed on them may cause them to falter

On Sunday, the Greek Parliament were required to vote in support of the Eurocrat replacement Prime Minister and many assumed that this vote cleared the way for a massive infusion of money from the IMF and the ECB to delay a Greek default.

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When Germany decided to impose an unelected Prime Minister on Greece in place of a democratically elected Prime Minister, it seemed that this paved the way for a new round of loans designed to support the Euro. The new Eurocrat Prime Minister was quick to tell the elected Members of Parliament that they had two choices. One was to support severe legislation to prolong the Greek recession and deepen its effects, or be denied the right to stand for re-election. That appeared to work on Sunday by giving the Eurocrat a clear majority of more than two to one.

What the passage of legislation hid was the fact that a significant number of MPs has rebelled in the face of bullying.

Then Germany said that the Greeks had only indicated that they might do as they were told and the evidence of past Greek actions suggested that they would fail to deliver. The Germans appear to be suggesting that only the appointment of a Reich Protektor for Greece with full dictatorial powers will suffice and safeguard German money loaned to Greece. What is unclear is whether this is just a German desire to dominate in Europe, or whether the Germans are attempting to ratchet the situation by following one Greek cave in with demands for further austerity measures before any money is sent to Greece.

The Greek people showed their feeling strongly on Sunday with a mass protest outside the Parliament building and by rioting that left more than 100 buildings burning.

The markets rallied on Monday because a reek default had already been factored in and any postponement looked like good news for the markets with the prospect of extra profits from the Greek tragedy.

The real outcome of Sunday’s vote offers two short term possibilities. One possibility is that the Government actually delivers this time on the full austerity package and accepts a growing level of civil disorder with rioting becoming more serious as the austerity measures destroy all quality of life.

The alternative is for the Government to delay and avoid implementation to avoid civil war. The consequence of that will depend on whether the next round of bail outs has already been delivered. If the money is in Greek hands, it delays the date when a default is unavoidable, but it ensures that Germany will block any further handouts and continue to demand the surrender of Greece and acceptance of a Reich Protektor.

In the medium term, Greece will leave the Euro and default. That will allow Greece to devalue its new currency and begin the climb back to some sort of economic stability and prosperity. If that does not happen, Greece is unlikely to be clear of recession for decades.

In the long term, a return to a national currency would allow Greece to develop a prosperous economy based largely on tourism.

Once Merkel has stood for re-election, Greece becomes far less important and could be kicked out of the EU and the EuroZone. Germans would rather enjoy cheap Greek holidays than have to dip into their pockets to keep Greece in the EuroZone. If Merkel is re-elected there is a different set of pressures in German politics. If Merkel loses, the new German leader may take a very different attitude to the Euro and there is even the prospect that Germany might leave the Euro and let it sink.

Some have suggested that the Franco German desire to keep Greece in the Euro is a refusal to accept the economic situation, but the real reason is that the EuroZone has never worked well and several governments have wished to leave but not wished to be the first to leave. If Greece does leave, a succession of other EuroZone members will follow and the drift could so easily become a rush and then a stampede.

The problem facing the Greeks is that they have received some major loans and a further round of loans only adds to the burden and the cost of servicing the unsustainable loans. The longer they remain in the Euro, the larger the debt and the greater the interest payments. If they then default on all loans, huge disorderly default will cause a great deal of damage to other nations and present many new problems. The nature of treaties and EU directives may mean that Greece will be unable to default on all loans, leaving a legacy of debt for future generations.

Editor

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