Wednesday, June 29, 2011

Europe and Greece: Who is Running This Show

Are They Trying to Make Things Worse?

The Greek Parliament has approved a new set of programs and policies designed to contract the Greek economy even more than it has already suffered in order to win approval of another round of bailout funding from the IMF and the European community.  The Dismal Political Economist previously described the European/IMF policy as Non-Lethal Suicide.

The upcoming $17 billion loan from the IMF and Greece’s European neighbors is the latest tranche in a longer-term, $160 billion emergency program approved for the country last year, when it also faced a possible default.

That program was intended to restore the confidence of private investors, and allow the country to begin borrowing money on its own again as early as next year.

It didn’t work, as the economy continued contracting, and the Greek government stumbled in implementing the broad set of reforms promised to the IMF and Europe. Many of those measures, along with additional cuts and economic policy changes, have been rolled into the program lawmakers approved on Wednesday.

Why are the Greeks even accepting this program?.  The problem now is that the previous policy has been so destructive that the Greek government cannot, in the terms of business bankruptcy, meet payroll.  If it does not accept the European bailout money civil society in Greece could well collapse into violent anarchy.  Even with the bailout it does not look all that good. (see pic)

So what we have is continuation of a policy that didn’t work.  This leads to a question on the International Finance final exam:

17.    Exactly who is leading the European program to deal with the financial and economic crisis in Greece?

A.     Groucho, Harpo, Chico, Gummo and Zeppo.
B.     Larry, Curley and Moe
C.     Homer and Jethro
D.     Gilligan and the Skipper
E.      Those two guys in Dumb and Dumber

Don’t answer.  It’s a trick question.  Based on what has happened a case can be made that any and all of the above are involved.

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