Greece – Economic Crisis And Troika Deal or Extortion?

July 2, 2015

By Padmini Arhant

The ongoing economic crisis in the Mediterranean country Greece originated from the sub prime mortgage debacle in the United States in December 2007.

The hedge fund and international securities traded by investment firms nowadays as equity management companies viz. Goldman Sachs then engaged in Greece is initially responsible for Greece economic recession due to bad decisions and directives including misrepresentation to creditors at that time.

Goldman Sachs along with many financial institutions behind gross mishandling and mismanagement triggering economic bleeding in early 2008 experienced earlier in Iceland and endured until today in Greece, Portugal, Spain, Ireland and Italy viz. PIGS…in Western and Northern Europe were bailed out with no stipulations and granted taxpayers funds exceeding trillion in the United States treating the cash payout to bankers as their privilege.

Subsequently the global economic meltdown with severity in Europe weighted down Greek economy tied with euro zone.

The euro as the national currency in Greece and throughout EU excluding England with over optimism on the common unit has failed to deliver the value pegged to the unstable and superficial commodity.

European Union policy of austerity on Greece strangling the country with demands on economic reforms primarily favoring the international creditors viz. International Monetary Fund (IMF), European Central Bank (ECB) and European Commission (EC) or EU presided financial package essentially behind Greece default.

The troika imposed austerity to streamline spending in the absence of economic growth stimulants in Greece evidently debilitated the cash strapped nation.

The two bailouts to Greece in 2010 and 2012 €240 billion ($272 billion) substantially expended in servicing the debt to international lenders viz. the troika – IMF, ECB and EC as well as the financial institutions with stake in Greece rather than direct investments in the economy promoting employment and business prospects for the citizens across the country.

The massive layoffs, salary cuts and pension reductions in compliance with EU bailout requirement further exacerbated the economic situation.

Following the adverse effects of austerity, the Greek electorate elected the anti-austerity political party – Syriza headed by Prime Minister Alexis Tsipras forming the coalition government with the independent party in Greece.

The ruling party in Greece consistently maintained negotiations with international lenders since election on January 25, 2015 alongside systematic improvement in reform focused on alleviating poverty and adopting strategy to satisfy obligations on the bailout program.

The troika conditions to incumbent government request on the six months extension to bailout deal deserve attention.

Greece approached the international lenders aka Troika to grant from the profits on ECB held Greek bonds to meet the immediate financial needs. The fund €12 billion ($13.4 billion) was scheduled as the offer.

In that amount €1.6 billion ($1.79 billion) payment to the IMF on June 30, 2015 was the priority and now that date has expired. Another €6.7 billion is to be settled with ECB in July and August.

Greece was offered a possible bailout not intended to relieve the economy from deterioration instead to enable Greece to pass that amount €1.6 billion ($1.79 billion) to IMF as loan payment at exorbitant interest rates and prepare for payments to ECB within weeks of receiving the third bailout amount.

Greece essentially used by lenders to profit from lending through money circulation amongst them under the pretext of rescue scheme with Greek citizens forced to bear the lending costs and high interest.

  1. Reducing pension payments that would only affect consumer spending with impact on retail business and ripple effects on the wholesale and manufacturing on domestic products while restricting import from EU and abroad.
  1. Increase Value Added Taxes (VAT) – in the dire economic environment, the average consumers forced to pay more taxes in addition to hikes up until now to payback lenders is an extreme measure contributing to consumer woes and limiting business activity in return.
  1. Military Expenditure cuts – perhaps setting the stage for complete NATO control over the nation.
  1. Privatization of country’s airports – the proposition from EU and lenders is a deviation from relevant options and subscribe to ulterior goals.

In response to international lenders harsh austerity imposition;

Greece Government reforms comprised – efficient tax collection methods, social security system and streamlining government bureaucracy. The additional steps included anti-corruption and promoting business as well as backing privatization in the economic sector.

As a result of Greece government and Troika failure on the agreement, the referendum on July 5 is expected to reject or accept EU, ECB and IMF rigorous austerity.

Despite Greece administration’s numerous concessions and adjustments to accommodate EU and lenders chronic treatment evidently a flawed recommendation,

The lenders declined the roadmap that had 70 percent of Troika trails and 30 percent Greece government shelter to save the economically deprived population from abject poverty.

Prime Minister Alexis Tsipras has called the nation for NO vote on EU austerity in the upcoming referendum.

The last minute overtures from the Greek leadership to EU and creditors has been in vain.

Greece citizens need to understand the entire scenario and act accordingly to relieve them from the persisting economic calamity and potential power vacuum paving way for EU and partners to install the government of their choice like in Ukraine.

The present Greece government is poised to resign upon YES referendum to EU and international creditors ultimatum.

EU and creditors stringent austerity on economically struggling nations has been counterproductive. Yet there is no acknowledgment from them and the hard line approach towards Greece is similar to the neighbor Cyprus account.

Cyprus bailout was tied to closure of the nation’s second largest bank, Laiki Bank and a 47.5 percent cut on deposits over 100,000 euros at the Bank of Cyprus for recapitalization.

The same formula was applied to Iceland problem and led to brink of economic collapse.

Cyprus capital Nicosia was hamstrung like Greece now and Cypriot parliament pushed into first post-bailout budget prior to receiving €83 million as installment payment from Troika in late 2013 and early 2014,

The austerity on Cyprus was identical to instructions to Greece – pensions and salaries were targeted with the outcome being dramatic escalation in poverty and unemployment in the country.

Interestingly Troika projection on Cyprus economic status after EU and euro zone austerity was the gross domestic product contraction to 7.7 percent in 2013.

IMF, ECB and EC/EU prolonged austerity only tightens the noose around citizens to submit to unreasonable unaffordable trend.

IMF and World Bank legacy in transforming developing nations to banana republic as it happened in Argentina, Panama, Chile, Indonesia and Mexico…are few of many countries drawn into the debt dragnet.

The developments against Cyprus and Greece serve as strong reminder for the people to protect their sovereignty.

The international creditors regrettable actions thus far confirm the reputation as predators ignoring the fact that austerity alone without revenue not viable for economic recovery.

Greece is confronted with EU and euro zone pursuit to topple present government for the stance against austerity based on reality.

If the referendum on July 5 anything like the event on Scotland independence with fraudulent means generating the predetermined outcome, Greece future would be bleak.

EU attempt to expel Greece government with Prime Minister Alexis Tspras is tactfully deployed creating circumstances for the government to seek people consent on EU austerity in the background of Syriza party elected to power to spare the citizens from economic plight inflicted via austerity.

In a way EU’s tactical move is to turn people against the government with Troika officials not entertaining Prime Minister Alexis Tsipras modified reforms to satisfy lender’s extraordinary gains from human misery.

Greece would survive the economic and political storm on its shores in returning to original currency – drachma for euro survival is not possible considering the lenders’ and EU irrational economic growth resistant strategy crippling economies to the point of no return.

Greece was the first nation to introduce democracy to the world and when democracy is threatened by forces to unseat the caring government that prioritize people over self-interest, the citizens must rise to the occasion and safeguard liberty that would then guarantee economic progress.

Greece voting NO to austerity on July 5 and retaining their honor by rallying with the current government opposed to EU plan that denies decent wages, pensions and business opportunity for jobs would demonstrate fairness prevailing over darkness.

Troika deal is nothing more than extortion exploiting the critical moment in Greece.

Greece defiance to EU and international banks austerity is the saving grace.

Greece unity to proudly defend the country from overt control under the guise of monetary aid would prevent Greece economy from free fall.

The clarion call to Greece is to back your government under the leadership of Prime Minister Alexis Tsipras and alliance to overcome the external challenge.

The major stumbling block is EU and euro zone membership with inherent complexity such as any submission on economic matter is subject to review, debate and approval by every other member state parliament and political consensus within.

The irony – EU preaching austerity hardly observes the tradition with EU officials and delegations appointments and salaries being an extravagant affair.  Even to hire the EU appointee, the amount spent in the recruitment process is not less than million euro. 

EU insistence on fiscal discipline exempt them from the protocol. 

Good Luck and best wishes to Greece and the government of Prime Minister Alexis Tsipras in the speedy economic revival as an independent nation.

Peace to all!

Thank you.

Padmini Arhant