Why Greek November 2011 Bailout Tranche Makes No Sense

So it was announced today that Greek has been granted the next tranche of the bailout by the troika.

The question has to be asked is why?

The Greek government deficit has actually increased since 2008 despite increasing taxes.

If there is one thing all economists agree on is that increasing taxes reduces tax revenues. It makes you wonder who is advising the Greek government.

Back to why the giving Greece the next tranche make no sense.

The Greek government does not have any plans on the table that will allow them to save 24 billion Euros a year which is the government deficit (10% of GDP).

Actually the troika have demanded Greece get the deficit down to 3%.  Okay so for the troika to be happy the Greek government needs to reduce its spending by 14.4 billion Euros a year.

The Greek government has not laid down any plans which will save Greece 14.4 billion Euros. Let alone actually implement such plans.

The best the Greek government can come up with is a 1 billion Euro a year saving through reduced salaries.

And this is assuming they can actually implement these pay cuts.

So to summarise, the whole Greek bail out plan is a fantasy.

Okay, so the motives for the tranche make no sense. So assuming that the troika are not complete idiots and assuming that they can see Greece is never going to get down to the government deficit down to the level they are asking for, there must be another reason for Greece getting bail out money.

To understand what the alternative reasons could be for granting Greece the next tranche we have to understand what is happening in Greece now and over the past 3 years, during which time the Greek government is being kept alive by these bail outs.

Over the past 3 years the Greek economy has shrunk  by around 16%. This drop in GDP has taken the form of hugely increased unemployment, around 20% of private businesses closing, the savings of Greeks have been drained and people’s and businesses earings have been cut conservatively by around 10%.

Basically the bailout package has allowed the Greek private sector and private citizens to be drained of their incomes sources and to be drained of the savings.

The bailout package has also meant the value of Greek assets have fallen because of the huge property, vehicle and business taxes

So continuing the Greek bail out process will obviously continue this draining of money from Greeks.

The troika are claiming that they are giving the Greek government bailout money so it can reduce the government deficit to 3% of GDP which is clearly impossible.

So the troika bailouts are intentionally or unintentionally extracting money out of the hands and bank accounts of Greeks and giving the money to international bankers.

If this is an intentional ploy by the troika to send Greeks into poverty, what do they gain?

This bankrupting of the Greek private sector and private people means the price of Greek assets will fall. Prices of land, resources, property and infrastructure will also fall as there is less money in Greece to buy these assets.

While Greeks will see the prices of assets falling in some kind of relationship to their wealth. To international investors the price of Greek assets will be becoming much cheaper.

In short the parties that would gain by falling assets prices in Greece would be international investors who would be interested in buying Greek states assets such as land, buildings and infrastructure such as roads, ports and railways, private assets such as houses, harbours, natural resources such as islands and coastline, and Greek utility companies such as OTE, DEI, water companies, betting companies and so on.

We are told that the Greek financial crisis is down to the Greek government being unable to pay back loans it has taken from banks. Given that it is impossible for the Greek government to pay back these loans let alone service the debt, the banks will get their money back by imploding the value of Greek assets and buying them up at discount prices.

In short, the troika bailout tranches do nothing but harm the ability of Greeks to defend themselves against foreign investors.

And the Greek government is enabling the international investors to carry out their plans which are obviously against the interests of the Greek people.

In short, intentionally or not, the troika bailout outs are allowing Greek to be taken over by foreign powers. In effect a war, except there are no guns, only the threat.

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