The video of a short intervention in PressTV News (10-9-2017) on whether Greece is going to get out of the troika austerity programmes.
A more extended comment follows.
Is Greece on track to get out of the straitjackets of the troika programmess in 2018?
Professor of Political Economy
University of Macedonia
In several recent public communications officials of the SYRIZA-ANELL government (the prime minister A.Tsipras among them) have touted that Greece is going to get out of the austerity bail out programmes in 2018.
This is a far-fetched declaration that echoes similar declarations by the previous ND-PASOK government. All governments implementing the unpopular troika Economic Adjustment Programmes (EAPs) are keen to promulgate their end and thus get rid of the political stigma associated with them.
However, there is a long road still till the Greek economy gets out of the woods.
In order for Greece to get out from the EAPs it is necessary to be able to borrow in international markets. Of course, even this would not end the Greek crisis, which is not a debt crisis but a structural one. Its deep rooted structural problems – to a great extent created or exacerbated by the participation in the European integration – cause the twin deficits (fiscal and current account deficits) that bankrupted the Greek economy. Being able to return to borrowing from the international markets would simply facilitate debt service.
The troika and all recent Greek governments have agreed – through the EAPs – that a return to the markets can take place when the debt/GDP ratio falls to 120% (an unsubstantiated scientifically argument that was made for political reasons). The last EAP (signed by the previously anti-austerity SYRIZA-ANELL government) set 2020 as the milestone for achieving this target. In paving this course some preliminary probing issues of Greek debt have to be made. The previous government made one and recently the SYRIZA-ANELL government made an identical one. Both of them were limited (small amounts of debt), entirely orchestrated by the foreign lenders (through backroom deals), of small time span and with a pricey interest rate. Tellingly, none of them surpassed the horizon of the existing conditionality (the iron guardianship exerted by the troika); which denotes that international markets are not willing to venture outside it. Thus, this solitary probing moves are almost insignificant.
The target of 120% debt/GDP ratio in 2020 is unachievable, as even the IMF has accepted in its recent dogfights with the EU. Actually, all these years and thanks to the pro-cyclical austerity policies of the EAPs, this ratio has increased from 129% in 2009 to 173% in 2016.
In order for the debt/GDP ratio to start decreasing the Greek GDP has to exhibit an unrealistically high and persistent boom. As many studies have shown, there is no current example of a country achieving such targets.
An anemic and probably unsustainable growth of the Greek GDP is possible (after the unnatural period of 8 years collapse with a total loss of approximately 26% of GDP). However, so long as the structure of the Greek economy remains the same (e.g. an GDP increase requires an increase in imports) then this rebound is destined to be weak and short-lived. Last but not the least, even such a rebound would not get the great majority of Greek people out of their current misery. Unemployment would remain high, wages would remain low, working conditions barbaric and job insecurity high.
For all these reasons, a Greek ‘success story’ is highly improbable. Behind the political facades and hypocrisies, there are two possible scenarios for the future that are currently being contemplated in the dark backrooms of the establishment. The first is a 4th EAP (that is a new bail out with additional conditionality and supervision) that would begin after the expiration of the current one in 2018. The second scenario – favoured by the EU as the IMF is probably leaving the troika – is a 4th EAP masqueraded as a precautionary credit line by ESM (European Stability Mechanism). This credit line would offer funds in Greece if needed but would carry with it conditionality and supervision.
Concluding, at the hands of the Greek establishment and its international patrons there is no end near for the tragedy of the Greek people.