Posts Tagged ‘debt relief’

Greek proposal is for European taxpayers to provide €5,000 handout per person

July 10, 2015

Why did Tsipras bother with the referendum?

The Greek proposal now is for much the same reforms that were rejected by the referendum. Except that now a debt write-off of about €54 billion is also demanded. That is about €5,000 for each of the 11 million Greek population to be funded by the taxpayers of the other European countries. It is not cash in hand of course but whether handout of cash or cancellation of debt, it costs the same.

The proposals are to be approved by the Greek parliament today and even if the hard-left vote against, it should go through with the help of all the centre-right votes. I suppose it will all get approved – with French pressure – on Sunday. But the bottom line is that every Greek citizen will effectively be getting a handout of €5,000 each from other European taxpayers.

It is not debt relief after a natural catastrophe or a war that is being asked for. It is debt relief for mismanagement. It is debt relief for earlier profligacy – for a bloated public sector which awarded itself generous pensions at 55; for years of  tax evasion and corrupt big projects. And it was done during a period when other more prudent European countries were considering raising the retirement age. Some of that profligacy will be corrected but far from all of it. This bailout is unlikely to suddenly bring “good housekeeping” to the Greek house. It will not prevent Greece from being constrained and stifled by the Euro straitjacket. Further bailouts will be needed.

For the Eurozone it will be a patch-up exercise for a fundamentally flawed common currency system. It is fundamentally flawed because it is being seen as a tool to bring about political and fiscal union when it should just be a natural – and inevitable – consequence of political and fiscal union. In the long run the Euro has to be shrunk or dismantled. Debt relief for the Greeks now is a precedent that establishes it will always be on the table for future mismanagement.

Past bad behaviour being rewarded for the sake of a grandiose concept of a Holy European Empire.


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