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Vampire policy makers of the IMF (and the ECB)

by talos Fri Nov 26th, 2010 at 02:24:16 PM EST


Statement by the EC, ECB, and IMF on the Second Review Mission to Greece

Abstract: IMF / ECB / EC to Greek workers: You're screwed and there's nothing you can do about it. We own you. If what we say sounds illogical - good, logic is an unproductive remnant of a bygone democratic era which you are well advised to forget as soon as possible...


Selected highlights (blockquotes in italics) with commentary:


The objectives underpinning the program are to restore fiscal sustainability, safeguard financial sector stability, and boost competitiveness--to create the conditions for sustained growth and employment. Maintaining fairness in the program also remains of paramount concern and this will continue to guide the direction of policies in the period ahead.

Translation: The objectives underpinning the program are to promote the German Stupidity Pact at the expense of the taxpayers and working people in particular, promote widespread social instability, poverty and gaping income differentials, and boost competitiveness by squashing already meager wages and salaries in the country to third-world levels. Maintaining fairness in the program is absolutely of no real concern to anyone, although a show of concern is put on for PR purposes just in case anyone in Greece is dense enough to fall for this bullshit or any bleeding hearts in Germany start wondering.


Regarding the outlook, the economy is expected to begin turning around in 2011. Wage and price inflation is beginning to moderate, setting the stage for improvements in competitiveness.

Comment: These are the same people who expected inflation to be around 1,9% this year (as opposed to ~5% at least in reality), despite having prescribed the blitzkrieg of indirect tax increases that have played the major role in pulling the inflation rate to numbers not seen in Greece the last 10 years. Inflation from where I am looking does not seem to moderate. In fact the new batch of VAT increases (in basic foodstuff as well) and other tax hikes (such as toll road fees, bus tickets etc) that they have imposed on our sorry asses, are almost certain to have a positive effect on price inflation.

Wage inflation is certainly beginning to "moderate": in fact wages are in free fall - its like saying of a sinking ship that "its upwards momentum has began to moderate". Public sector wages having been cut by 20-40% this year and private sector wages plummeting as employers take advantage of widespread insecurity and galloping unemployment (suffered even before the "troika" basically destroyed the small and ineffective fig-leaf that was Greek labor laws and collective bargaining system - see below), in a country where "half of Greece's paid employees [had] net incomes of between €501 and €1000" in 2006. Of course "wage moderation" in the private sector was created by forbidding by law any wage increases in any company regardless of any agreements.

See also a personal post, on Greek labor compensation and productivity...

As for competitiveness this is a buzzword the IMF uses for creating more impoverished and desperate workers. In 2005 the ECB was reporting that much of the competitiveness problems Greece faced were due (as much or more) on high-profit and indirect taxation driven inflation. This almost certainly continued till the crisis of 08. Inflation through indirect taxation though is exactly what the troika is boosting. The troika is hard at work indeed (along with their henchmen in the Greek government) to increase that sort of competitiveness - yet why would the average Greek worker set to join the working destitute and live in a desert of vanishing social welfare safety nets, give a damn about such "competition" towards penury?

Finally, the laughable prediction of "turning around the economy within 2011" has few outside observers agreeing, as they seem to see the depression in Greece extending to well beyond 2011:


"The Greek Government's 2011 budget should be enough to ensure that it can continue to tap its euro 110bn bailout facility, but it does nothing to improve the medium-term outlook for the economy and public finances," said Ben May, European economist at Capital Economics.

The budget also forecasts a sharper recession next year than originally predicted, with the economy expected to contract by 3 percent compared to the originally forecast 2.6 percent. This follows from a 4.2 percent contraction this year.

"With the economy likely to remain in recession well beyond 2012, we think that the debt to GDP ratio could eventually exceed 170 percent of GDP, implying that a restructuring of government debt is eventually all but inevitable," May said.

This seems about right to me...


In the fiscal area, the deficit reduction by 6 percent of GDP in 2010 is larger than the initially targeted change. At the same time, data revisions for 2009 and weaker-than-projected revenue collection mean that an extra effort will be needed to meet the deficit target of 7.5 percent of GDP in 2011, which the government has reaffirmed.

Translation: Because an acknowledgment of higher than expected deficit reduction would create problems in the legitimization of the implicit goal of thirdworldization, we had to run the numbers yet again so as to show that the original deficit was in fact higher than originally determined. This allows us to put in effect measures regarding (what will, we hope, become) a path to a sweatshop economy, that will make the "satanic mills" of the 19th century look like the Swedish welfare state. Since it is inconceivable that our, wholly arbitrary but nevertheless sacred, numerical targets might be revised in light of this re-estimation of the 2009 deficit, all else follows inescapably.

Comment: It is indicative as to what passes for logic in the IMF's communiques, that they use as an excuse for the latest series of attacks against working people in Greece the fact that their (totally unrealistic and consciously unrealistic) revenue "projections" have not been met. However even an Athens cabdriver could certainly have guessed that by asphyxiating the economy and creating a depression from this recession, these projections (which were based on assuming little decline in real taxable incomes and an inspection mechanism that was both crooked and inefficient already, before being further defunded by the measures imposed by the troika itself) were ludicrously unrealistic to begin with. Thus as Greece "fails" unavoidably to meet other unrealistic projections one should expect further measures to correct this "underperformance"...


New measures have been agreed to broaden tax bases and eliminate wasteful spending, particularly in the areas of:

  • Health spending--which is inefficient relative to other euro zone countries;

  • State enterprises--which are a heavy burden on the economy with perennial losses for Greek taxpayers; and

  • Tax administration--which has instruments now coming into place to strengthen compliance.

Translation: New measures have been agreed, to rob the working classes of any meager savings they might have retained and to destroy the last vestiges of a (sub-standard even before the IMF plague) social state.

Noteably:

  • Truly inefficient health spending is being cut without being made more efficient, thus making it even less efficient and creating in the medium run a greater economic burden: I.e. as the number of nurses in public hospitals declines (due to the "no new hiring" clause in the troika's mandates) doctors report a marked acceleration in the spread of contagious microbes in hospitals, due to a huge increase in the number of patients each nurse treats (note that due to the overprescription of antibiotics Greece is already a world leader in superbugs), something that will lead to an even greater burden on the public health system and society as it will have to face the consequences of spreading epidemics.

  • Greece will be left with practically no train system outside of Athens and Thessaloniki, mass transportation will be priced out of range of the poorest and will be made scarcer. Bus and metro tickets prices (in a country where already before the crisis average wages were half those in Germany and northern Europe, and gas prices are already the highest in Europe due to the indirect taxes on gasoline imposed by the troika) will be increased by 50%. Water services might also be privatized with the well known effects that has on prices...

  • Tax administration will be understaffed (as there is a ban, practically, on hiring people in the public sector) and more susceptible to corruption, since the inspectors salaries have been cut severely as well. The ban on public sector hiring
will also result in a less efficient tax collection system.


The government's fiscal policy remains anchored in reducing the deficit to below 3 percent of GDP by 2014. The government's medium-term budget strategy paper, to be discussed in the next review, will specify time-bound action plans for crucial structural reforms needed to achieve the remaining fiscal adjustment, and to do so in a socially balanced way.

Translation: The government's fiscal policy remains anchored in reducing the deficit to a completely outlandish and arbitrary number by a completely outlandish and arbitrary date, which, if achieved will have had the result of reducing the country to third world levels in all sorts of measures of living standards. That this goal is unachievable will allow the ECB and the IMF bastards to claim that Greece failed in its programme, and force an onerous  default on the country at some point, on colonial terms.


Structural reforms are needed to secure Greece's competitiveness, reinvigorate output, and increase employment. While significant progress has been made, with some landmark reforms--including pension reform--the program has now reached a critical juncture.

Translation: Structural reforms, and by such we mean the many ways we have devised to redistribute wealth to the richest, inside the country, and to the core EU from the periphery, at the EU level, are needed to secure that workers will be so disempowered as to accept working for crumbs... Old people will die before they receive pensions: even if they don't keel over through overwork and disease, they will starve or freeze to death given the minuscule amounts they will receive as what will be laughably called "wages".


Many of the reforms that are necessary to transform Greece into a dynamic and export-driven economy require skillful design and political resolve to overcome entrenched interests.


Translation: First of all some terms: Entrenched interests = The great majority of the population. Then "export driven economy", as trained and skilled labor flees to other countries in order to feed themselves and their families, = a labor intensive export economy... Thus Greek wages will certainly float down to those of their Balkan neighbors and, who knows, if labor flexibility is aggressively pursued, perhaps below that. Of course one could argue that it is impossible to turn a country which has been seriously deindustrialized, as is par for EU policy regarding periphery countries from 10% of GDP exports to a net exporter - exporting what? What would it mean for Greece to become an "export driven economy"? How wise is it to prescribe as a cure something which is by design impossible to implement on a global level and which will be antagonized continuously by the hard Euro policy?


The challenge now is to implement an ambitious schedule for these next-stage reforms:
  • Aligning wages more closely with firm-level productivity, including through reform of arbitration and collective bargaining systems.
  • Opening up access to services, trades, and professions.
  • Unlocking the potential of Greek industries by cutting red tape and barriers to entry, and privatizing state assets.

Let me point out that "aligning wages more closely with firm level productivity" is bullshit. On two counts: One, currently they have forbidden any wage increases at all in Greek companies, even if there is agreement between workers and management, thus the alignment they're referring to is only downward. Second, what they have done by prioritizing "firm level wage agreements" over collective general or even sectoral agreements, isn't aligning "wages to productivity" but aligning them to despair, given that real unemployment in Greece is scheduled to reach at least 20% by next year. Thus firms will be able to coerce workers into working for a pittance regardless of firm profits or "productivity".

All the measures they have imposed have this common denominator: wage depression. To an unprecedented extent. However even Eurobank Research, hardly a paragon of worker advocacy, seems to think that they are overdoing it:


The Greek economy has experienced productivity increases of 2.4% per annum on average over the past decade, compared with 0.8% per annum in the EU-16. If productivity continues to increase at comparable rates in the future, ULCs of Greek exporters will likely decline to their level of 2000 within the next two years without the need for radical wage cuts.

Note also that they are creating with all of this a society of even higher criminality and graft, something that isn't likely to help with "competitiveness in tourism", a cornerstone of the greek economy, obviously...


In summary: the reforms needed to return Greece to robust economic growth are underway, but developments to date also reveal that structural issues must be dealt with to make the adjustment sustainable.

Translation: In summary: the reforms needed to return Greece to third-world status are underway, but developments to date also reveal that structural issues must be dealt with to make the adjustment sustainable, so that the country remains a basketcase for the foreseeable future.

I'll let Jarvis Cocker sum it up, and you all can sing along with him:

(A first draft of this was previously posted in histologion)

Display:
by rootless2 on Fri Nov 26th, 2010 at 04:34:54 PM EST
Many of the reforms that are necessary to transform Greece into a dynamic and export-driven economy require skillful design and political resolve to overcome entrenched interests.

I am reminded of one of Stiglitz' pithy remarks: Politicians of all stripes like free trade. They just don't like imports.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Nov 26th, 2010 at 04:41:45 PM EST
How can you turn Greece into an export-driven economy without running afoul of the European Commission's "Illegal state aid" rules?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Sat Nov 27th, 2010 at 02:53:12 AM EST
[ Parent ]
According to the troika: "minimize wages". They do not mean "export economy" as in Germany. They mean "export economy" as in Vietnam. Still it's not at all obvious that cutting wages alone will do that. I think they might include tourism and shipping in their definition of "export". Tourism is not seriously affected by wage depression, and  shipping not at all.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Nov 27th, 2010 at 04:20:47 AM EST
[ Parent ]
Actually, Vietnam imports more than it exports, and state intervention in the economy is very high (thankfully)... Although that means some scandals too, such as the bankruptcy of the national shipbuilding company.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sat Nov 27th, 2010 at 12:41:01 PM EST
[ Parent ]
Good point. China then?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Nov 27th, 2010 at 01:38:33 PM EST
[ Parent ]
No, not like China either. China has an activist currency policy.

There is no net exporter in the world that got that way by following IMF/ECB policy recommendations. Their vision for Greece involves magic ponies at several points along the way.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Nov 27th, 2010 at 02:05:48 PM EST
[ Parent ]
Given the disconnect between the described goals and the prescription for accomplishing those goals, and given that this disconnection is becoming pervasive and more obvious throughout the world I think an examination of the language and the policy purposes is in order. I would suggest that the problem is that the true purposes of these policies cannot be stated plainly, as they are not sufficiently presentable for such purposes.

This is another variation of the "Its a liquidity crisis" dogma in which solvency is never addressed. The reason is that admitting solvency problems would raise unfortunate questions, such as, why not let insolvent institutions be resolved? This cannot be discussed because the true role of the central banks is to protect incumbent financial interests at all costs. That is due to political considerations. All else is smoke screens generated by continual mis-use of available language and dogma.

The common solution to the problems of both Ireland and Greece, and of countries to come, involves default. The sooner the better. The longer the scams run the greater the damage that is incurred. How would the Greek electorate and population feel were Ireland to succeed in defaulting on its fraudulently incurred debt?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Nov 28th, 2010 at 10:24:19 PM EST
[ Parent ]
How would the Greek electorate and population feel were Ireland to succeed in defaulting on its fraudulently incurred debt?

Jubilant. I think that the Greek electorate is looking for a sign that there is a realistic way out of this that does not include pauperization of large segments of the population.

There is however one important difference between Greece and Ireland: Ireland (if I understand correctly) has a comfortable primary surplus, Greece has had (since 2007) a primary deficit. This is the argument being used (along with tremendously optimistic projections) to sell the TINA project to society. I can't say people are convinced but no alternative plan has been put on the table - yet.

BTW it seems that the Irish deal may result in the extension of the repayment period for Greece... Which means a lighter load on the budget, but 5 extra years of IMF overlordship....

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Mon Nov 29th, 2010 at 02:47:27 AM EST
[ Parent ]
What if they stopped paying for foreign guns? What would that do to their primary balance?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Nov 29th, 2010 at 03:01:24 PM EST
[ Parent ]
As per the (recently revised) 2009 budget, reducing them to, say, Portugese levels would diminish it to ~5.5% , procurements are at ~2-3% GDP each year. Theoretically this year's primary budget deficit would be at 2-2,5%. Which means that as of January 1st we would be at around 0%

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Nov 29th, 2010 at 05:46:40 PM EST
[ Parent ]
Why does not the Greek government  cancel the arms purchases and default on any cancellation penalties? Or are they too concerned about the personal consequences of depriving powerful local magnates of kickbacks, etc.?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Nov 29th, 2010 at 08:15:41 PM EST
[ Parent ]
Well the way I see it, they would have to sit down with Turkey and reach some sort of understanding in order to do that, an understanding quite far from the national maximal demands. Erdogan has offered a moratorium and cohabitation in the Aegean, but I think that the Greek gvt at this point (when the word "quisling" is ever more frequently used to describe its economic policies) is loathe to have the nationalists turn against it too, especially since they are increasingly using the rhetoric of "national salvation" to justify the austerity programme and their only political ally in Greece as far as austerity is concerned is the far-right LAOS party.

That and the fact that there are strong diplomatic pressures from Germany and France not to cancel arms orders. In the case of the German submarines sale, the final settlement sounds a bit colonial... (and the whole deal was far from clean - and one of the subs was indeed faulty). Some deals have been canceled, others have been made. The French frigate deal was first said to have been frozen, but it seems like its going to be quickly thawed out.

Also keep in mind that Greece is probably paying substantial sums as installments of deals past.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Tue Nov 30th, 2010 at 01:40:32 PM EST
[ Parent ]
Yes, as ever, the old "Who lost the Aegean" ploy.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Dec 1st, 2010 at 12:19:45 AM EST
[ Parent ]
they would have to sit down with Turkey and reach some sort of understanding in order to do that, an understanding quite far from the national maximal demands. Erdogan has offered a moratorium and cohabitation in the Aegean
See Greece and Turkey: a major peace initiative by Upstate NY on October 26th, 2010
The news references anonymous sources and it's such a short article, but if true this is a huge monumental breakthrough in Greek and Turkish relations, and it promises to bring a seismic shift to all of Europe.

Ekathimerini: Aegean pact in the works

The article is so short that I'll just paraphrase: Greece and Turkey agreed in principle to compromise on the International Law of the Sea. Rather than Greece taking what is allowed to Greece by International Law, a proper sea buffer, Greece has reduced its buffer around the islands by half, while Turkey will respect a full buffer off the Greek mainland.



Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Wed Dec 1st, 2010 at 02:49:54 AM EST
[ Parent ]
Yes and the talks are stalling. Any sort of deal with Turkey at a moment of "national weakness" can and will be used at this juncture against the government even by parts of the political spectrum and the population that have little to no nationalist leanings... The widespread discontent is looking for some reason to burst out.

This I would be pleasantly surprised if some sort of deal that lead to a spectacular decrease in defence spending was struck any time soon. Keep in mind the huge financial interests that are being fed by the Greek defense budget and the implicit recognition by successive Greek governments that weapons procurements (who you buy from) is a tool of foreign policy for Greece...

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Wed Dec 1st, 2010 at 06:43:26 AM EST
[ Parent ]
So the rational strategy for the Greek population is to move to Germany.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Nov 26th, 2010 at 06:37:04 PM EST
Young and educated people are moving already to all sorts of places, and many more are preparing to do the same. If this lasts for another year I think most professionally qualified people will start packing up. Australia might be high up in their preferences, given the large number of Greeks already there and the fact that they are an english-speaking country in which there is a demand for various professionals, and those with connections to Germany / other northern EU countries will certainly be heading north. The UK will be a destination, the US, Canada. And of course, massively, Cyprus.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Nov 27th, 2010 at 04:28:01 AM EST
[ Parent ]
Poul Thompson, our IMF rector provinciae, talks about Greece in the LA Times and is - I conclude - on crack:

So if you were an investor would you hedge your bet on Greece? The end-of-year target deficit was 8.1% of GDP, but it looks as though the deficit will remain at about 9.4%.

No, definitely not. I would be impressed by the fact that they [the Greeks] are reaffirming their target commitments for 2011, as we agreed last May [under the bailout plan]. The fact alone that the deficit was adjusted by 6% of the GDP [from 15.4% to 9.4%] in an economy contracting by 4% should give people confidence...

...Isn't this austerity budget killing all hope of attracting foreign investment?

No. What people are seeing is that Greece is coming to grips with its fiscal problems; that it's balancing its budget; that it's liberalizing the labor market, making it easier to hire and fire. This is so much more important than a period of temporary high taxes to bring down the deficit. I have no doubt in my mind that what is happening now is going to make Greece so much more attractive to foreign investment. It's all about creating the conditions for Greece to create new jobs and to compete within the Eurozone...

...Even if Greece emerges from its crisis, it will be saddled with a debt of 154% of the GDP. How does it cope with such a debt?

Debt will be uncomfortably high but it will be on a downward trajectory. So we will be on a sustainable path.



The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Nov 27th, 2010 at 01:34:44 PM EST


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