August saw once again a eurozone crisis over Greece, and once again a bailout. The main effect of the second Greek bailout will be a major transfer of Greek debt from private creditors to taxpayer-backed bodies like the European Central Bank. Greek debt and interest payments through August amounted to 18.2 billion euros, so despite the release of 12 billion euros, Greece may not have enough funding to make it through to the end of September.
While the Greek parliament was passing a package of privatisations and cuts to public services at the insistence of the EU and IMF, police used unprecedented levels of violence to suppress mass protests and prevent demonstrators from blocking the parliament. The austerity measures do not address the causes of the crisis, but make public service workers pay for a crisis they did not cause. The extra burden for an average family of four will be 2,795 euros a year - a month’s income. This is a ruinous deal for Greece.
Credit agencies Standard & Poor and Fitch dealt a blow to plans to make the private sector contribute to a second Greek bailout, saying that this could trigger a default, something which EU leaders and the ECB want to avoid at all costs.
Many commentators say that the solution to the Greek crisis is simple: default on the debts and leave the euro. US economist Martin Feldstein argues, “the only thing which will help Greece is to leave the eurozone.” Another Harvard professor, Kenneth Rogoff, agrees: “I don’t think there is any question that if you look at it narrowly from Greece’s point of view, it would be better to default now, clean it up and move on.” The eurocrats are already saying that Greece will need a third bailout, of 85 billion euros. ■