Spiegel Online International carried a disturbing story Monday on the subject of bailouts.
The proximate item is Greece’s economic strait, and this is what Spiegel is reporting about that. The current troika—the IMF, the European Commission, and the European Central Bank—are proposing
[a]nother partial default. That, indeed, would seem to be the conclusion that Greece’s main international creditors have come to. According to information received by SPIEGEL, representatives of the so-called troika—made up of the European Central Bank, the European Commission and the International Monetary Fund—proposed just such a debt haircut at a meeting last Thursday held in preparation for the next gathering of euro-zone finance ministers.
But half-measures simply prolong the problem and continue Greece’s addiction to handouts while at the same time providing no mechanism for getting the Greeks to self-sufficiency other than leaving them to their own, already failed devices—both those that drove them to this strait and those of the last three years that have had no useful effect.
This time around, public creditors would be involved, meaning that taxpayer money from those countries which have stood behind Greece would vanish off the books.
But where is the justice in this? Indeed, where was the justice, originally, in forcing the taxpayers of entirely separate jurisdictions—other nations—to indemnify the Greeks (and the Irish, and by extension, the Spanish, Italians, and Portuguese) against their own foolish decisions? Indemnify rather than help, since no meaningful accountability mechanisms were applied.
That’s in the past; those innocent taxpayers already are dragooned into the existing bailout. The primary question remains, though: where is the justice in compounding that prior error by extending it, by forcing responsible taxpayers to pay for continuing this folly? And how does this enabling help the Greeks (and Spanish, Italians, and Portuguese; although these three already are attempting preemptive measures so as to avoid their own humiliation)?
Athens has only introduced 60 percent of the reforms [already] demanded by the European Union.
The troika has already agreed to give Greece two extra years to meet its austerity goals, a delay that will likely result in a need for up to €30 billion in additional aid, according to the ECB and European Commission. The IMF believes the funding gap will be closer to €38 billion.
Thus, the EU and the IMF know they’re proposing throwing money down a rat hole, and they’re proposing that anyway. It’s true enough that cutting the Greeks off from further bailout moves will jeopardize the taxpayers’ money already committed. However, it’s the nature of bankruptcy—which the Greeks will be better off going through—that such debts get written off and the creditors lose out. But that’s the only way to stanch the bleeding here. There’s no useful purpose in committing additional taxpayer funds to this failed effort.
Take careful note of the similarities to our own situation. Failures here, too, says the current administration, need to be propped up with taxpayer money and, in our case, favored investors protected from the consequences of their decisions.