Eurozone Punishes Greece on Bailout Deal

by John M. Curtis
(310) 204-8700

Copyright February 10, 2012
All Rights Reserved.                                         

           Railroading Greece to accept a 130 billion euro [$172 billion] bailout, the Brussels-based European Union put the hammer down on Greece to accept a punitive austerity program, calling for major sacrifices of Greek citizens.  Prospects of a Greek default sent the Euzone into a tailspin, causing EU leaders to scramble for an acceptable fix.  EU finance minister meeting in Brussels refused to sign on to a new bailout unless Athens accepted a set of draconic conditions.  Insisting that the Greek parliament must (a) ratify the EU bailout agreement, (b) agree to $323 million euros in additional cuts and (c) accept political assurances from EU finance ministers, Eurogroup chair Jean-Claude Juncker warned that there would be no deal without all three conditions.  “In short, no disbursement before implementation,” attesting to the real problem faced by Greece and all 16 other Eurozone countries.

            Juncker’s extreme measures reflect the central flaw of the Eurozone—17 EU counties agreeing to the euro as the common currency.  Promised unparalleled prosperity when the euro launched in 1999, the exact opposite has occurred in all but a few EU countries.  Once they signed on to the euro, 17 independent countries sacrificed their sovereignty to the Frankfurt-based European Central Bank.  All Eurozone countries must get cash from the ECB, or, in the case of today’s bailouts, extract the cash from the treasuries of more prosperous Eurozone countries.  “Those elements need to in place before we can take decisions,” said Juncker, reminding Greece they have no longer have any sovereignty.  Sovereign nations are defined by their ability to print and coin their own currency.  If a country’s banks need cash, they allow their central bank to supply more currency.  

            Instead of getting the cash from the ECB, the Eurozone has tapped its member states and the International Monetary Fund for Greek’s whopping bailout.  Greek politicians deeply resent the Eurozone’s heavy-handed demands, requiring massive cuts in public employee salaries, pensions and welfare benefits.  With the IMF receiving contributions from the U.S. and EU for the expressed purpose of dealing with Third World debt, it’s outrageous that the IMF is involved in Greece’s bailout.  While there’s nothing wrong with EU deciding to finance Greece’s bailout, the cash shouldn’t come from the IMF.  ECB officials refused to print more cash and pass the borrowing costs on to Eurzone countries.  Exploiting the IMF to bailout Greece runs afoul with its mission of financing Third World debt.  Worried about the euro’s devaluation and hyperinflation, the ECB refused to fund Greece’s bailout.

            Greece’s Finance Minister Evangelos Venizelos said Greece faced a fateful decision of whether to stay in the Eurozone.  “If we see the future of our country with the Eurozone, within Europe, we should do what we have to do for the program to be approved and for the PSI [private sector bondholder losses] to be concluded on time before major bonds expire in March,” said Venizelos, raising the very real possibility that Greece will opt out of the Eurozone.  Whether or not Greece opts out of the EU is anyone’s guess.  Ten other EU countries currently don’t subscribe to the euro.  Greece could certainly opt out of the euro and still maintain membership in the EU.  If Greece’s parliament really deals with reality, they know that it’s time to exit the Eurozone.  Borrowing more cash from the EU, IMF or ECB only makes Greece a slave state to its European barons.

            EU officials have pounded on Greece to accept the new bailout and austerity program to protect bondholders.  EU finance ministers are worried about more devaluation of the euro should Greece decide to exit.  While all want Greece to sign on the dotted line, Greek officials must accept the consequences.  Signing the EU’s proposal would eviscerate Greece’s already compromised sovereignty, potentially causing more riots in the streets.  Greek workers don’t want to sacrifice health care, pension and welfare benefits because their leaders, back in 1999, were sold a bill of goods to join the Eurozone.  Not only has Greece not received the promised prosperity, they’ve gone broke in the process.  “The painful measure that creates misery for the youth, the unemployed and pensioners do not leave much room,” said secretary general of Greece’s ADEDY labor union.   

            Forcing Greece to accept the Eurozone bailout plan would put a leaky Band Aid on an unending economic hemorrhage.  Borrowing more cash from the EU, IMF or ECB would force average Greek citizens into punishing concessions.  “We won’t accept them.  There will be a social uprising,” said Deputy Labor Minister Yannis Koussoukos, saying the agreement would be “painful for working people.”  While the EU wants to avoid the euro’s further devaluation, they must stop pressuring the Mediterranean island paradise into another costly boondoggle.  Greece needs to cast off the Eurozone yoke and stand on its own, printing its own currency and managing its own economy.  Only last week, German Chancellor Angela Merkel urged Greece to allow the EU to manage its economy.  Instead of more pressure from the EU, Greece needs to finds its own fix and regain its sovereignty.

  John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.       

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