Economics, International economy

European doublespeak while Athens burns

Orwellian doublespeak is alive and well and living in Europe. Today, seemingly oblivious to an Athens in flames, Ohli Rehn, the European Union’s Economic and Monetary Affairs Commissioner, sternly warns Greece that “disastrous consequences would follow if Greece did not avoid a disorderly default.” And he does so with the intent of bullying Greece into continuing to hew the misguided policy line of its IMF-EU taskmasters that has brought Greece to its present terrible socio-economic pass.

Apparently, nobody seems to have informed Rehn that Greece’s economy is already in a state of collapse. Over the past year, Greece’s manufacturing output has declined by 18 percent while its youth unemployment is now around 50 percent. Nor does it seem that anyone has explained to Rehn that this collapse has occurred as the direct result of IMF-imposed hair-shirt fiscal austerity within a euro straitjacket that precludes currency devaluation as a means to promote the Greek external sector. And it seems to have escaped Rehn’s notice that Greece is rapidly moving to a state of becoming politically ungovernable as a direct consequence of the economic hardship that it has been forced to endure.

As if to add insult to injury, the IMF and EU are now prescribing to Greece even more of the stiff medicine that has brought the Greek economy to this painful pass and that will guarantee Greece a lost economic decade. Little wonder then that the Archbishop of the Greek Orthodox Church has been warning Europe of a social explosion in his country.

And, again, nobody seems to have informed Rehn that Greece is already well into the process of a disorderly default on its debt. For Greece is using the legislative threat of retroactive collection clauses to get its private sector creditors to “voluntarily” accept a 70 percent write down in the present value of their Greek sovereign debt holdings. Someone might inform Rehn that this is very little different from Argentina’s take it or leave it offer to its private creditors in 2005, which involved a 72 percent write off of its debt and which was widely regarded as a disorderly default.

An even more pernicious form of European doublespeak is that Greece is but a special case and that what is occurring in Greece could not happen elsewhere in Europe. Maybe someone should inform Rehn that Portugal is going down the very same road as did Greece and that it will be no more successful than was Greece in restoring fiscal sustainability by engaging in draconian budget austerity within the constraint of euro membership.

One thought on “European doublespeak while Athens burns

  1. Dear Mr Lachman,

    I highly respect your opinion and in general I agree with everything you have written on Greece and Europe in the last couple of years.

    However, since I live next to Greece, I would like to say that the premise that Greeks can reform their economy, start to work and even be competitive is not true. At least yet. Athens is burning exactly because they do not want to face the reality.

    Before admitting a problem finding solution to it is never possible. Many greeks still think they have a political problem.

    Thanks for sharing your insights with us,
    Yassen

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