Greece is not even trying anymore

Back to square one

by Wolf Richter

Italian Prime Minister Mario Monti, while visiting Japan, summarized it eloquently when he said, "The financial aspect of the crisis is over." The ECB, despite any apparently fake German reservations, has jumped with both feet on the money printing bandwagon where it happily joins the Fed, the Bank of Japan, and other central banks around the world. The endless flow of money has started in the Eurozone, and Greek politicians, it now turns out, have figured this out.

Among them, Prime Minister Lucas Papademos who didn't wait long to put the need for athird bailout package on the table. And the difficult reforms are falling off the table one by one. The new priority is the general election on May 6—the flood of euros having been secured for the time being. Politicians are jostling for position to grab whatever votes they can. They're no longer paying attention to their legislative work, the tough reforms that party leaders and the government had promised the bailout Troika. Some of which would have to be completed before the elections. Promises made solely to obtain the second bailout package.

And they’re altering what little reform legislation does move forward, such as liberalizing the taxi industry, to curry favors with their supporters—to the utter frustration of their unelected technocrat Prime Minister who implored his ministers to focus on their jobs and stop the political quibbling. Apparently with little impact.

“It is the prime minister’s decision that this government should continue working right up to the last day,” spokesperson Pantelis Kapsis said lamely but admitted that much of the work would be left to the next government. So, the interim government only accomplished part of its job: the bond swap, a default that blew up over €100 billion in Greek bonds held by private sector investors. “We owed it to our children and grandchildren to rid them of the burden of this debt,” mused Evangelos Venizelos, at the time Finance Minister, after having whacked private sector investors with a 72% loss, while the drumbeat of Greece’s economic horror show continues in its own manner. For that unrelenting debacle and its consequences, read.... “A harder Default To Come.”

The interim government also accomplished another part of its job: it opened the Troika money spigot and got the bailout billions flowing again. But many of the reforms that it promised to implement would remain up in the air.

With one exception. Under pressure from the bailout Troika, Parliament is moving on a bill that would set in motion the creation of an escrow account for a big portion of the bailout billions, a condition imposed by the Troika who no longer trust Greece on anything. They want to make sure the money doesn’t evaporate. It will be used to repay Greece’s foreign creditors—their backdoor bailout being the purpose of the whole scheme. The Greek people, however, will see little of it.

And Papademos, who was supposed to oversee the hard work of implementing the promised reforms, and who has been shunted aside, darkened his outlook for the next government.

Further wage cuts might still be necessary, he said on Friday. And “joblessness will probably increase and the recession will probably continue,” through “most of 2013”—a downward revision from his assessment of only a few weeks ago when he pegged the end of the recession at mid-2013. With the bailout billions, the government would likely have enough money to fund pensions till 2015, he said, but that would be it. And his government was working on a proposal to cut another €12 billion from the budget, as promised to the Troika, he said, but the nearly impossible job of implementing those cuts:

 “The next government and the next parliament will decide.”

The writing is on the wall. Little will get done before the election. And after the new government takes over, it’s back to square one. More promises, more strikes, more disappointments, and the extortion racket to get more bailout billions will start all over again.

Meanwhile, across the border, deficit-plagued Turkey floated a plan to get its people to turn in their huge stash of physical gold in exchange for “certificates,” a first if still voluntary step in what may become a process of gold confiscation. And this, just as the world's major central bankers met in Washington. For that load of ironies, doublespeak, and red flags, read.... Gold Confiscation, Inflation, And Suddenly Virtuous Central Bankers.