Will The New Bailout Save Greece? Probably Not

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WASHINGTON – After dire warnings about Greece falling into the abyss of bankruptcy and national ruin, guess what…the EU got them another rescue package. It is a tough deal. But it is a deal. Of course, this is not final. There are preconditions that need to met.

Preconditions

Before finalizing any arrangements leading to an additional, gigantic bail-out package, (it could go as high as $ 96 billion), the Greek Parliament needs to perform the functional equivalent of public acts of contrition. They have to commit to change the pension system, raise more taxes, and other things. I assume that this is required by the (cruel?) EU creditors in order to show them that, this time, Greece is serious.

Unhappy Greeks

Well, all this is well and good, but only as far as the politics of the EU and the Euro are concerned. Of course, the headline is that the Euro is safe because there will be no dreaded Grexit. The European stock markets are celebrating. Wall Street is also participating in the festivities.

But the reality is much different. Greece was, is and will continue to be an almost unmanageable economic mess. Beyond that, the prevailing sentiment among the Greeks is that their economic and fiscal crisis is really someone else’s fault.

Believe it or not, the accepted narrative is that this misery has been imposed on Greece by the evil Germans who want to suck their blood. The delusional Greeks want to believe that while they were experiencing a totally manageable fiscal issue back in 2009, the Northern Europeans for whatever reasons used this crisis as an opportunity to humiliate Greece. They purposely destroyed Greek finances and economy by imposing impossible austerity measures.

We did not do this

There is very little awareness in Greece that, while the EU-ECB-IMF rescue packages may have been less than perfect, ultimately the problem rests in a hopelessly unproductive economy, with too many state workers, corruption and cronyism, that got deeper and deeper into debt.

Well, now the debt is horrendous and the conditions imposed by the creditors are as harsh as they can be. However, given the despondent state of mind of the Greek people, I really wonder if anything good can possibly come out of this emergency rescue package.

In the final analysis, any credible Greek recovery strategy has to focus on new investments, enterprise creation, attracting foreign investors and a lot more; so that little by little the economic wheels will start turning again.

Greece needs hope

But it is obvious that for any of this to happen the Greeks need at least one key ingredient: “hope”. Yes, it is only hope that can create a measure of self-confidence.

The Greek society should be able to say: “OK, we got ourselves into a really bad place. However, thanks to the latest rescue package, we have got a good chance of getting out of this. Therefore, it is definitely worth our while to get busy, get to work and start producing. If we do this consistently and professionally, in a few years we can get back on our feet. So, let’s get moving”.

Conspiracy theories

This is the spirit that Greece needs to come back from its latest near death experience. But I suspect that this is not the prevailing atmosphere in Athens and beyond. The Greeks were, are and will be very resentful. They resent the very countries and the institutions that are bailing them out,  because –guess what– the additional credits come with strings attached!

Remember that in an empty gesture of defiance only a few days ago a large majority of Greeks voted against the previous rescue package, because they were told by Prime Minister Alexis Tsipras that it was too onerous. By voting “No”, they were told, they would show the EU creditors how tough they are, and they would get a better deal.

Well, it did not work out that way. Now, it looks like they will have to live under terms that will be even more onerous. (Congratulations Mr. Tsipras! The referendum was a really clever move! Any more bright ideas?)

Defiance

Given this confusion bordering on delirium, you can rest assured that the most paranoid conspiracy theories already in circulation will dominate the future national debate on the debt issue. The pundits will talk about humiliation, and about the need to re-establish national dignity through some acts of defiance, and other such nonsense.

Which is to say that many (if not most) Greeks will deal with this new situation in a bad spirit. They will not cooperate. Instead of focusing on work and investments, they will resist and fight against the austerity, just as they have done before. Only this time it will be worse, because the burden is much heavier.

Can we have a miracle?

Short of a real miracle that will transform the national consciousness, hard to believe that anything good will come out of this new “settlement” that settles nothing.

The bottom line is that Greece should have never been allowed to join the Euro. This was a fatal error. And now both the Greeks and the rest of the Eurozone members are paying the consequences.

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