Greeks Buy Time for Insolvent Bankers and Delusional Politicians
By: John Browne, Euro Pacific Capital
Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency.
To return to national economic viability Greece must abandon its use of the euro currency, which has become a financial straight jacket. Nevertheless, Greek politicians may have agreed secretly to accept the austerity in name only, in return for a liquidity bailout that will buy time for European unity to solidify. Once political unity is restored, we should expect more massive financial transfers from northern countries, present day Germany and Britain, to the subsidized southern regions.