Tuesday, February 07, 2012

The Greek Vise

by Paul Krugman

The current plan calls for Greece to move into large primary surplus — that is, surplus not counting interest payments on the debt:

That’s a huge swing — and it’s supposed to happen in the face of a deeply depressed economy. Here’s what it implies for real government spending:

Can I say that this looks basically inconceivable?

And here’s the thing: when this started, Greece was running a large primary deficit — which meant that even if it repudiated all its debt, it would still have been forced to make a major fiscal contraction. This is no longer true. So we’re now looking at a scenario in which Greece is forced into killing levels of austerity to pay its foreign creditors, with no real light at the end of the tunnel.

This is just not going to work.

SOURCE: http://krugman.blogs.nytimes.com/2012/02/06/the-greek-vise/

Thats what Merkozy and IMF demands threatening that other way let Greece default.They ask for a reduce in wages of private sector of 25% whith exuse of competitiveness, remove of labor contracts, further reduce of pensions and all these in an enviroment of 20% unemployment, 4years depression in a row, duplication of taxes (which the majority of people can not afford). 
And the most outrageous they ask the goverment to sign that all the primary surplus (collected by the blood of the citizens) goes to pay the depths.
They ask to to change the rules of public loan from the existing domestic to British law, that means in simlpe words if goverment can't pay back it's debts in future they have the right to seize even the Parthenon! 
In this occasion default is a bitter but the less worse solution, even if this means exit from Eurozone.
How much is the troika demanding from Greece? How tight is the squeeze? Here’s a look based on the most recent IMF report (pdf).

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