Greece will fail
By Duncan Richardson, News Editor
24 Jun 2015
The latest plan by the International Monetary Fund (IMF), European Central Bank (ECB) and the European Commission to rescue the Greek economy is likely to fail. The Greek economy needs to grow and the countries debt reduced, however, the latest proposals will not solve either issue.
No doubt the IMF, ECB and European Commission will draw up forecasts that show further austerity measures will promote investment, increase consumer confidence and stimulate economic growth. Their forecasts will be wrong and the depression will only deepen causing a bigger crisis in the future.
When the IMF first became involved in 2010 they forecasted the Greek economy would suffer a short but painful recession which would bottom in 2011. As we now know this did not happen and when the IMF drew up their second plan in 2012 the Greek economy was in freefall. Once again they wrongly assumed the economy would soon stabilize and return to growth.
The Greek economy has a number of problems. There is no demand and the government’s debt now stands at 175% of Gross National Product. More debt and a fresh round of stimulus measures will not solve the problem of over indebtedness.
In the long term Greece only has one option and that is to leave the euro, devalue its currency and default on all or part of its debt. The troika however will continue to push for new measures and policies that have proven to fail. Einstein had a definition for such behaviour – insanity.