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Emet m'Tsiyon

Thursday, May 17, 2012

EuroFools Betray Greek Brethren, Undermine Their Own Creation -- Prove that Their "Peace" Advice to Israel Is Either Hostile or Stupid

UPDATING 5-19 & 6-2-2012

As an Israeli, I am tremendously amused to see how the EU, more specifically the Eurozone, plus the IMF, cannot solve the debt crisis. It should warn us against taking any advice from the EU about our conflict with the Arabs. The Greek debt-cum-economic crisis at present is due not only to the failure of Greek governments prior to Papandreou secretively building up debts with the advice of US financial firms. It is also due --and even more so-- to the utterly stupid and counterproductive "remedy" demanded by the eurozone and IMF. And the German role here is especially thick-headed and outrageous.

I consider Wolfgang Schaeuble, German finance minister, a weapon of European self-destruction. It should have been obvious 2 years ago that without either the Eurozone [EMU = european monetary union] and/or IMF guaranteeing loans to Greece [as Krugman recommended] or/and the provision of an easy loan facility for Greece at a reasonable, low interest rate [maybe something like eurobonds], that interest rates for Greece would balloon and swell up on the open market and Greece could never pay back the loans at --let's say-- 33% interest. Especially without growth. So the original Greek "bailout" was stupid and unworkable, which some foresaw. Now, the Germans --led by Schaeuble are insisting on punishing Greece [watch films of the German finance minister seething with rage over Greeks "breaking" promises]. This is outrageous because the Germans all too easily forget that Germany did not come out of its WW2 ruin & wreckage on sheer austerity & hard work but got Marshall Plan billions from America in the form of cheap, low interest loans as well as grants. Actually in the end, most of the loans were forgiven & Germany paid back only about 15% of its Marshall Plan aid!!! The Americans could have left the Germans to grope for food in their post-war ruins, after a war that they had started [also see here & here & here]. Of course, some German economists are more sensible than Schaeuble.
Yes, Greece needed structural reforms but easy loans too were indispensable. Without them Greece got into a vicious circle that the Euro fools still don't understand. As an Israeli I see that EU "peace" prescriptions are as reliable as their economic stupidities. Doctor EU, heal thyself.

UPDATING 5-19-2012
Solidarity is a two-way street, Greece must keep its promises.
Guido Westerwelle, German Foreign Minister, FDP party
[Israel TV, channel 1, Ro'im `Olam 5-19-2012]
Solidarity is a two-way street. . .
the European Community
must stand firm and demand the necessary structural reforms. . .
Only when the Greeks also provide evidence that they
are serious [must we provide help]

Rainer Bruderle, FDP party leader in Bundestag.

We called Schaeuble a European weapon of self-destruction. This implies that he has been the brains and the force behind Germany's policy on the Greek debt crisis [now a crisis in several eurozone states since the Greek "rescue" plan of 2010]. Indeed. Angela Merkel, German chancellor [PM] does not seem very bright and takes her economic d
irectives from Schaeuble, supported by most Germans. Since Germany is the largest successful economy in the eurozone and has the most money reserves, it can force its will on the rest of the EMU, which is what has happened. Yet the first austerity plan for Greece of 2010 has obviously failed. But no change in EMU policy is likely. Nor any admission of fault in the "rescue" plan itself. Schaeuble blames the Greeks. Now Greece may leave the eurozone, the EMU, which could lead to higher interest rates for other eurozone states and to eventual break up of the EMU. This would harmfully affect EU states like the UK that are outside the eurozone as well as the whole world economy. Hence Schaeuble is a European weapon of self-destruction.

Could a different rescue plan in Greece in 2010 have saved Greece? Maybe, but as said above, it would have had to provide an easy borrowing facility for Greece --not even necessarily as generous as the Marshall Plan was to Germany [see addendum below] but with reasonably low interest rates-- plus provisions for growth. Now it is probably too late to save Greece and/or keep it in the eurozone. Maybe the EMU itself can no longer be saved. News out of the G8 summit [5-19-2012] reports that Merkel resisted the calls by other G8 members for a focus on growth & stimulus over austerity. The eurozone which the Germans love so much may be on the way to "break up," as David Cameron, UK prime minister, wondered about the other day. The Germans have shown appalling harshness and stinginess in this affair. The German urge to punish may end up punishing the Germans too. Schaeuble himself seems at times to be playing a Gestapo officer in one of those old WW2 movies.

the other eurozone [EMU] states and the IMF --mainly run by Europeans-- went along with this sad comedy, this farce of greed, harshness, stinginess and historical amnesia --which especially characterizes Germany. Doctor EU, heal thyself. And don't come to Israel with barely disguised proposals for having the Arabs do your dirty work, finishing Hitler's job in the name of "palestinian self-determination."

- - - - - - - - - - -ADDENDUM- - - - - -
More on the Marshall Plan & Germany from Committee for the Abolition of Third World Debt
The 1953 London Debt Agreement, or the German debt
If West Germany could redeem its debt and rebuild its economy so soon after WWII it was thanks to the political will of its creditors, i.e. the United States and their main Western allies (United Kingdom and France). In October 1950 these three countries drafted a project in which the German federal government acknowledged debts incurred before and during the war. They joined a declaration to the effect that “the three countries agree that the plan include an appropriate satisfaction of demands towards Germany so that its implementation does not jeopardize the financial situation of the German economy through unwanted repercussions nor has an excessive effect on its potential currency reserves. The first three countries are convinced that the German federal government shares their view and that the restoration of German solvability includes an adequate solution for the German debt which takes Germany’s economic problems into account and makes sure that negotiations are fair to all participants.” |5|
. . . . .
The agreement set up the possibility to suspend payments and renegotiate conditions in the event that a substantial change limiting the availability of resources should occur. |7|
To make sure that the West German economy was effectively doing well and represented a stable key element in the Atlantic bloc against the Eastern bloc, allied creditors granted the indebted German authorities and companies major concessions that far exceeded debt relief. The starting point was that Germany had to be able to pay everything back while maintaining a high level of growth and improving the living standards of its population. They had to pay back without getting poorer. To achieve this creditors accepted first, that Germany pay its debt in its national currency, second, that Germany reduce importations (it could manufacture at home those goods that were formerly imported), |8| third, that it sell its manufactured goods abroad so as to achieve a positive trade balance. These various concessions were set down in the above-mentioned declaration. |9|
Another significant aspect was that the debt service depended on how much the German economy could afford to pay, taking the country’s reconstruction and the export revenues into account. The debt service/export revenue ratio was not to exceed 5%. This meant that West Germany was not to use more than one twentieth of its export revenues to pay its debt. In fact it never used more than 4.2% (except once in 1959).
Another exceptional measure was that interest rates were substantially reduced (between 0 and 5%).
Finally we have to consider the dollars the United States gave to West Germany: USD 1,173.7 million as part of the Marshall Plan from 3 April 1948 to 30 June 1952 with at least 200 million added from 1954 to 1961, mainly via USAID. [here Committee for the Abolition of Third World Debt]
UPDATING George Soros, billionaire money manager, far from our favorite person, warns that the eurozone has only 3 months to solve or alleviate its financial crisis otherwise the crisis may lead to the break up of the EU altogether. Soros, surprisingly, blames Germany for profiting from the single currency while harming the peripheral countries.
Germany benefitted from debt relief after WW2 but not willing to help Greece by granting debt relief. How they forget!! [here]

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