Madness has enveloped the Papandreou regime as well. Unable (and unwilling) to go through with the serious contraction of the public sector ordained by the creditors, the regime keeps thrashing about and piling taxes upon taxes on an exhausted and outraged society, but with little hope of collecting what it budgets. All this “rescuing,” it is now obvious, hardly steers the country away from default; on the contrary, with every tax and every levy imposed, what’s left of the Greek economy withers and dies. Meantime, the sovereign debt keeps climbing with pitiless regularity, to reach an estimated 189% of GDP in 2012, while the Troika auditors remain inexplicably fixated on the Greek government producing “primary surpluses” out of an economy that produces little, if anything. What better way of indeed causing a “disorderly” default?
The markets are certain Greece will crash, with the infamous CDS default insurance contracts pointing to a 90 percent probability of Greece going belly up, perhaps as early as December 2011. Greek banks have been viciously affected by their exposure to Greek government junk and truckloads of loans borrowers cannot service any longer, losing around 80% of their stock market value under the relentless hammering of the Athens stock exchange that breaks one downward spiral record after the other these last few days.
But the madness continues.
The northern Europeans, led by Germany, continue on their insistence for punitive -- indeed, revenge -- measures against Greece without really assessing the true size of a pan-European “credit event” that will occur when, not if, Greece crashes into the ground, nose first, a prospect that has already prompted President Obama to press Germany and France to do more to rescue Greece. As for the Papandreou regime, it clings onto power with maniacal persistence, unable, discredited, and deeply hated by the entire Greek population save some diehard pro-“socialist” cells here and there: unpublished public opinion polls suggest that PASOK, Papandreou’s party, is faced with an electoral Tartarus that could be translated into less than 15% of the vote!
Given the shaky state of the European economy, the deep divisions among EU members on what to do next, and the insurmountable debt problems of Italy and Spain, a Greek collapse could signal the beginning of the end of the euro. This very real threat is the only remaining weapon for Greece -- but the Papandreou regime, a servile messenger for the Troika, is unable to wield it.
Nevertheless, and even at this 12th hour, those who actually caused this disaster, i.e. the austerity “brain trust” at the IMF, continue to parrot the mantra that if Greece commits suicide by austerity, she will not need to restructure her debt.
They may be right, after all. You cannot demand repayment from a dead country.