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By Jack Rasmus
It is a known fact that Schaubel and the ‘right wing’ of Euro bankers
and ministers have wanted to eject Greece from the Euro since 2012. In
that prior debt restructuring deal, private bankers and investors were
‘paid off’ and exited the Greek debt by means of loans made by the
Troika, which were then imposed on Greece to pay. 2012 was a
banker-investor bailout, not a Greece bailout. What was left was debt
mostly owed by Greece to the Troika, more than $300 billion. Greece’s
small economy of barely $180 billion GDP annually can never pay off that
debt. Even if Greece grew at 4% GDP a year, an impossibility given that
Europe and even Germany have been growing at barely 1% in recent years,
and even if Greece dedicated all its surplus GDP to paying the debt, it
would take close to a half century for Greece to pay off all its current
debt.
Schaubel and the northern Europe bankers know this. In 2012, in the
midst of a second Eurozone recession and financial instability, it was
far more risky to the Euro banker system to cut Greece loose. Today they
believe, however, that the Eurozone is stronger economically and more
stable financially. They believe, given the European Central Bank’s $1.2
trillion QE slush fund, that contagion effects from a Greek exit can be
limited. Supporters of this view argue that Greece’s economy is only
1.2% of the larger Eurozone’s.
What they don’t understand, apparently, is that size of GDP is
irrelevant to contagion. They forget that the Lehman Brothers bank in
2008 in the US represented a miniscule percent of US GDP, and we know
what happened. Quantitative references are meaningless when the crux of
financial instability always has to do with unpredictable psychological
preferences of investors, who have a strong proclivity to take their
money and run after they have made a pile of it—which has been the case
since 2009. Investors globally will likely run for cover like lemmings
if they believe as a group that the global financial system has turned
south financially—given the problems growing in China, with oil prices
now falling again, with commodity prices in decline once more, with
Japan’s QE a complete failure, and with the US economy clearly slowing
and the US central bank moves closer to raising interest rates. Greece
may contribute to that psychological ‘tipping point’ as events converge.
But there’s another, perhaps even more profitable reason for hardliners
and Euro bankers wanting to push Greece out. And that’s the now apparent
failure of Eurozone QE (quantitative easing) policies of the European
Central Bank to generate Eurozone stock and asset price appreciation
investors have been demanding.
Unlike in the US and UK 2009-2014 QE policies that more than doubled
stock prices and investors’ capital gains, the ECB’s QE has not led to a
stock boom. Like Japan recently, the Eurozone’s stock boom has quickly
dissipated. The perception is that stock stimulus from the Eurozone’s
QE, introduced six months ago, is perhaps being held back by the Greek
negotiations. Euro bankers and investors increasingly believe that by
cutting Greece loose (and limiting the contagion effects with QE and
more statements of ‘whatever it takes’ by central banker, Mario Draghi)
that Grexit might actually lead to a real surge in Euro stock markets.
Thus, throwing Greece away might lead to investors making bigger
financial profits. In other words, there’s big money to be made on the
private side by pushing Greece out.
full:
http://www.counterpunch.org/2015/07/15/greece-as-a-euro-economic-protectorate/
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