“Greece Strikes Deal, Eurozone Saved”

That is the headline in the Daily Beast this morning.  I believe it should read, “Greece Capitulates, Eurozone Doomed“.  As many writers have indicated, this is a punitative plan that any loan shark would find too cruel.  Remember loan sharks only make money when you pay.  Creating conditions that says you can never pay is not good business, but that is what the Eurozone seems to be doing.

It will be interesting to see if the Greek Parliment will go for it, and after the referendum, whether the Greek people will stand for it.  I am still struggling with how it is suppose to work.  You might give them some debt relief if the Greeks prove you can trust them, and they can prove this by collecting more taxes (to pay debts) and further cutting pensions.  From my point of view it is the austerity thing, waiting for the confidence fairy, which has never worked.  If I am right, GDP will further fall and the can has been kicked down the road for another crisis.

But what is most troubling is that the deal really makes Greece a ward of the European Union.  They can even sell off its assets.  What does that say to other members of the EU that are struggling with debt and with the inability to adjust their economies through monetary policy?  It says Germany runs your economy.  This is setting up the classic and historical conflicts that may just result in the failure of the EU.

Oh, and for those finger waggers, yes Greece over borrowed and over spent.  But EU loan sharks over lent.  And those who are really suffering, the unemployed youth of Greece, had nothing to do with any of it.  But in this morality play, someone has to pay.  Those someones may come back to bite the EU and doom it in the future.

See Greece in a Nutshell to see my simple minded explanation of why the Euro is a flawed currency that prevents smaller economies from recouping from bad economic times.

Note:  Why do we care?  Two reasons.  First, a failure of the EU does not bode well for national security and the economy if the EU nations fracture and take sides and form new alliances.  Second, this is Republican Economics 101, austerity with hard money (strong dollar).  While Germany forces this down Greece’s throats it empowers Republican nonsense, and its failure, as it will fail, is blamed on the immoral Greek population, also part of the Republican narrative.  The hope was that the EU would finally end the austerity politics and help Greece grow again.  This would have not only helped Greece, but established a new, successful model for how economies work.

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