Stop the Second Bailout Package! EU Should Admit Greece is Bankrupt

by Christian Rickens

Spiegel
February 20, 2012

Greece is bankrupt and will need a 100 percent debt cut to get back on its feet. The bailout package about to be agreed by the euro finance ministers will help Greece's creditors more than the country itself. EU leaders should channel the aid into rebuilding the economy rather than rewarding financial speculators for their high-risk deals.

First things first: this commentary isn't directed against Greece. It's got nothing to do with all the talk in Germany about Greek citizens not paying their taxes, Greek civil servants who don't work or Greek politicians who break their promises. This commentary has a clear and simple message: The second Greek bailout of €130 billion ($172 billion) that euro zone finance ministers are expected to agree on Monday afternoon should not be paid out.

Sure, Greece will need help from the other European Union member states for years, possibly even decades, and Germany shouldn't refuse that help. Europe will likely end up pumping far more money into Greece in the coming years than the fresh aid now being discussed in Brussels.

The mistake isn't the size, but the construction of the bailout package. It isn't geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.

How else can one explain the fact that around a quarter of the package won't even arrive in Athens but will flow directly to the country's international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn't bankrupt -- after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.

That leaves €100 billion. But that too isn't geared to what Greece needs in order to get back on its feet. It's linked to an estimate of how much debt the Greek economy can bear without collapsing. International technocrats agree that with debts amounting to 120 percent of gross domestic product, the country can just about go on servicing its debt. That's the level at which the cow can go on supplying milk without dying of exhaustion. So 120 percent became the goal.

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