Meanwhile, how's that austerity fascism working in Greece?

EU austerity policies risk civil war in Greece, warns top German economist Dr Sinn

“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.

“The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.

Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.

“Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union,” he said, describing the failure of the EU’s bail-out strategy to include a haircut for the banks as an invitation to moral hazard.

“There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we’ll never have debt discipline in the eurozone,” he said.

Greek society has so far held together well, despite a wave of strikes and street violence in the early months of the crisis. However, unemployment is rising fast and political fatigue with such austerity policies typically sets in the second year.

Under the rescue deal, the eurozone pledged €80bn of new loans at 5pc interest and the International Monetary Fund offered a further €30bn.

The joint bail-out was hoped to safeguard Greece against the pressure from global capital markets for two and half years, but the relief rally proved short. Spreads on longer-term Greek government debt have surged back to crisis levels of about 800 basis points, implying a high risk of default.

“We are in the second Greek crisis right now, today,” said Dr Sinn.

Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.

The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.

Link:
http://www.telegraph.co.uk/finance/economics/7980291/EU-austerity-policies-risk-civil-war-in-Greece-warns-top-German-economist-Dr-Sinn.html