Monday 24 September 2018

Dan White : Our €1bn to help bail out Greece will be an utter waste of money

A elderly man In a wheelchair waits with other pensioners outside a national bank branch to withdraw a maximum of €120 ($134) for the week in central Athens
A elderly man In a wheelchair waits with other pensioners outside a national bank branch to withdraw a maximum of €120 ($134) for the week in central Athens
Enda Kenny , second left, leaves after a meeting of eurozone heads of state at the EU Council building in Brussels

Let's be clear at the off. Another bailout for Greece will be an expensive waste of time and money and will only prolong the agony of the Greek people.

Grexit would be a far better option, both for Greece and rest of the eurozone.

In the end all the talk of Greece being forced to take a five-year 'time out' from the euro proved to be just that, talk.

Instead of ejecting Greece from the single currency, Europe's leaders cobbled together another last-minute compromise over the weekend that keeps the unfortunate country in the club.

This was just about the worst possible outcome. The latest deal will be third Greek bailout since 2010.

While the precise details have yet to be hammered out, Greece will be lent about €86bn - most of which will be recycled to help repay some of its existing debts.

Which, of course, begs an obvious question: If the two previous Greek bailouts haven't worked why should this one succeed?

This is more of the policy of 'extend and pretend' that has been followed by European leaders since the full extent of Greece's financial problems first became apparent in late 2009.

Far from solving Greece's problems, the latest bailout is almost certain to fail as its two predecessors did and the Greeks will likely be back seeking a fourth bailout in 2017 or 2018.

In the meantime, the Greek people will have had even more misery heaped upon them - the country's economy has shrunk by a quarter and the jobless rate has soared to 25pc since 2010.

The bailout medicine being prescribed for Greece is doomed to fail for three main reasons.

Firstly, it is now clear that austerity has been counter-productive. A 2012 IMF report admitted that it had hopelessly underestimated the impact of austerity.

The IMF had estimated that every €1 of spending cuts or tax increases would knock 50 cent off a country's economic output.

In the real world, every €1 of spending cuts or tax increases reduced output by between 90 cent and €1.50.

Secondly, even in the unlikely event of austerity actually working, any Greek bailout would still probably fail.

It should now be clear to all but the wilfully blind that Greece is utterly unsuited to membership of the euro, which has left it with a massively over-valued currency that renders its tourist industry and exports uncompetitive in international markets. And finally there is Greece's €320bn debt mountain, the equivalent of 180pc of its annual economic output.

The idea that Greece, crushed by austerity and with an overvalued currency, can ever hope to repay even a fraction of this money is utterly deluded.

Yet, despite all of the evidence to the contrary, European leaders look set to approve a third Greek bailout.

This is of more than academic interest to everyone in this country as the Irish Government is expected to contribute approximately €1bn of our money to the bailout.

This is money that, like the €350m we chipped in to the first bailout - we dodged the bullet at the time of the second Greek bailout because we were in a bailout programme ourselves - is set to disappear down the Swanee.

I have a modest proposal to make: Instead of blowing €1bn on a Greek bailout our Government should instead give €1,000 pocket money to the first one million Irish people to take a holiday in Greece - while we would still squander our money at least we'd have a good time doing so!

When a policy isn't working it's time to change it. A third Greek bailout will fail like the first two. It's time to recognise reality. Euro membership is the wrong option for Greece. Both Greece and the rest of the Eurozone would be better off letting the country exit the currency.

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