January 2011 – October 2012

Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr

The Greek Great Depression

Greece on the brink of depression and the myths accompanying the EU-IMF “rescue plan” (January 2011) Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr Introduction Last year, especially after February 2010, we were reading numerous articles describing the severe economic crisis in Greece, articles that were front-page news in the world mass media in most cases. But the “process” that led to the Greek economic crisis was not new, as it was firstly described in detail in some papers or internet media just in 2009. In Greece, there is an economic crisis that started to “show up” after the disintegration of the production structure which was process accelerated at the beginning of 80s and at the same time this economic crisis was followed by a corresponding chronic crisis of the Greek political system. This crisis deteriorated with the outbreak of the current global financial crisis of 2007-2008, and it became obvious by the social unrest of December 2008. After the Olympic Games in 2004, and for the next five years, a steep worsening in the condition of the Greek economy has been observed – but everything was hidden under the explosion of global credit and real estate bubble, until all these bubbles were burst in 2007-2008 global financial crisis. In Greece, that was not so obvious even in 2008, but it was after the deleveraging of local real estate bubble in 2009. This destructive course in the Greek economy, which started in the beginning of 80s, eventually had as a result the bankruptcy of Greece in 2010. This bankruptcy led to the enforcement of the EU-IMF “rescue plan” and the “International Financial Control” is already here with us, as it was again in February 1898, after the bankruptcy of 1893 and the defeat by the Turks in 1897. The EU-IMF “rescue plan” In May 2010, a three-year agreement was signed, describing the mechanism of how Greece would receive €80 billion in loans from other euro-zone members and €30 billion from the IMF. This loan agreement was made under the provision of advice by the English law firm “Slaughter and May” [1] (what a symbolic name for Greece in the following months). This loan agreement has very strict terms, and the demands of the lenders underlie the English legal system. For the first time, the holders of the Greek bonds that would be issued because of that “rescue package” could proceed in the garnishment of the Greek public property (unofficially estimated in 300 billion Euros), when the Greek government couldn’t pay the loan after 3 years (from the first moment it was obvious that this loan couldn’t be paid in 3 years, and now, what a surprise, the lenders are thinking for the lengthening of that loan). This is the main reason, with many other “new-established procedures” that were decided, why this loan agreement has turned into an “occupation” agreement for Greece. IMF undertook the responsibility for defining the austerity measures and watching the implementation of the plan by the Greek government. As EU admitted, it called IMF to participate in the rescue plan because of its “technical expertise” from previous

implementation plans. And that’s what happened in Greece too. The classical IMF measures were proposed and implemented. The Greek government acted very fast, surprising even the EU-IMF officials, to slash and then freeze public-sector wages, raise sin taxes, increase value-added taxes, impose a new levy on businesses, cut pension payments and raise retirement ages for some public-sector workers. That was the very easy part of the plan. The other one was the challenge of economic growth that is necessary for Greece, if the lenders really want to take back the whole value of the Greek bonds they possess. But the IMF “advice” and the plan in general have nothing to do with growth. [2] It is just a plan trying to cut the public deficit of Greece and put an order to the chaos in the financials of the Greek public sector (what a surprise again, recently even the biggest supporters of the EU-IMF “rescue plan” admit that the plan has nothing to offer in implementing growth policies). On the contrary, the plan kills any probability of growth in Greece for the next 3 years. The economy can’t proceed to growth paths, when there are huge tax invasions in the middle class income. And this killing of growth with these austerity measures is certain, when we know that Greece is in recession one year before the implementation of the “rescue plan”. The results of IMF measures were obvious since the first months of their implementation. It’s the destruction of the middle class, the pauperization of large proportion of the Greek population and the start of a general disintegration of the Greek society in the name of the reduction of Greek public deficit. And now officially we know that the Greece’s state revenue in 2010 rose 5.4 percent on an annual basis to 51.1 billion Euros, missing the initial IMF’s target of 13.7%. [3] The targets of the Greek budget for 2011 won’t be caught because the additional austerity measures that have been planned won’t bring additional revenues. That should be easily known for someone who has studied the theory of Laffer curve. [4] One potential result of the Laffer curve is that increasing tax rates beyond a certain point will become counterproductive for raising further tax revenue because of diminishing returns. And we have already reached that point in Greece many months ago. Moreover, some weeks ago the very important data of unemployment rate and inflation was published in Greece. That data concluded that we are in the situation when both the unemployment rate and the inflation rate are persistently high, that is stagflation. The unemployment rate is rising very fast, especially during the last 2 years. The increase of unemployment rate in the last 2 years is one of the biggest after the Second World War. The lows of the last 15 years were in the end of 2008. But since 2008, when the deleveraging of the local real estate bubble was obvious, the unemployment rate doubled. The latest data [5] shows that the unemployment rate was 13,5% in October 2010, against 12,6% in September and 9,8% in October 2009 (we all know that the real unemployment is much higher). In addition, Greek inflation rose to 5.2% in December 2010 from 4.9% in November [6]. In this explosive mixture we should add the negative GDP trend we have since 2009 (about -4.5% recession in 2010), that will continue in 2011, and of course the present data projection shows also recession in 2012, and not a slight growth as the EU-IMF “rescue plan” tells us. So more jobs will be lost, the income of the citizens will shrink more, and as a consequence the economy will shrink further until recession turns into depression. We are

just a few months before this painful process begins. And whatever the IMF had as a prediction for recession, unemployment rate, country’s revenues will be proved false, far away from the reality. [2] Even the debt prediction as a percentage of GDP in 2013 will be higher, maybe in 2011. [7] Other recent estimates predict that the Greek public debt as a percentage of GDP in 2020 will be still higher than the one in 2009, and the Greek society will be in ruins, after being under the “rescue plan” for a decade. The myth of the “huge Greek Debt” During the last year all the mainstream Greek and foreign media were presented Greece as the country with one of the biggest debts in the developed world. But this is only the one side of the truth, when on purpose they focus on the public debt. In table I, we present an indicative list of countries by total debt. It is the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. The figures here are represented as a percentage of annual GDP.

Country Total debt Financial Institutions

Non financial business

Households Government

UK 469 202 114 101 52 Japan 459 108 96 67 188 Spain 342 75 136 85 47 N. Korea 331 108 115 80 37 Switzerland 313 84 75 118 37 France 308 81 110 44 73 Italy 298 77 81 40 101 USA 290 56 78 96 60 Germany 274 76 66 62 69 Canada 245 47 54 84 60 Greece* 230 108

* 2007

Table Ι: Total debt in 2008 of selected countries, (%) of GDP Source: McKinsey Global Institute (Exhibit 7) [8] It is obvious that Greece is not the “western” country with one of the biggest total debts as a percentage of annual GDP, but other countries that criticized so badly Greece’s debt should consider the real financial situation of their “home” first. In table II, we present an indicative list of countries by external debt. External debt by definition is the total public and private debt owed to non-residents repayable in foreign currency, goods, or services, where the public debt is the money or credit owed by any level of government, from central to local, and the private debt the money or credit owed by private households or private corporations based in the country under consideration.

Country External debt US dollars

Nick Per capita US dollars

% of GDP

Luxembourg 1,994,000,000,000 30 June 2009 4,028,283 3854%

Ireland 2,287,000,000,000 30 September 2009 515,671 1004%

Netherlands 3,733,000,000,000 31 December 2009 226,503 470%

United Kingdom 9,088,000,000,000 30 June 2009 147,060 416%

Hong Kong 655,100,000,000 30 September 2009 92,725 311%

Switzerland 1,339,000,000,000 30 June 2009 182,899 271%

Belgium 1,354,000,000,000 7 October 2010 126,188 267%

Austria 808,900,000,000 30 September 2009 97,411 212%

Portugal 507,000,000,000 30 June 2009 47,632 223%

Denmark 607,400,000,000 30 June 2009 110,216 196%

France 5,021,000,000,000 30 June 2009 80,209 188%

Greece 552,800,000,000 30 June 2009 49,525 167%

Spain 2,410,000,000,000 30 June 2009 52,588 165%

Sweden 669,100,000,000 30 June 2009 72,594 165%

Germany 5,208,000,000,000 30 June 2009 63,493 155%

Finland 364,900,000,000 30 June 2009 68,180 153%

Norway 548,100,000,000 30 June 2009 113,174 143%

Italy 2,328,000,000,000 31 December 2008 39,234 101%

United States 13,450,000,000,000 30 June 2009 43,758 94% Table IΙ: Total external debt of selected countries, (%) of GDP [9,10] From the table above, we conclude again that Greece is not one of the countries with the biggest external debts in the world, but there are some countries in the list that we could make the assumption that they are already “insolvent”. And we have to remember the “principle” of the countries’ lenders of any kind: “The total debt is the public and the private one and all that should be paid”. Now they know that the total debt is impossible to be paid by the large “western” countries and they are trying to deal with the “small” problem, which is the public debt of the “western” countries. They are trying to postpone the confrontation of the private debt problem for some more years later. But there will be some day in which the “bill’ has to be paid for every big “western” country. Conclusions Having in mind all the previous data and the real situation that exists in the majority of the Greek population and not following the beliefs of the corrupted bureaucrats and some of the Greek Nouveau Riche of the last decade, the implementation of the EU-IMF “rescue plan” will bring disaster to Greece. If some people still deny understanding this, they are the same people that denied seeing the coming of the global financial crash of 2007-2008. In a few days some EU-IMF bureaucrats will come to Greece to see what extra measures should be taken for additional cuts of 12 billion Euros in 2012-2014 [11]. The measures and their results will be the usual ones: slaughter of the weak pensioners and employees with new or increased taxes, elimination of thousands of small businesses via the huge taxation policy, collapse of the internal consumption and a huge amount of new unemployed people.

In 2011 debt servicing and amortization payments will reach the huge amount of 25% of GDP that is continuing the following years especially during the 2014-2015 period, when, more than 70 billion Euros annually will be needed to pay back the loan from the EU-IMF (55.2 billion in 2011, 57.9 in 2012, 53.2 in 2013, 70.8 in 2014 and 76.7 billion euros in 2015, taking account that we haven’t a decision for lengthening the EU-IMF loan till now). It is obvious that all this money cannot be paid. If Greece wants to move out from this economic death spiral must begin immediately a renegotiation of its whole debt, not only of the EU-IMF one (under the threat of an immediate stoppage of payments in case this is not accepted), aiming at a significant lengthening of the period of its repayment and a corresponding reduction of the present amount of debt (a 40-50% hair-cut is appropriate). This renegotiation must take place in the Eurozone, and in no way after returning to drachma. In this period of time the returning to drachma will be a disaster. Drachma is wanted by the corrupted political and financial elite which have their deposits already abroad and after the returning of drachma they will have the purchase power to buy the wealth of Greece in a bankruptcy cost. Drachma can’t help now for the improvement of the competitiveness of Greece, since there is no production infrastructure during the last years, and there are very few exporting products and services. On the contrary, it accelerates a procedure that leads Greece to a “Third World’ economic condition and of course to the strong economic influence of Turkey. Then, as we mentioned above, Greece can use appropriately its public property of 300 billion Euros so as to handle efficiently the remaining debt and start procedures for growth policies. Of course, this growth should concern its “classical” economic sectors such as tourism, shipping, agriculture and the exploitation of the country’s rich mineral wealth. At the same time we have to co-operate with countries that will give us a boost in our competitiveness in several sectors in the new rising world. This world has already risen in the wider area of Asia. Greece can play a significant role in this new world and can have many benefits when it will find its role there. It’s not utopia. Very briefly, Greece should co-operate with Israel in the area of applications in the high-tech industry, co-operate with Russia and China and find its path with their help to Asian challenge, these are just a few examples. But the leaders of this new course must be young Greek people that have a vision and will work hard for it. The older people owe it to them, because during the last years they “managed” to create a Japan-like lost generation of youths in a very short time indeed. [13] Of course, this new era for Greece won’t exist as soon as the corrupted representatives and their ‘colleagues” of the present political system that brought Greece to bankruptcy won’t be punished very strictly. But if this impunity will continue in combination with the new austerity measures that are coming soon, there will be a perfect explosive mixture that when it explodes the social unrest in December 2008 will seem like a walk in the park. The next days, weeks are very crucial for the “progress” of the EU-IMF occupation.

References [1] http://www.slaughterandmay.com/news-and-recent-work/recent-work/recent-work-items/2010/republic-of-greece---loans-of-up-to-eur-80-billion.aspx [2] http://www.imf.org/external/np/exr/faq/greecefaqs.htm#q2 [3] http://www.euro2day.gr/news/economy/124/articles/623504/Article.aspx [5] http://personalmoneystore.com/moneyblog/2010/04/08/laffer-curve-explaning-taxation-theoretically [5] http://www.euro2day.gr/dm_documents/130111_anergia_Ei3jF.doc [6] http://www.euro2day.gr/news/economy/124/articles/621855/Article.aspx [7]http://online.wsj.com/article/SB10001424052748703674704575234404114028636.html [8]http://www.mckinsey.com/mgi/reports/freepass_pdfs/debt_and_deleveraging/debt_and_deleveraging_full_report.pdf [9] https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html [10] http://en.wikipedia.org/wiki/List_of_countries_by_external_debt [11]http://www.grreporter.info/en/more_12_billion_euros_additional_cuts_2012_2014/3792 [12]http://www.ekathimerini.com/4Dcgi/4dcgi/_w_articles_economy_1_06/12/2010_121633 [13] http://www.dailyfinance.com/story/careers/japans-economic-stagnation-is-creating-a-nation-of-lost-youths/19580780/

The results of the troika’s “rescue plan” implementation in Greece and the global debt crisis (August 2011) Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr

Source: Vassilis Papageorgiou http://vpapag.wordpress.com/

Introduction Ireland is not like Greece http://globalinsolvency.com/headlines/ireland-not-greece-lenihan-tells-eu Portugal is not like Greece http://www.economist.com/node/15959527 Spain is not like Greece http://www.ft.com/intl/cms/s/0/ff2b6e34-2f8a-11e0-834f-00144feabdc0.html#axzz1VZcWNtYp Italy is not like Greece http://www.fxstreet.com/fundamental/analysis-reports/research-euroland/2011/07/15/ Obama: US is not Greece or Portugal http://www.eubusiness.com/news-eu/us-economy-politics.bc7 S&P downgrades U.S. credit rating from AAA http://www.usatoday.com/money/economy/2011-08-05-s-and-p-downgrades-credit_n.htm During the last weeks, we are witnesses of a “new” global financial crisis that was triggered by the S&P’s downgrade of US credit rating. The real causes were the global sovereign debt crisis, the slowdown of growth in Europe and the US, the possibility for many western countries to enter again in a recession and of course the end of the QE2 program in the US. This crisis has lately signs of a “Lehman-like” borrowing crunch in the EU among its banks.

As we have written in a previous article [1], and now it is more obvious to many analysts [2], Greece’s public debt is just a drop to the ocean of total global debt. The term of total debt and the debt of the private sector is now mentioned in mainstream media like Wall Street Journal. So, reminding the true numbers, Greece has a total debt up to 296% of GDP. Portugal’s total debt reaches 479% of GDP, Ireland’s total debt is 490% of GDP, Spain’s total debt is 506% of GDP. But the problem doesn’t stop. Italy’s total debt is more than 400% of GDP and UK’s total debt explodes to 540% of its GDP. [3] The final conclusion is painful. The global financial system is bankrupt. There is no way all these loans that have been given to be paid back. The various elites are trying to gain time and move the global monetary reset to the future. Their measures, mainly austerity ones, are used for this purpose and at the same time the financial elite in cooperation with the political one is trying to move this debt from banks to taxpayers. But in the long run all the above will be proved useless. The results of EU-IMF “rescue plan” in Greece We had mentioned in our previous article [1]: …In addition, Greek inflation rose to 5.2% in December 2010 from 4.9% in November. In this explosive mixture we should add the negative GDP trend we have since 2009 (about -4.5% recession in 2010), that will continue in 2011, and of course the present data projection shows also recession in 2012, and not a slight growth as the EU-IMF “rescue plan” tells us…

… The targets of the Greek budget for 2011 won’t be caught because the additional austerity measures that have been planned won’t bring additional revenues…

What is the result of troika’s “rescue plan”? Amid plunging consumer demand, weakening global growth prospects and the fresh austerity measures that will be implemented mainly in September 2011, analysts said Greece's economy could shrink 2% or more next year, following a 4.5% contraction in 2010 and an expected 3.9% downturn in 2011 [4]. During the last days, the Greek finance minister admitted that the downturn in 2011 will be finally above 4.5%. There are also predictions that made by Credit Swiss (18/8/2011) that in 2011 the contraction will be 5%. In its report for the Greek banks and the macroeconomic data of Greece, Credit Suisse also estimates that, because of the lower than expected collection of revenues, the deficit of government will be nearly 10%, against the target of 7,6% defined by the troika. What were the latest troika’s predictions? In the latest predictions prepared by the troika, Greece is seen growing at an annual pace of 0.6% in 2012, down from a previous 1.1% forecast, while in 2011 a 3,8% downturn was predicted. Once again, their predictions failed as they were always failing during the last 16 months. Of course, we could also mention Greek government’s predictions in February 2011 [5]. They totally failed. Moreover, Greek unemployment rate hits record high 16.6% in May, according to data released by the Hellenic Statistical Authority (ELSTAT) [6]. The total number of jobless Greeks soared above the 800,000 level for the first time in the last few years, reaching 822,719. Twelve months earlier, in May 2010, the figure stood at 602,185 or 220,534 fewer jobless people.

The steep rise in unemployment is obviously due to the recession of the greek economy since 2009 and the austerity measures imposed, forcing a considerable number of enterprises to close down and thousands of jobs to be lost. The problem is greater among women and the young. 20 percent of women seeking a job in May could not find one (against 14.1 percent for men), while 40.1 percent of people aged between 15 and 24 were unemployed. A more important data is the labor force participation rate. The number of employed during May 2011 is estimated at 4.131.528 persons. The inactive workforce is 4.383.374 persons. The employed reduced to 299.798 in comparison to May 2010 (-6,8%) and to 51.804 in comparison to April 2011 (-1,24%). And what about the other numbers of the budget in the first 7 months of 2011? The revenues were 26,8 billion Euros (28,7 billion Euros in 2010), the public expenses were 40,9 billion Euros, 2,7 billion Euros more than the expenses in 2010 in the same period. Here, we have two comments. The first comment is that the Laffer curve was verified in our case, as we had written [1]. More taxes and wage cuts were implemented by the Greek government and the result was what we expected, less revenues. The other comment has to do with the public expenses. It is inadmissible. After so many wage cuts that made to civil servants, the total public expenses rose for more than 20% since last year. That means there are now some parts in the government, in co-operation with connected companies of the private sector that spend much more than they spent in the happy days of growth and credit expansion. In addition, during the last days there are info that the so-many-times announced new payroll of the civil servants will be implemented mainly on new employees (the usual “divide and conquer” method among generations during the last two decades). The “special” payroll for the part of current well-paid “special” civil servants will remain almost the same [7]. It is estimated that about 60.000 civil servants will keep their wages almost unchangeable. Troika seems to agree, if the money that will be missing is gathered from other sources. Which sources? From the usual victims of self-employed and owners of very small businesses in the private sector? Yes, this is the “solution” that has been already proposed by the government, and they will present it in the new tax law in the parliament next October. It is amazing how the government attacks to the major part of the private sector that has entered a death spiral since 2008. The tax measures that are taken, concerning the very weak self-employed and the owners of very small businesses, give us the impression that we have a similar “peaceful” procedure in concept like Kristallnacht in a Greek version against this part of private sector. This procedure is done so as the part of the corrupted political elite in co-operation with their colleagues in the part of the corrupted financial elite will still have the power to steal Greece’s wealth till the final collapse occurs. Troika is aware of this procedure and responsible for it. Of course, no real measures and procedures are set against tax frauding. No controls in spending of local governments and municipalities (OTA), which have no balance sheets for their entities and no one knows what is really going on with their budgets. In these entities, the party of spending in “shadow”, unknown purposes continues during the implementation of the rescue plan. Finally, what will be the conditions till the end of this year and at the beginning of 2012 after implementing troika’s policies? The conditions will be simply depressionary. The recession will reach 5% or more, the unemployment rate will be almost 20% (the real unemployment rate will be almost 25% and if we include the underemployed, this rate will reach at 30%).

Taking into account that unemployment concerns only the private sector, the unemployed and the underemployed will reach almost 35% of the working force in the private sector. These numbers are similar to the ones we saw in the Great Depression in the US. Fortunately, there are still strong bonds in the Greek family, and the collapse of the society hasn’t happened till now under these financial conditions. Of course, we shouldn’t forget that the wages of the employed in the private sector are cut down to Chinese standards in a completely de-regulated labor market. We expected that. The troika’s plan is just one more implementation of a similar previous plan in Germany. It is the order given by the Kommandantur of EU. It is well-known its view about “work ethic”. Arbeit macht frei. And it was first implemented in the program of “mini-jobs”.

Now, a soaring number of Germans are working in so-called “mini-jobs,” according to official figures that show another side to the “booming” economy [8]. By the end of September 2010, more than 7.3 million of these poorly paid jobs of up to €400 per month existed, nearly 1.6 million more than in 2003, according to the figures from the Federal Labour Office (BA).

The figures, reported in daily Süddeutsche Zeitung, show that roughly one in four jobs are now such mini-jobs. This includes nearly five million workers for whom a mini-job is their main employment but also more than two million for whom it is a second job. Mini-jobs are most common in retail and wholesale sales, in restaurants and hotels, and in health and welfare services. Almost half the jobs in food and beverage hospitality are mini-jobs.

The troika’s plan has succeeded. Trying to make us “competitive,” the plan drives unemployment to unprecedented levels, devastates the smaller private business sector and the self-employed, destroys the middle class, and has started a general disintegration of the Greek society. If we miss some numbers on the way, there is no worry. More austerity measures are to come.

The global debt crisis

For a long time, the sole purpose of banks was to supply the economy with money. Since 1982, gradually, the financial industry has largely disconnected itself from the manufacturing economy. A key event happened in 1999, when the Glass-Steagall Act was repealed under President B. Clinton. That law set a strict separation between commercial and investment banks. Removing this major barrier, institutions like Citigroup and Bank of America were enabled to grow into financial giants. Many banks became so large and powerful that they are now “too big to fail”.

The latest global financial crisis is not a crisis of the last months that burst because of the Greek public debt crisis. It is a procedure that started some years before, on August 2007. The first phase began on 9 August 2007, when BNP Paribas announced that it was ceasing activity in three hedge funds that specialized in US mortgage debt. This was the moment it became clear that there were tens of trillions of dollars worth of derivatives swilling round which were worth a lot less than the bankers had previously imagined.

The banks had excessively given mortgages on Americans without paying much attention to their customers' ability to repay these loans. They packaged the risks into new financial products and sold them on (the so-called subprime products). When the subprime bubble finally burst, it dragged down the entire financial industry with it. The major financial firms

found themselves on the brink of bankruptcy and were forced to appeal to the government for help.

The assistance was provided, but there was a terrible mistake in that process. It was not established a new Glass-Steagall Act, and only a few of the dangerous financial products were banned. The next step of the crisis was when the US government allowed the investment bank Lehman Brothers to go bankrupt. Within a month, the threat of a domino effect forced western governments to inject vast sums of capital into their banks to prevent them from collapse. The banks were rescued, but it was too late to prevent the global economy from going into freefall. At the same time consumer and business confidence collapsed.

Finally, on 9 May 2010 the IMF and the European Union announced they would provide financial help to Greece. Now, the issue was not the solvency of banks but the solvency of governments. Budget deficits had ballooned during the recession, mainly as a result of lower tax receipts and higher non-discretionary welfare spending, but also because of the fiscal packages announced in the winter of 2008-09. Austerity became the new keyword, affecting policy decisions in the UK, the Eurozone and, most recently in the US, giving the name to this decade as “the austerity decade”. This August, the “transformation” of a private debt crisis into a sovereign debt crisis was complete when the rating agency S&P announced that America's debt would no longer be classed as triple A.

What we are witnessing is not just the decline of the US but the decline of the West. During the last decades, the assumption was that each generation would have a better life than the last. This social contract has broken down. Growth is less rapid than it was 20 years ago, and the gains have disproportionately gone to companies and the very rich.

Western societies have seldom been more divided, and never have income disparities been as great as they are today. At the same time, the markets are constantly demanding higher returns. Those who do not meet their expectations are punished with declines in the price of their stock and higher borrowing costs. Companies, forced to adjust to these requirements, keep wages down and their workforces at a minimum.

The data presented below shows clearly why US is in decline, thus the West is in decline too (similar data exists for the big countries of the Eurozone). So, according to the most recent Census Bureau data from 2005 – 2009, average US household wealth was reduced by 28% [9]. This represents a loss of $27,000 per household. Currently, at least 62 million Americans of US households, have zero or negative net worth. Moreover, 43.6 million Americans, 14.3% of the population, lived in poverty in 2009, a dramatic increase of four million people since 2008. The National Academy of Science released their latest findings that 52,765,000 Americans, 17.3% of the population, lived in poverty in 2009. The poverty rate for children is even worse. According to Census data, a total of 15.5 million [10] American children lived in poverty in 2009, which is 20% of all children. The number of children in poverty increased 28% since 2000, and jumped 10% from 2008 to 2009. Extrapolating data from the 2009 National Academy of Science poverty rate, in relation to the Census childhood poverty data, the number of American children living in poverty in 2009 is more accurately 18.8 million, which is 24%.

In addition, nearly 15% of the U.S. population relied on food stamps in May 2011, according to the United States Department of Agriculture. The number of Americans using food stamps shot to an all-time high of 45.8 million in May, the USDA reported. That's up 12% from a year ago, and 34% higher than two years ago. The official unemployment is around 9%, 14 million people. The only reason unemployment has stayed below 10% for the past few months is because millions of long-term unemployed, and part-time workers who are looking for full-time work, are not included in the government unemployment rate. The labor force participation rate has fallen to a 27-year low of 63.9%. Currently, an all-time record 6.3 million people have been unemployed for over six months, and the average time it takes for a person to find a job has also just hit an all-time high of 40.4 weeks. We could present more data for the US, or data for the strong countries of the Eurozone, which clearly shows that there is a big problem in the main western societies. This can’t be sustainable for a long period of time. The recent riots in London are a proof of our approach. We will also agree with what Albert Edwards of Societe Generale wrote in his last report in August about what happened during the recent years in the western societies [11]: “I and many others have been pointing out for a long time now the simple fact that the global economy has been living way beyond its means for years. A massive transfer of income to the very rich has occurred while middle class real incomes stagnated. The middle classes only tolerated this because Central Bankers created housing booms to keep the impoverished middle classes borrowing and spending to give them the illusion of prosperity and stop them from revolting. I believe the Fed and Bank of England, in particular, were wholly complicit in this daylight robbery. These unsustainable private sector Debt Mountains were transferred to the public sector in 2008 to prevent the adjustment to the depression-era reality that the debt unwind would undoubtedly have brought about. Yet, those debts are as unsustainable in the hands of the public sector as they were in the private sector”. Conclusions It is obvious now that the “rescue plan” led Greece to a financial depression territory. That will affect a large proportion of the Greek population as autumn comes and the tourist period for 2011 ends. We had written [1] that there is a need for a hair-cut of 40-50% in public debt. On the contrary, a very complex mechanism was decided for a rollover of the government bonds in a range of 30 years. That “solution” condemns the next two generations living in a financial environment of a very huge public and private debt with high unemployment and wages similar to the Chinese ones. (This is exactly the environment that will trigger the acceleration of the real estate bubble bust. Many of the unsold properties will remain unsold for more than a decade) Now, except from the big changes that have to be implemented in the Greek economy (the old model already died), a bigger hair-cut will be needed, more than 50% in some cases. As time passes and no serious measures are taken for reducing Greek public debt, the cost of that hair-cut will be bigger and painful. Why are we saying that this period of time is crucial for the Greek public debt and will have more consequences to a future hair-cut?

We all know that the global stock markets fell sharply after the downgrade of the US. This decline had started at the beginning of May 2011. Regarding the Dow Jones Index, it was noticed a pattern of fall since the top of previous May similar to the one happened in 1937. It was the result of the “capital strike”, as it was called then, that had as a result a strong recession in the US.

Figure 1: Dow Jones Index chart from 1937 to 1942 lows

There are also technical indicators (such as [MA(50), MA(200) – daily], [MACD, RSI, EMA(13), EMA (39) – weekly] that suggest we may be already in a bear market, because of the fear that the big economies of the planet will return to a recession. According to technical analysis theories, if this bear market is proved in the next few weeks, it will last till Q3,Q4 of 2012, or using another approach till Q3, Q4 of 2014.

Figure 2: S&P500 Index, 1995-2011 (Weekly): EMA(13) – green line, EMA(39) – red line

So, having in mind that we are at the beginning of a new bear market and probably the big economies will enter a new recession, even for just a few months, then the efforts for stabilizing the Greek economy will face greater difficulties. Of course, the targets of the troika for 2011 and 2012 will fail. The deficit will rise more, as the public debt will as a consequence, and the need for bigger hair-cuts will be inevitable. Since Greece is under the control of troika, Europe’s fate is decided by German state elections and small Finnish parties. The European Central Bank is divided and it didn’t do any actions in time to stabilize panicked markets. There is no way the euro can survive under these conditions. In this very difficult situation, we observe a failure of economic strategy and leadership in the Eurozone and US economies. Governments in Europe and US have been unable to cope with the realities of global capital markets and competition from Asia. Both regions are being whipsawed by globalization. Jobs for low-skilled workers in manufacturing, and new investments in industry, have been lost to international competition. Employment in the US and Europe during the 00s was held up only by housing construction boosted by low interest rates and reckless deregulation, until the construction bubble collapsed. There is no growth strategy, only the hope that scared and debt-burdened consumers will return to buying houses they don’t need and can’t afford. More analysts conclude that there is no chance for the indebted western consumer to manage to pay this entire ocean of public debt and at the same time to consume at levels that support economic growth. On CNBC, Stephen Roach of Morgan Stanley said [12]: we need “ways to forgive the excesses of mortgage, installment and revolving credit, as what was done in the 1930s that will help consumers get through the pain of deleveraging sooner rather than later.”

He explains how the conundrum of high unemployment and poor wage gains, juxtaposed with high debt, makes it clear that there is zero chance that consumers will be able to support the kind of economic growth via deleveraging and accumulating savings that avoids a deflationary outcome. The macro backdrop for consumers is deflationary. Central banks or fiscal agents might attempt to reduce the real burden of debt. But we already observed that in UK the Bank of England has missed its inflation target time again and again. The consumer there is in a world of pain [13]. However, if we see another recession before the deleveraging is complete, deflation is going to be all around us, increasing the real burden of debt. We’ll conclude with that statement. There is no way all this global huge debt to be paid back. That statement applies to the Eurozone, the US, the UK, China, Australia, Canada, nearly everywhere one looks. References [1] Greece on the brink of depression and the myths accompanying the EU-IMF “rescue” plan, RIEAS, January 2011, http://rieas.gr/component/content/article/29-first-page/1411-greece-on-the-brink-of-depression-and-the-myths-accompanying-the-eu-imf-rescue-plan-.html [2] World debt guide, Owe dear. Economist – July 2011, http://www.economist.com/blogs/dailychart/2011/07/world-debt-guide [3] The “ocean” of debt and the “drop” called Greece. Imerisia Online (in Greek), http://www.imerisia.gr/article.asp?catid=12336&subid=2&pubid=111685166 [4] Analysts Say Greece's Recession Will Continue in 2012.WSJ –August 2011, http://online.wsj.com/article/SB10001424053111903639404576514310324414384.html?mod=WSJEUROPE_hpp_sections_world [5] Greece: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, February 28, 2011, http://www.imf.org/external/np/loi/2011/grc/022811.pdf [6] Unemployment rate 16,6% in May than 15,8% in April (in greek), http://www.euro2day.gr/news/economy/124/articles/652280/Article.aspx [7] Many levels in the new payroll of the public sector (in greek), http://www.tovima.gr/politics/article/?aid=415770 [8] Germany's part-time jobs system is thriving despite fierce criticism, http://www.dw-world.de/dw/article/0,,15032531,00.html [9] SDT Wealth Report, http://pewsocialtrends.org/files/2011/07/SDT-Wealth-Report_7-26-11_FINAL.pdf [10] Children research data, http://www.childrensdefense.org/child-research-data-publications/data/state-of-americas-2011.pdf

[11] Albert Edwards: this has nothing to do with that downgrade, http://www.planbeconomics.com/2011/08/19/albert-edwards-this-has-nothing-to-do-with-that-downgrade/ [12] Stephen Roach: Consumers need debt jubilee, http://www.creditwritedowns.com/2011/08/stephen-roach-consumers-need-debt-jubilee.html [13] UK household finances are worse than during height of recession, http://www.telegraph.co.uk/finance/personalfinance/8714537/UK-household-finances-are-worse-than-during-height-of-recession.html

After the last EU Summit: Greece’s “Yeltsin-like” era Ante Portas (December 2011) Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr Introduction The EU Summit on 8-9 December 2011 has finished. It was decided that Eurozone countries will aim to finalize by March a new treaty that imposes more central control over national budgets. The treaty will set out stricter rules for a “fiscal compact”. Countries that fail to respect limits on debt and deficit levels would be subject to almost automatic sanctions, which could be blocked only by a weighted majority of member states. It is obvious that a consequent loss of national sovereignty to the EU comes upon the members of the new “euro-plus” zone. This new “euro-plus” zone is nothing more than a German fiscal panopticon [1]. Every time a member country fails to respect these limits, it must slash social programs (is there any limit in these cuts?) and impose austerity policies on the population without end. And of course, all the above won’t work. They will just result in the loss of sovereignty and democracy of the member country, economic misery, and a hopeless future for millions of people. Does anybody address the issue of sustainable growth? This new treaty expresses the will of a part of the German financial elite to transform the Eurozone of the several member countries to One/United State (Единое Государство) [2] of Germany. In my opinion, there is a large possibility that all these that have been decided in the summit won’t be finalized by March, and what is going to be voted, if so, will be totally different from the agreement of the last EU summit. In fact, the last agreement doesn’t do anything to stabilize the euro. It doesn’t give any solution to the debt crisis, not only concerning public debt, but also to the total and/or external debt of the biggest western countries [3], [4]. A probable downgrade of France in the next days/weeks will change the agenda of the next EU summits again. Greek economic developments in the coming months It was mentioned in a previous article [3]: …On the contrary, the plan kills any probability of growth in Greece for the next 3 years. The economy can’t proceed to growth paths, when there are huge tax invasions in the middle class income. And this killing of growth with these austerity measures is certain, when we know that Greece is in recession one year before the implementation of the “rescue plan”… ... The targets of the Greek budget for 2011 won’t be caught because the additional austerity measures that have been planned won’t bring additional revenues. That should be easily known for someone who has studied the theory of Laffer curve... On the 13th of December 2011 IMF admitted that their plan had mistakes, especially in the imposition of very high taxes on the Greeks. But, on the other hand, the catastrophic mixture of taxes and cuts in wages and pensions will continue till 2015 (at least), as it was decided and “signed” last October.

The collapse in the real Greek economy was obvious since the beginning of autumn and now is accelerating. This will be reflected in the final numbers of Greece’s economy in 2011. The downturn in 2011 will be finally 6% of GDP or more [5]. The deficit of the government will reach nearly 10% of GDP (more than 3% of GDP is owed to the private sector, not recorded in the overall deficit). Once again, troika’s predictions failed. And they will fail again in 2012. I expect the recession to be almost 5% next year (or more), giving me enough data for a prediction of recession in 2013, and not of a slight growth according to troika’s predictions. 2012 is the year when the full intensity of the taxation storm will be felt by Greek citizens, the cuts in wages and pensions will be almost the sum of the ones implemented in 2010-11 and of course the unemployment rate will skyrocket. The credit crunch will spread to a large proportion of the Greek population. The private sector is in a death spiral [6]. Consumers’ spending is not recovering; the government has suspended payments to the private sector in order to “reduce” its deficit. As Mr. Athanasopoulos (Retail Banking of NBG) said a few days ago in a Banker’s review conference, 30-40% of the Greek businesses existent in 2007 will disappear by 2012 [7]. In the same conference, it was mentioned that in Greece there is a “third-world” percentage of self-employed in the economy (30%, that is not true, of course), which is an obstacle to growth. For this reason, the percentage of self-employed should be reduced 50% or more. It immediately reminded me what I had written [8] concerning the “Kristallnacht” procedure against the very weak self-employed and the owners of very small businesses, which is implemented by new tax measures targeting them. And it is obvious the goal of reducing 50% the self-employed will be achieved by the new taxation act, which will be voted in the following months. It will impose an income tax of 20% from the first euro, this income will be defined by “objective criteria” whether it exists or not, leading a large proportion of self-employed to the labor market exit (for the majority of the self-employed, the burden will be more than 50% of their income, including the payment to their professional insurance fund). The following example of self-employed engineers is characteristic. According to the chairman of the Technical Chamber of Greece, 50% of engineers are now unemployed or under-employed. In July an increase to the amount “new” engineers pay for their health care insurance and pension was voted. This increase is up to 93% and taking into account that this payment is considered as income, many engineers won’t afford to pay it (as well as the new income tax that will be voted) and now they are seeking for solutions abroad (a huge brain drain in progress). Following the inevitable economic collapse of the next year under troika’s policies, Greece will suffer a sharp increase in the rates of poverty and economic inequality. Estimates by the International Labor Organization, based on troika’s taxation policies against the Greek people that are implemented retrospectively on the incomes of 2011 [9], say that another 20% of the Greek population could fall under the poverty line. Taking into account that already 20%, or more, of the Greeks are under the poverty line now, it is concluded that 30-40% of the Greeks will be in severe poverty in the following months, as a consequence of the new measures decided in October. Public health indicators will show a dramatic corresponding decline. Life expectancy will start to drop for men and women in the poorest parts of the population. Both health factors and sharp increase in deaths of mostly young people from causes (such as murders, suicides

and accidents will be caused by increased disregard for safety) will significantly contribute to this trend [10]. Deaths from infectious and parasitic diseases will increase, mainly because medicines will be no longer affordable to the poor. Of course, this already happens in so-called developed Germany during the last decade, regarding the poor part of its population [11]. There will be supply shortages of consumer goods related to the impoverishment of the Greek people. Greeks on fixed incomes (the vast majority of the workforce) will see their purchasing power drastically reduced. Conclusions The financial and social conditions in Greece are obviously depressionary. The austerity measures have driven Greeks into street [12]. Athens features today the biggest number of homeless and poor people, since the German occupation in 1940. The real unemployment rate is above 20%. The most frustrating thing is that the unemployment rate in young people is 46%. As they feel there is no future in their country, they are fleeing to countries that can offer them a job in what is described as the biggest emigration wave since the 1960s. A significant part of the remaining young people will be forced to follow the organized crime. Under these economic conditions increased criminality will be a “common practice”. Political chaos is also on the horizon with the latest voted measures rupturing the ruling Pasok party as never before. With politicians frequently attacked by angry voters, many of them say they no longer have the stomach to endorse new measures on January that are turning the nation into "a poverty house”. But troika demands yet more "shock and awe" measures that should be decided by Greek government next month – job losses, tax hikes and pension cuts in a desperate try to cut the deficit. Moreover, the destruction of the public health care system and public education will be continued at an accelerated rate. Everyone knows the new measures that have been already prepared will give no solution in the death economic spiral. One way or another, the present political system is going to collapse in the following months, though it seems the corrupted political ruling elite won’t be affected so much. The last scene of the Greek drama will be played when the lenders will demand the seizure of Greece’s public wealth. Troika’s “rescue plan” will come to a dead-end very soon. At that time the lenders will buy Greece’s public wealth at 10% or less of its real value. Everything will be privatized. That will be the end of troika’s plan orchestrated by Germany, a plan for Greece’s “punishment” in the new framework of the German fiscal panopticon. The other member countries of the “euro-plus” zone, seeing the social and economic destruction brought by this plan, will do anything Germany wants them to do in order to avoid such measures on their people. But it’s just a plan on paper. If Germany pushes Greece too much, even forcing Greece to exit the Eurozone, the only thing that will be achieved is the destabilization and, finally, the destruction of the Eurozone. From now on, the “behavior” of Germany against Greece will affect the triggering of processes for the global monetary reset, which I estimated that could happen some years later, in 2014-2018 [13]. The countries concerned must intervene now in the policies and plans of Germany, if they want to slow down that triggering.

References [1] Panopticon, http://en.wikipedia.org/wiki/Panopticon [2] Zamyatin Yevgeny, We, http://ru.wikipedia.org/wiki/%D0%9C%D1%8B_%28%D1%80%D0%BE%D0%BC%D0%B0%D0%BD%29 (in Russian) [3] Greece on the brink of depression and the myths accompanying the EU-IMF “rescue” plan, RIEAS, January 2011, http://rieas.gr/images/vard1.pdf [4] Eurozone debt web: Who owes what to whom, http://www.bbc.co.uk/news/business-15748696 [5] 6,9% recession in the first 9 months of 2011, http://www.enet.gr/?i=news.el.oikonomia&id=330992 (in Greek) [6] The private sector in a death spiral, http://www.enet.gr/?i=news.el.oikonomia&id=331091 (in Greek) [7] http://www.capital.gr/capitaltv/player.aspx?id=1124 [8] The results of the troika’s “rescue plan” implementation in Greece and the global debt crisis, August 2011, http://www.rieas.gr/images/vardagalos.pdf [9] 2 million Greeks are to fall under the poverty line, because of troika’s policies http://www.enet.gr/?i=news.el.oikonomia&id=330144 (in Greek) [10] Suicides rose 40% in 2011, http://www.enet.gr/?i=news.el.ellada&id=330696 (in Greek) [11] Life expectancy falls for the poor Germans, http://www.newsit.gr/default.php?pname=Article&art_id=111284&catid=7 (in Greek) [12] Austerity drives Greeks into street, http://www.youtube.com/watch?feature=player_embedded&v=8MnbY55yeSo [13] Global monetary reset: 2014-2018 http://www.am-rus.org/index.php?option=com_content&view=article&id=136%3A2011-05-29-21-36-32&catid=41&Itemid=68 (in Russian)

After last Greek elections: It’s time for Greece to “attack” (May 2012) Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr ...Political chaos is also on the horizon with the latest voted measures rupturing the ruling Pasok party as never before... ...One way or another, the present political system is going to collapse in the following months, though it seems the corrupted political ruling elite won’t be affected so much.[1] Τhe Greek elections of May 6 confirmed, with no doubt, the above predictions written some months ago. The election results were already “known”, more or less [2], by Europeans and other players that participate in this case study/experiment against Greece started on May 2010. The only thing that was less probable for them was the extent of collapse, regarding the two political ruling parties during the last 4 decades. For a very few votes, some thousands ones, the coalition government wasn’t formed, as they had planned. But the part of financial elite, which wanted Greece out of the Euro-zone since March 2009 [3], is not “prepared” to risk forcing Greece to exit the Euro-zone before the US elections in autumn. The plan was this exit to be an “alternative” to take place in 2013-2014, after the seizure of the largest valuable part of Greece’s public wealth. In any case, the main conclusion of these elections is the “transformation” of Troika’s last version MOU into a worthless paper. The fake dilemma: Euro or New Drachma? After a week of meetings among the political party leaders that entered parliament and President of Greek Republic, a coalition government was not formed at last. After talks collapse, as a result, new elections were decided to be held on June 17. Via the mass media Greece's European lenders are warning that any attempt by Athens to cut loose of its strict spending obligations would spell an end to the billions of Euros in bailout funds and, moreover, Greece would be likely forced to exit the euro-zone. Never before in a nation’s elections there was such a bombardment of a ‘dilemma’ (euro or drachma?) in order to contemplate who to vote for. But is this dilemma real for the majority of Greek people now? In fact, it isn’t. The financial and social conditions that exist in Greece since last autumn “translate” this dilemma in the following: “Greeks, would you implement the troika’s austerity measures, that will be stricter as time passes because of their failure, in order to have a “slow death”? ; or will you exit now the euro-zone and you will have a “sudden death” ? (...because your country is not prepared properly to stand up to the consequences of this exit) This dilemma is not working and will not work if lenders raise it too much via mass media. The previous elections should have taught them so. On the contrary, this dilemma may “force” Greek people to massively vote the opposite that lenders expect. And then, they will feel the real great surprise of the next elections results.

In addition, there are two totally different “sides” of the Greek society that have no fear against the prospect of new drachma. The one side is the part of the corrupted political and financial elite which have been transferring their deposits/financial assets abroad since 2009 and after the returning of drachma they will have the purchase power to buy the wealth of Greece in a bankruptcy cost, as it has been already mentioned [4]. The other side consists of the 1,5 million unemployed Greek people, the hundreds of thousands of employed and underemployed having wages less than 400-500 euro per month (after taxes), the majority of the depositors in Greek banks that have very few money in them because they are poor [5]. They are so angry, they don’t care if Greece returns to drachma because they feel they have nothing more to lose, so such a dilemma by the lenders to them may have the opposite result than they expect. Conclusions The financial and social conditions in Greece are getting more depressionary, especially after last January. Latest data from Greek Statistical Authority is: In Q1 2012 Greek economy shrinks 6.2% [6]; unemployment rate at 21,7% on February 2012 [7]; the active working force is 3870000 people, the non-active working force is almost 4300000 people; 500.000 jobs have been destroyed in 2 years; the projection of unemployment rate in private sector is estimated about 35%. These levels of unemployment are near levels which propelled Nazis to power in Germany [8]. On the contrary, according to the spring forecasts from the Commission, GDP would shrink by 4.7% this year and would be flat in 2013, and unemployment would be also expected to rise further to an average 19.7% rate, adding one more failed report in the chain of the numerous failed ones published by troika during the last 2 years [9]. Greece is not responsible for this global debt crisis. This global debt crisis was the result of a procedure started after the .com crash in 2000 and led to the bankruptcy of the global banking system in 2007 [10]. Since then, the financial elite in cooperation with the political one are trying to move this debt from banks to taxpayers. In this way, we have the “transformation” of banking debt crisis into a public debt crisis. Greece, as one of the weakest parts of the Eurozone, was the first victim of this “transformation”. But, in fact, this global debt crisis started in 2007 accelerated the global power shift from west to east, and especially to the so-called “Eurasian” territory. This global power shift is taking place step by step since the early 1990s. The nature and dynamics of globalization are in the process of being transformed by underlying pressures that are just not bursting to the surface for the time being, but if someone looks carefully at parts of the real game played in Greece then the parallel geopolitical shift is obvious [11]. In this geopolitical shift, Europe, the Mediterranean countries, the Middle East are going to play an important role because of their location. Countries that are “far away” from Europe and the Mediterranean Sea have a disadvantage in their initial “placement” in this geopolitical game. Greece has a very important role in this geopolitical shift. On the one hand, Greece is the “traditional” eastern gate to Europe; on the other hand, Greece has a specific location in the Mediterranean Sea and good relations and contacts with countries of the Middle East. This very important role of Greece in the new geopolitical shift has been noted before and the

“entrance” of IMF in the Eurozone was the “Trojan Horse” of the representatives of the dollar and sterling zone. So, in the name of the Greek public debt crisis 2 blocks have been formed in the global mass media:

a) the “anti-memorandum” block, supported by the representatives of the dollar and sterling zone, that say since May 2010 Greece should leave euro

b) the “pro-memorandum” block, supported by Germany and EU, that say in the same period Greece should stay in the Eurozone at any cost.

But the interests of both blocks have nothing to do, at first, with the real interests of Greece in this crucial period. All of the above players during these 2 years know that the austerity measures of memorandum would give no solution to the problems of Greece. That will be a pretext, if some day they’ll decide to throw Greece out of the Eurozone. The only results “achieved” till now are the destruction of the middle class, the pauperization of large proportion of the Greek population and general disintegration of the Greek society. In addition, it is obvious that Greece is becoming a country of the new rising global feudalism [12]. For the above reasons, now there should be a critical political mass in Greece that understands the big shifts of the tectonic plates of globalization and the new possible future geopolitical role of the country. This critical political mass/coalition must re-examine old alliances, create new ones where possible and start negotiating new country’s geopolitical role. Greece should start talks with Germany and EU for negotiating an immediate Marshall-Plan-style package if they really want to keep Greece within the euro zone. The financial and social destruction happening in Greece since last January has not yet appeared as data in their reports. When this data appears, maybe, it is too late. That also means that IMF-type austerity can no longer be implemented. Greece should also start talks with the Dollar Zone. There should be negotiations for the provision of a “safety-net”, if Greece finally exits the Eurozone. In addition, negotiations should be concentrated on the new country’s role in the Mediterranean Sea, in the Middle East, in the “Eurasian” territory. Both Eurozone and Dollar zone should prevent immediately Greece’s collapse and should start such moves before the elections in June. It is for their interest too. In fact, the consequences of Greece’s exit out of the Eurozone have not been examined in full extent (or they have been examined in secret reports). Actions should be taken at once in Eurozone, because a possible triggering of a real catastrophic domino effect is close to burst [13]. A new Yalta-like conference is running in different ways around Greece during the last years. Greece must have the chance to negotiate its new placement in the 21th century. That’s why a critical political mass/coalition is needed for this project. If it appears at last, I hope so, another necessary project to run is the punishment of the corrupted political and financial elite that brought Greece to bankruptcy, in fact many years before 2010.

References [1] After the last EU summit: Greece’s “Yeltsin-like” era ante portas, RIEAS, December 2011, http://rieas.gr/research-areas/editorial/1655-after-the-last-eu-summit-greeces-yeltsin-like-era-ante-portas.html [2] Greek elections: Be afraid, be very afraid, http://ftalphaville.ft.com/blog/2012/05/03/986401/greek-elections-be-afraid-be-very-afraid/ [3] Banks prepare for the return of the drachma, http://www.reuters.com/article/2012/05/11/us-banks-drachma-idUSBRE84A0DC20120511 [4] Greece on the brink of depression and the myths accompanying the EU-IMF “rescue” plan, RIEAS, January 2011, http://rieas.gr/images/vard1.pdf [5] Deposits of Greeks in banks: the majority of them has a banking account of 100 euros http://www.protothema.gr/economy/article/?aid=196271 (in Greek) [6] Greek economy shrinks 6.2% in Q1, http://greece.greekreporter.com/2012/05/15/greek-economy-shrinks-6-2-in-q1/ [7] Greek Unemployment Rate Hits Record 21.7 Percent Amid Political Turmoil, http://www.huffingtonpost.com/2012/05/10/greek-unemployment-rate_n_1505392.html [8] Neo-Nazis Will Have Seats In The Greek Parliament, And This Famous Chart Is Proving Apt Once Again, http://www.businessinsider.com/neo-nazi-golden-dawn-party-to-garner-seats-in-the-greek-parliament-2012-5#ixzz1v7wbKstT [9] European Commission: Greece GDP Shrinks 4.7%, http://greece.greekreporter.com/2012/05/11/european-commission-greece-gdp-shrinks-4-7/ [10] The results of the troika’s “rescue plan” implementation in Greece and the global debt crisis, RIEAS, August 2011, http://www.rieas.gr/images/vardagalos.pdf [11] Clyde Prestowitz: Waiting for the global economic tsunami, http://prestowitz.foreignpolicy.com/posts/2011/03/01/2011_waiting_for_the_global_economic_tsunami [12] Brian P. Klein: The Rise of Global Feudalism, http://the-diplomat.com/2012/04/07/the-rise-of-global-feudalism/ [13] Santander, BBVA among Spanish Banks Downgraded by Moody’s, http://www.bloomberg.com/news/2012-05-17/santander-among-16-spanish-banks-cut-by-moody-s-on-economy.html

The final turn… (October 2012) Dr. George D. Vardangalos (RIEAS Development Manager) Copyright: www.rieas.gr "The three aims of the tyrant are, one, the humiliation of his subjects; he knows that a mean-spirited man will not conspire against anybody; two, the creation of mistrust among them; for a tyrant is not to be overthrown until men begin to have confidence in one another -- and this is the reason why tyrants are at war with the good; they are under the idea that their power is endangered by them, not only because they will not be ruled despotically, but also because they are too loyal to one another and to other men, and do not inform against one another or against other men -- three, the tyrant desires that all his subjects shall be incapable of action, for no one attempts what is impossible and they will not attempt to overthrow a tyranny if they are powerless." Aristotle: Politics, Book V Chapter 11. Greece’s accelerating collapse (final stage) and IMF’s withdrawal after the usual “Mission Accomplished”… Greece revised on 5th October the depth of the recession it suffered last year, saying that business activity had contracted by 7.1 percent instead of a previous estimate of 6.9 percent. The Greek statistics authority issued the new estimate of GDP based on 2010 prices. [1] GDP for 2011, calculated at 2010 prices, amounted to 206.4 billion Euros compared with 222.2 billion Euros for 2010 (7.1% reduction). The change was made in the context of the revision of the GDP figures for the period 2006 to 2011. The greater decline in last year's GDP means the targets for the 2013 draft budget that was tabled in Greek Parliament on 8th of October will have to be revised. This first draft sees Greece's GDP shrinking to 200.9 billion Euros this year and to 193 billion in 2013. Once the revised figures for 2011 are factored in, the estimates will also drop further, rendering the picture of the country's economy even weaker. [2] It is already clear that Greece will not again meet its deficit targets, the main reason being that cuts to the budget have led to a much steeper recession than official forecasters had predicted. The Greek government now expects the economy to shrink 7% in 2012. That compares to the decline of 4.7% that the IMF projected for Greece back in April. This was not just the first time that the IMF and other official forecasters had badly underestimated the severity of Greece's downturn. In April 2011, the IMF had predicted that Greece's economy would grow 1.1% in 2012, after shrinking just 3% in 2011. In fact, Greece's economy shrank by almost 7% in 2011. And, in April 2010, the IMF was projecting that Greece's economy would be on a slow and steady growth path in 2012 after shrinking by just 1.1% the prior year. The IMF said on 9th October that according to its expectations Greece’s debt will reach 181.8% of the gross domestic product (GDP) in 2013 [3], which requires revision of the plans for financial recovery of the country, a representative of the fund announced at a press conference. The IMF hiked its April prognoses on Greece’s debt by 21 points. Let’s not forget that Greece had a debt of 115% of GDP before IMF-ECB-EC intervention.

All these recent announcements give the excuse IMF needs to begin withdrawal from its participation in Troika’s “rescue plan” in the following months. Greek debt is unsustainable, as it was obvious from the first “rescue plan”. EU called IMF to participate in it because of its “technical expertise” from previous implementation plans. After 2.5 years of implementation of the classical IMF measures during the last decades, the main aims of this “rescue plan” have already been succeeded: the destruction of the middle class, the pauperization of large proportion of Greek population, the general disintegration of the Greek society. And as it was written [4], the initial “rescue plan” killed any probability of growth in Greece for the next 3 years at least. The economy couldn’t proceed to growth paths, when there are continuous huge tax invasions in the middle class income. This method is again followed by the next 13.5 billion Euros (and maybe more, up to 18 billion Euros) austerity measures, that are ready to be voted by the Greek government. It gives a “guarantee” that growth won’t come again for the next 3 years. The Greek Great Depression 2012 was the beginning of the “Greek Great Depression” and “Greek Yeltsin-like” era [5]. There is a lot of data describing the present situation in Greece; the most characteristic is presented below: Greek unemployment rate hit again another record high 25.1% in July, according to data released by the Hellenic Statistical Authority (ELSTAT) [6]. 1.26 million Greeks were unemployed, with more than 1,000 jobs lost every day over the past year. In the worst-affected 15-24 age group, unemployment was 54.2 per cent. In July 2008, a year before Greece's acute financial crisis broke, there were only about 364,000 registered unemployed. The important data is again the labor force participation rate, which is getting continuously smaller. The number of employed during December 2011 was estimated at 3.899.319 people. The inactive workforce was 4.424.562 people. July’s data show the number of employed at 3.763.142 people and the inactive workforce at 3.356.276 people. 1 million were “lost” in numbers during the last 7 months. Moreover, according to the rules of unemployment measurement, self-employed and owners of small businesses can never be counted as unemployed. As a conclusion, in fact, nearly two million people in Greece are without work now, including those whose year-long benefits have run out. Furthermore, taking into account that employees paid by the public sector, one way or another, are 1.0-1.1 million people, the percentage of unemployment in the private sector is already 50%. In August there were thousands of businesses that did not paid salaries, hundreds of thousands of Greek households with no income that month. There are also companies that do not pay their employees' salaries for months. The special secretary of the Labour Inspectorate said data show that 120,000 businesses have not paid their salaries on time. So, more than 400.000 workers were not paid on August [7], and over 400,000 families are without a wage earner [8]. That also means that one in two Greeks that is being paid a salary nowadays belongs, one way or another, to the public sector. It is obvious that Troika still “supports” public sector in order to be able to pay especially the guardians of the tyrannical regime-Greek government, so as to proceed to the final stage of the “rescue plan”, as soon as possible (“fast track”): to buy Greece’s public wealth at 10% or less of its real value. Everything is going to be privatized. That will be the end of troika’s plan orchestrated by Germany, transforming Greece into a German protectorate, with a standard of living similar with that of the Third World countries. As an exchange, Troika has promised

to a certain part of the corrupted Greek political and financial elite that they will remain in local power afterwards. Another critical sector collapsing at an accelerating pace is healthcare [9]. Healthcare in Greece is already at crisis point with hospitals running out of vital supplies and drugs. Cancer patients have to source their own prescriptions as pharmacies fail to stock vital drugs due to the government not providing funds to pay for them. The insolvent country's worsening liquidity has led to public insurers being unable to pay bills and prescription drugs running dangerously low. Thousands of people have no access to public healthcare. Doctors estimate that right now, at least 40% of Greeks are either uninsured or cannot get public healthcare, and the trend is likely to grow. Furthermore, hospitals are under increased pressure as austerity has resulted in many people abandoning hospitals of the private for public sector. Additional strain is placed on hospitals due to the needs of illegal immigrants who have not contributed towards social security funds. Greece’s overall public healthcare system is on the verge of collapse. Public hospitals are under-staffed and under-supplied. The government owes millions of Euros to pharmacies and medical staff. Finally, the most important thing: The serious economic crisis will have serious repercussions for even the youngest swathes of the population. The physical and psychological development of youngsters in the country is at risk because of malnutrition caused by poverty. The alarm has been raised in a report of April 2012 on the situation of young people in Greece drafted by UNICEF’s Greek committee and by the University of Athens. The report says that 439,000 children in the country are currently living below the poverty line - underfed and in insalubrious conditions - in families that represent 20.1% of Greek households [10]. The final blow Under this depressionary financial situation, Troika demands from Greece to adopt austerity measures worth 9 billion Euros next year, rather than the 7.8 billion Euros it had planned for in the 2013 budget. The total package for 2013 and 2014 is worth 13.5 billion Euros in spending reductions and tax hikes (in order to give 2-years extension, they demand measures worth 18.5 billion, according to latest information). Almost 5 billion Euros of the cuts next year will come from pensions, which is likely to mean larger reductions for pensioners who earn more than 1,000 Euros a month than had originally been planned. About 1.7 billion Euros will be cut from civil servants salaries, rather than the planned 1.4 billion. Welfare payments will be slashed by 1.2 billion Euros. The measures will include an increase in the retirement age from 65 to 67. These austerity measures will add more pain and recession to Greece. My first estimation is that recession will be 5-7% in 2013. Now, it is not known if there will be a 2-years extension for the implementation of austerity measures, but taking into account the fiscal multiplier effect IMF describes in its latest report, it seems highly probable that in the following 2-3 years Greek GDP will have a further decline of 10-15%.

In its latest report [11], IMF has an extended reference to fiscal multiplier. It admits that it made a huge mistake in its estimates for the recession as a result of austerity measures. In their latest researches they found the coefficient on planned fiscal consolidation to be large, negative, and significant. These researches suggest that actual fiscal multipliers were larger than forecasters assumed. In the case of Greece, fiscal multiplier has actually been over 1.5. Maybe, it can even be about 2.0. Returning back to the austerity measures, the government orchestrates the final attack to the private sector. The wages of the employed in the private sector are cut down to Chinese standards in a completely de-regulated labour market. The tax measures taken, concerning especially the very weak self-employed and the owners of very small businesses, continue the “peaceful” procedure in concept like Kristallnacht in a Greek version against this part of private sector. The aim is now obviously the elimination from the market of the self-employed and the owners of small businesses, as soon as possible. In 2011, two anti-constitutional tax measures were implemented on self-employed: a) a fixed tax of 500 Euros was paid by every self-employed person, in fact as a penalty for being so, b) the amount of money paid by self-employed in health care and pension professional funds (flat amount, independent of income, paid even if there is no income) was not considered as expenses. On the contrary, it is considered as income, and it is taxed additionally. Among the tax measures the Greek government has in mind to implement on self-employed next year, two more anti-constitutional ones have been proposed/decided: a) self-employed will pay tax from the first Euro of their income, b) this tax will be 35% of their income (now there are thought for a range of 20%-35%). What does it mean for the self-employed? Taking into account the real income of 80% of self-employed this period, he/she must pay 60-70% in average of their income for taxes and payments to health care and pension professional funds. In the case of tax range, that payment is up to 50%. That means that self-employed won’t survive in the following months, because of the government’s tax measures giving them the lethal blow. I have to remind that self-employed are never considered unemployed by law, they don’t take any aid when they are unemployed, they have to pay each year 4000-8000 Euros to health care and pension professional funds (this money range is valid for the latest voted law for self-employed engineers). So the 10% of self-employed and owners of businesses that gather 90% of the wealth will gather more money from the hundreds of thousands that will be out of the market, sooner or later. Most of the money of tax evasion is obviously and mathematically among this 10%. But nothing is done for this. On the contrary, the tax reforms that Greek government “advertises” are in fact significant reduction of taxes in the wealthiest part of the society and raise of taxes to the remaining part. Big private businesses say also the tax hikes are suffocating them. In the worsening financial climate, two of Greece's largest companies have announced they are pulling out of the country. Coca Cola Hellenic (CCH) announced that it was switching its primary listing from Athens to London, and moving its corporate base to stable, low-tax Switzerland [12]. Its move follows Greek dairy group FAGE's relocation to Luxembourg this month [13]. There are rumours that many other large companies are preparing to pull out of the country.

In addition with the latest information about large companies not paying September’s salaries, Greek private sector is near a credit crunch that could create conditions for immediate collapse of the Greek economy without any warnings. These conditions are similar with the ones happened in Capital Strike in US in 1937-38. The usual commentators will say simply, it was a Black Swan event. This collapse must be prevented immediately, or else it will cause an unprecedented event with chain reactions that will affect EU, the wider region of Mediterranean and the Middle East. I won’t say much about the measures that have to be implemented, starting even before the American elections of November. In brief, they are needed:

• 120-160 billion Euros haircut in Greek public debt (mainly OSI)

• A long extension to the loans taken from Troika, reduction of their interest to the level ECB is lending banks now

• Recapitalisation of banks (debt will not been included in public debt, in fact this money is created out of thin air) and at the same time separation of banks in their commercial and investment parts under a law like the old Glass-Steagall Act in U.S.

• Immediate implementation of a New Marshall Plan for the reconstruction of the Greek economy. The damage that has already been done by Troika’s “rescue plan” is irreversible.

Big countries are responsible for the destruction of the Greek economy because of the Troika’s “rescue plan”. Even if some of them didn’t force its implementation, they allowed other countries to make this hubris that caused and causes thousands of deaths among the Greek population. Now, they must support by any means the reconstruction of the Greek economy. For the countries mainly responsible for this destruction, Nemesis is already under their way. References [1] Greece says 2011 recession worse than first thought, http://www.focus-fen.net/?id=n289184 [2] Greek Statistics Authority: Estimations for 2011, http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0702/PressReleases/A0702_SEL15_DT_AN_00_2011_02_F_GR.pdf [3] IMF: Greece’s debt to reach 181.8% in 2013, http://www.focus-fen.net/index.php?id=n289452 [4] Greece on the brink of depression and the myths accompanying the EU-IMF “rescue” plan, RIEAS, January 2011, http://rieas.gr/images/vard1.pdf [5] After the last EU summit: Greece’s “Yeltsin-like” era ante portas, RIEAS, December 2011, http://rieas.gr/research-areas/editorial/1655-after-the-last-eu-summit-greeces-yeltsin-like-era-ante-portas.html

[5] Greek unemployment rate hits 25.1 percent in July 2012 (in Greek, ELSTAT data), http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0101/PressReleases/A0101_SJO02_DT_MM_07_2012_01_F_GR.pdf [6] Greek unemployment rate hits 21 percent in December 2011, http://news.kathimerini.gr/4dcgi/_w_articles_economy_2_09/03/2012_475130 [7] 10% Of Greek employees works but does not charge your salary, http://www.deltaworld.org/international/10-Of-Greek-employees-works-but-does-not-charge-your-salary/ [8] The EU Turning Greece into a Failed State, http://news.eirna.com/510103/the-eu-turning-greece-into-a-failed-state [9] Austerity brings Greece's healthcare system to its knees, http://www.cbsnews.com/8301-18563_162-57453670/austerity-brings-greeces-healthcare-system-to-its-knees/ [10] Crisis: Greece, more than 400,000 children hungry, http://www.ansamed.info/ansamed/en/news/nations/greece/2012/04/06/visualizza_new.html_162378646.html [11] IMF: World Economic Outlook, October 2012, http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf [12] Coke Hellenic to leave Athens, relist in London, http://www.marketwatch.com/story/coke-hellenic-to-leave-athens-relist-in-london-2012-10-12?link=MW_home_latest_news [13] FAGE set to move HQ to Luxembourg, http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_09/10/2012_465379