The editor-in-chief of Handelsblatt, a leading German business newspaper, published a Letter to Georgios Papandreou, Prime Minister of Greece, called “There is a life after death”
Here are a few excerpts…
Dear Mr. Papandreou,
With the greatest respect, the Western world is monitoring your efforts to master your country’s debt crisis. No other democratic country has ever managed anything like that in peacetime. You are shrinking the state apparatus; you are fighting corruption; you are teaching your fellow countrymen how to become honest tax-payers.
You are a modern hero. You are attempting the impossible. ….
The bitter truth to which you and all parties who wanted to help Greece have to admit is that the help doesn’t help. Your country is getting deeper and deeper into the mess.
The truth that Greece has to cut back and save has turned into an untruth. The right thing has turned into the wrong thing. You already cut pensions, lowered the salaries of civil servants by 30 per cent and raised the prices of gas by almost 50 per cent. You can’t restore the health of your country by saving. And the European Union can’t restore your country’s health by again and again injecting new loans.
Soon, the day will come when the tortured body will surrender. The Greek construction industry already shrank by 70 per cent. Sales of car dealers sank by half. A daily export volume of 50 million Euros Greece is achieving far too little. Soon the day will come which investors fear in their nightmares. Then the word “insolvency” will be on everyone’s lips.
But it is also the day when a new truth will be born: Don’t save but invest, they will tell you – so that the Greek economy will grow again. Do not service debt with debt, you then will be recommended, but spread out the debt service, cut it and maybe even completely suspend it for a while. It will be a day of impositions, especially for those who lend money to you and your people. Financial markets will grind to a halt in horror – and then they will turn to embrace the future. Because Argentina in 2001, Mexico at the beginning of the eighties and Germany after World War II taught us that there is a life after death – at least, in the case of highly indebted states.
Mr. Papandreou, so far, you attempted the impossible. Now you should do the possible. Just as you deceived the officers as a boy and denied to know where your father was hiding you now must repudiate the pride of the Greeks – in order to save your country. Come to meet the new uncomfortable truth before it knocks at your door. It’s already on its way.
Once needed structural reforms are in place, the sooner Greece defaults, the better off it will be. The sooner the IMF, ECB, and EU accept the fact that Greece is insolvent and cannot possibly return to growth via forced austerity, the better off the Euro-Zone will be.
Greece needs structural reforms but is not savable. Nor is Ireland, Portugal, or Spain. What can’t be paid back, won’t be paid back. Bond-holders are going to learn a much needed lesson.
Mike “Mish” Shedlock
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