Puppet Government

The Financial Times reports Memo Reveals Extent of Control Bailout Monitors Will Have on Greece.

The 29-page memo details what Greece will have to do in order to get a third bailout program. The memo covers damn near every aspect of Greek finances, effectively making the Greek parliament a puppet government of Germany.

Devil Details

  • The Greek government will have its hands bound on everything from overall budget planning to drug pricing, tourist rentals, farmers’ fuel tax breaks and the finer points of personal bankruptcy.
  • Greece must eliminate recent cross-border withholding taxes.
  • Overhaul the tax administration.
  • Progressively raising the pension age to 67.
  • Cut pharmaceuticals prices.
  • Reverse recent protective labour laws.
  • Open up a range of sectors to fuller competition.
  • Liberalize energy supplies for consumers by 2018.
  • Commit to a broad range of fiscal, financial, regulatory and pensions reforms.
  • A task force will decide how to setup a €50bn privatization fund, with specific demands coming out in December.
  • Greece must go from a primary account deficit of 0.25 percent this year to surpluses of 0.5 per cent next year, 1.75 percent in 2017 and 3.5 percent in 2018 and beyond.

A one line preamble note reads “the recovery strategy takes into account the need for social justice and fairness”.

Tsipras also won a “guaranteed minimum income” but the Financial Times revealed details.

I suspect what we are really talking about is some form of minimum unemployment insurance, with lots of restrictions and controls.

Growth Projections

EU officials believe the Greek economy will contract 2.3 per cent in 2015 and 1.3 per cent in 2016. They also predict Greece will bounce back in 2017 with growth of 2.7 per cent that year, before accelerating to 3.1 per cent in 2018.

In an over-under bet, I will take the “under” on GDP growth in 2017-2018 even though many of the reforms will help Greece over the long haul.

The notion that Greece will have a 3.5 percent primary surplus in 2018 and beyond, is unquestionably absurd.

Germany Wants More Strings

ZeroHedge reports DAX Crashes After Germany Warns Greek Bailout “Insufficient”

ZeroHedge lists some additional demands by Germany, citing the Bild and Bloomberg. As frequently happens, there is no link to Bloomberg or Bild and searches for items in the list all point back to ZeroHedge.

I suspect this may be a rehash of a report that ties back to the July 11 article Germany Says Greece’s Latest Proposal to Creditors “Insufficient” on the English edition of EFE.

EU Guarantees

Reuters reports Germany Examining Whether EU Can Guarantee Greek Debt to IMF

The German government is looking at whether the European Union could provide guarantees for Greek debt to the International Monetary Fund (IMF) in order to keep the Fund on board and avoid the need for major debt relief, German weekly Die Zeit reported.

Without citing its sources, the paper reported on Wednesday that the idea meant that “if Greece ran out of money, the Europeans would jump in and the IMF would suffer no losses. In return, the Fund would no longer demand extensive debt relief.”

The plan would thus fulfill two key demands made by German Chancellor Angela Merkel – keeping the IMF involved and avoiding a debt writedown.

In other words, Germany wants to load this bailout on taxpayers, hoping that will satisfy the IMF. But isn’t that just another illegal transfer mechanism?

And with such a guarantee, why would the IMF need to be involved at all?

Regardless, this is another one of those smelly sleight-of-hand proposals, that stinks to high heavens.

Bailout Won’t Work

The former Greek finance minister made a simply claim today that I endorse 100%: Bailout Won’t Work .

Former Greek finance minister Yanis Varoufakis has said the latest Greek bailout deal “is not going to work”. Mr Varoufakis, speaking on the BBC’s World at One, said that others negotiators in Tuesday’s agreement felt the same way.

He said: “The Greek finance minister… says more or less the same thing.

He added that he had seen the “finance minister of Germany go to the Bundestag and effectively confess this deal is not going to work”.

“The International Monetary Fund… is throwing up its hands collectively despairing at a programme that is simply founded on unsustainable debt… and yet this is a programme that everybody is working towards implementing.”

He added: “Ask anyone who knows anything about Greece’s finances and they will tell you this deal is not going to work.”

I’m Your Puppet

In honor of the puppet government in Greece, run by Germany and the creditors, I offer this musical tribute.

Link if video does not play: I’m Your Puppet.

Mike “Mish” Shedlock