NEW YORK TIMES: …Even as fears mount in Europe about the rapidly worsening situation in Spain, Greece’s problems are far from solved. The president of the European Commission, José Manuel Barroso, is expected to make his first visit to Athens since 2009 on Thursday to meet with Prime Minister Antonis Samaras as the troika begins yet another assessment of how well the country has complied with a spate of harsh austerity measures imposed as the price for loans. Greece’s lenders say they will not finance the country any further unless it meets its goals. But many experts say that the targets were never within reach and that pushing three increasingly weak Greek governments to comply has only profoundly damaged the economy.
“We knew at the fund from the very beginning that this program was impossible to be implemented because we didn’t have any — any — successful example,” said Panagiotis Roumeliotis, a vice chairman at Piraeus Bank and a former finance minister who until January was Greece’s representative to the International Monetary Fund. Because Greece is in the euro zone, he noted, the nation cannot devalue its currency to help improve its competitiveness as other countries subject to I.M.F. interventions almost always are encouraged to do…
At the end of last week, the European Central Bank cut off a crucial source of cash for Greek banks, saying that it would stop accepting Greek government bonds as collateral for low-cost loans until the troika completes its report, which is not expected until late August at the earliest. Greek banks must now borrow from the Greek Central Bank at a higher interest rate, from a fund with limited means; if it runs out, Greece would have to start printing drachmas… (more)
EDITOR: Greece can certainly benefit from some reforms. But making the country into another Germany is a hopeless task. It is a more southern, thus has far less needs, and why would it want to trade its culture for that of the tutonic northerners? Better to assist Greece to revert to the drachma. The European Union would do better to focus on salvaging the euro for Spain. Of course, we have been saying this for years.
