Despite its being a small and irrelevant country, Greece continues to make the global capitalism nervous all the time. The frequency of the hysteria used to be "once per year". We just learned that it has been raised to "once per 3 months": Greece will run out of money in October.
It's becoming really annoying. At the same moment, there doesn't seem to be a consensus yet that a full-fledged old-fashioned bankruptcy is what should be encouraged. So let me propose a new restructuralization policy that could be interpreted as a "non-bankruptcy". The basic ideas are:
- Greece will get rid of all debt – all Greek bonds issued before the end of August 2011 will be dealt with by someone else – under certain conditions.
- A group of saviors ("saviors" for short) will create a new entity that will take the responsibility of the old Greek government to pay the installments including the interest rates as they arrive.
- Greece's debt will thus be set to zero. The Greek government will become a new entity with new ratings, the so-called new Greek government.
- The saviors will only repay X percent of what they should where X will continuously change from 100 percent on September 1st, 2011 to 60 percent on September 1st, 2015, according to the maturity day, and will be 60 percent after September 1st, 2015. I think that X should be lower than 100 percent because it's crazy to imagine that those who lent their money to Greece in a risky way (for high interest rates) shouldn't pay anything.
- Consequently, the saviors' new daughter institution which would be the legal successor of the old Greek government will be declared bankrupt by the rating agencies.
- The new Greek government will be able to acquire a reasonably good rating and issue new bonds.
- The critical point: the new Greek government will however pay 25 percent of their internal public expenses (which is 20 percent of all expenses including this payment to the saviors; now it is over 10 percent of the GDP) to the saviors every year until the year 2050. Between 2050 and 2075, the percentage will drop from 25 percent to 0 percent (2075 will be the first year without this fee).
- The EU countries will agree not to save the new Greek government until 2075 included in the case that the new Greek government creates a new unsustainable debt.
- The recipe balances the contributions of the Greek government, the Greek public, and the creditors.
- It eliminates the uncertainty about whether Greece will be saved again or not.
- For Greece, the interest rates and repayments would no longer be an abstract number that can grow arbitrarily; it would be a fixed percentage of their public expenses that they could comprehend and consider as a fair deal. The Greek nation could gradually re-learn the rules of the market economy and the meaning of the money – things they have completely forgotten.
- Greece would have many years to adapt to the new conditions and to lower the expenses.
- The new Greek government would be stimulated to reduce its own size and make the Greek economy less redistributive because this would reduce the fee paid to the saviors.
- The nations outside Greece wouldn't care so much about the bloated Greek government because they would be getting money proportional to its size.
- All current holders of the Greek debt could be treated in the same way.
- The "saviors" could be any powerful enough group – e.g. just the combination of the German and French government – and there would be nothing unfair about it because they wouldn't be losing money; they would just make a deal with the new Greek government that could turn out to be good business for both sides. The plan doesn't depend on any painful consensus-making.
Under this scenario, the new Greek government could acquire new debt – issue bonds worth something like 50 percent of the new Greek GDP – but make this figure sustainable. During the next decade, they could also shrink the public expenses from 50 percent to something like 30 percent of the GDP. That would still bring about 30/4 = 7.5 percent of the Greek GDP during the next 40-65 years to the saviors' wallets which could be a good deal for the saviors. At the same moment, Greece could spend those 7.5 percent of GDP as well because many other countries have to do the same thing.
Do you see some trouble with the plan above?
You can see that I was inspired by selling Greece to slavery – which would be a natural approach that used to work well during the good old times, e.g. during the glorious years of ancient Greece. However, I had to frame the partial slavery in a politically correct way.
One more comment. What I find irritating is that the politically correct politicians such as Merkel and Sarkozy are never trying to find a deal that could actually be good for both sides. What they are constantly doing is to spread a suffocating politically correct atmosphere that de facto forces individuals and whole nations to do many things that are not good for any of them, and sometimes even pretend that everything is fine with them. And this is just bad management and bad politics.
The proposed fee to the saviors was based on the new Greek government's expenses. It has the advantage that this figure is the key entity that Greece should be pushed to lower, in order not to be a troublemaker in the future. Of course, some people would have to verify that Greece doesn't fake their data about the budget.
One could also introduce different sorts of fees to the saviors, for example one based on the Greek imports (to discourage Greek imports as well), or their combination. It's a matter of details. The important point is that one could easily sketch real plans that just send this problem to the history books. I needed half an hour to think about it and write it down: why Sarkozys and Merkels aren't capable of doing such things in whole years (there isn't any readable proposal anywhere), despite having thousands of overpaid bureaucrats working for them?
Well, let me answer: because they're the heads of parasitic governments who just consume the taxpayer money without doing any useful work.