By Tim Shufelt - from the National Post
To fix Greece, a modern country built on the ruins of past civilizations, is to impose a modern financial blueprint on the ruins of its failed economy.
Greece is insolvent. That’s due, in part, to ingrained deficiencies that have long kept the country deeply uncompetitive.
Prevailing over those forces will prove an historic challenge, but one that should, in theory, not differ essentially from that facing any failed enterprise, including other countries that have fought back from default.
Yet after billions in bailout money and more than one year into its crisis, Greece has made roughly no progress. In fact, its problems have worsened. The debt burden has increased, the country’s relationship with the rest of Europe is being poisoned by every bailout dollar thrown down the well, and the government has lost all credibility with the Greek people, making austerity and shared sacrifice politically impossible.
Greece has become a casualty of an economic and currency union that lacks political unity. The reduction in principal the country requires is a non-starter for European officials, who seem primarily concerned with protecting Greece’s major creditors. Meanwhile, the Greeks themselves seem unable or unwilling to face up to their own fiscal realities.
A glance at Greece’s books is enough to convince any objective observer that a restructuring of its debt is crucial to the country’s recovery, said Alex Jurshevski, founder of Toronto-based Recovery Partners and an expert in sovereign restructurings.
The Greek debt load sits at about €330-billion ($450-billion), or almost 150% of its GDP.
“If Greece has to refinance its entire debt at today’s coupons, it would be immediately bankrupt,” Mr. Jurshevski said. “It couldn’t pay those coupons, it would crowd out all other government expenditure, the government would fall, there would be riots on the streets, and their paper would be worthless.”
But what must be done and what has been done are worlds apart, he said. Europe’s political powers instead advocate “bailouts” to fund short-term debt payments and austerity to improve fiscal conditions.
“The whole game from the get go has been to preserve the bank’s capital in this whole equation. There hasn’t been a bailout of the countries under financial pressure, it’s been to preserve the banks’ financial solvency that have lent to these places. Nothing more,” he said.
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