02.02.2012 0

Default better than death of democracy

By Bill Wilson — Reflecting Europe is nowhere near agreement on how to “rescue” Greece — let alone prop up Italy and Spain — German Chancellor Angela Merkel again delayed finalizing any deal on Jan. 30, telling reporters, “We won’t have a thorough discussion of Greece because the troika is in Greece and we don’t have a result of the talks with the banks.”

Greece cannot receive what remains of the original €110 billion bailout refinance loans, nor an additional €130 billion pledged in October, unless an agreement is reached with both Greece and private banks that lent the money to begin with.  With €14.5 billion of debt coming due on Mar. 20, time is running out to resolve these issues.

At issue is Greek control over its fiscal sovereignty, and whether private investors will be forced to accept losses as much as 70 percent while governmental institutions such as the European Central Bank (ECB), the International Monetary Fund (IMF), and other sovereigns that purchased Greek debt bear no losses.

Germany has demanded quite explicitly a “transfer of national budgetary sovereignty” to a “budget coordinator” appointed by European authorities to administer Greece’s budget that will “veto decisions not in line with the budgetary targets set by the Troika,” referring to the tripartite organizations administering the bailouts: the European Commission, the ECB, and the IMF.

Greece has, to its credit, rejected these demands. A government source told AFP, “It is out of the question that we would accept it, these are matters of national sovereignty.”

Another told Athens News Agency, “We can never accept this. A similar proposal was made in the past by a Dutch minister. We do not even discuss about it.”

So, Greece is not willing to cede sovereignty to the Troika, even if it means a certain default.  Thus far, it is true: Greece has not met the targets it agreed to as a condition to receive bailout funds.  It has not reduced its budget deficit at all.  Instead it grew from €16.6 billion to €19.1 billion.

But that makes a good case for default, for debt restructuring across the board, for significantly reforming Greece’s socialist system, and even for leaving the Euro system altogether.  It does not make the case for the end of Greece.

With the Drachma, Greece could work out new terms of repayment for its creditors and a new conversion rate.  It could set its own rules for balanced budgets or not.  It could use its central bank, print money, and pay the debt that way.   After all, if the government there wishes to leave its people with crushing inflation and a debt that cannot be paid honestly, that’s really its problem.  Anyone foolish enough to lend money to such a mess will get what they richly deserve.

The trouble is that would mean the Troika, in addition to private investors, would likely face losses on their debt holdings, too.  The ECB could be bankrupt.  It holds €55 billion in Greek bonds, and has given Greece another €101 billion in loans from the ECB system.  The IMF has lent €23 billion to Greece.  The European Financial Stability Facility (EFSF) has also lent €53 billion.

Coupled with the €34 billion that remains of the original 110 billion bailout, that means governmental institutions have assumed €165 billion of Greece’s €340 billion debt — when they did not have to — rather than let losses be realized by European financial institutions, primarily in Germany and France.  Now, they are poised to assume another €130 billion at any cost, even if it means the end of the liberty and sovereignty of the Greek people.

Oddly enough, okay with this approach is the U.S. government, which sacrificed hundreds of thousands of Americans in the World Wars to protect democratic self-determination in Europe.  Is this what they fought to bring about?

U.S. Treasury Secretary Timothy Geithner has said recently that the nation would be comfortable with participating in bailing out European banks that bet poorly on sovereign debt if “Europe is able to find the political will to build a more effective firewall”.

But, so far, that has proven unacceptable to the Greeks.  They are not alone.

A recent poll in Ireland found that 72 percent of Irish demand a referendum on the adoption of a new permanent bailout treaty, the €500 billion European Stability Mechanism (ESM).  A group of lawmakers there is now attempting to petition to force such a referendum.  They fear the new treaty, which will indeed cede significant sovereignty to the Troika, will be adopted without the people having any say.

Opposition to the growing European tyranny is not confined to the bailout states.  American Enterprise Institute scholar Alex Pollock called attention to a recent protest in Warsaw, Poland against the ESM, with thousands of Poles waving red and white flags shouting, “We want sovereignty, not the euro.”

The fight for liberty is right now.  Free peoples are attempting now to save their countries from a menace that, once let loose, will assuredly smash the unity of Europe, perhaps irreparably — and bring an end to democracy there.

That is not an acceptable outcome just to avoid a default on sovereign debts, or to bail out international financial institutions that made poor investment decisions.  Greece can save itself — and its neighbors — from this tyranny by sticking to its guns and just saying no.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

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