In an interview with Thassos Gouriotis on Pronews TV’s Black Monday, eminent economic analyst Nikos Iglesis analyzed the future of the Greek economy (which is bleak) with a realistic approach and concluded: “There is no hope for the current political arrangements and we need alternative governance.” for the country to survive in the future.”
Regarding the banking crisis that started in the US (as in 2008), Nikos Iglesis said:
“The main event that triggered this crisis was the increase in interest rates, which was done by all the major central banks to cope with inflation. When the world economy stopped shutting down due to the coronavirus, there was an increase in inflationary pressures.
Long before that, in the summer of 2021, when they ended the lockdown, Greece was also experiencing rising inflation. As a result of globalization, supply chains were disrupted, some companies stopped working, others could not transport their products. This is where the inflationary spiral began.
That’s when central banks raised interest rates as it’s the only weapon they have to fight inflation. They have made money more expensive, which means more expensive loans. Whether it is loans to governments, businesses or consumer loans.
More expensive loans mean governments, businesses and households have to pay more interest every year. This means a reduction in demand as you take income away from the family, from the business, from the government, and economic activity decreases.
When we say “demand”, we mean not only consumer demand, but also business demand. Therefore, the rise in interest rates led to the blocking of bonds. Banks have not only deposits, but also bonds that they sell to other banks. Bonds are a kind of credit, it is a paper, after the expiration of which the money must be returned with the appropriate interest.
As interest rates rose, old bonds began to fall in value. Because the new bonds that the markets expected to come out would carry higher interest rates. Nobody wants to hold a bond with an interest rate of 1-1.5% when bonds with an interest rate of 3 or 3.5% come out. So they started lowering the prices of the bonds that were locked up so that if the banks needed liquidity and had to sell the bonds they had in their portfolio, they could sell them for a lot less.
We do not know if this crisis has stopped. We will know about this when the banks stop raising interest rates and start cutting them in reverse order. But at present this does not seem to be the case.
Therefore, the weakest banks found themselves in a situation where they can no longer meet their obligations. When confidence in the bank falls, the withdrawal of deposits begins, everyone runs after their money. Then central banks come to the rescue of these banks by issuing new money, which also causes inflation to rise.”
On how all this affects the Greek economy, the analyst said:
“The political system of Greece was saying exactly the same things about the safety of Greek banks during the 2008 crisis. They said that our banks have nothing to do with American ones and are safe. In less than two years, Greece went to memorandums of understanding from “For the debt crisis that has arisen. Now the problem is the rise in interest rates. This rise is a burden on the Greek economy, a burden on businesses, a burden on households, a burden on the public debt.”
As to whether the Greek economy is in danger, he said: “We don’t know what kind of skeletons are in the closet of each bank, because foreign shareholders are now running it. The problem is this: if the bank goes into bankruptcy, who will Can the Greek government currently take out new loans to finance the bank’s bailout?
It seems to me very unlikely that any mechanism will give us 10 or 20 billion euros. And what would be the cost of such a loan? The US Central Bank can issue money, the Greek Central Bank cannot issue money. Only the European Central Bank issues the euro. Otherwise, a country that can issue its own money may face a crisis, unlike countries EUwhose central banks are branches of the ECB.
Asked whether Greece should be in or out of the euro area, he said: “In the new crisis that the Greek people and their economy will experience, this question will arise again. Political figures have not answered the main question: why were introduced Memorandums Memorandums were imposed on Greece in order to stay in the euro area and continue to pay its debt.
Debt has four factors that determine it:
- First, how much do you owe.
- Second, to whom do you owe, to whom does the debt belong? Before 2010, most of the debt was owned by Greeks, it was in Greek government bonds, and the interest remained in Greece, this is not the case today. The debt belongs to foreigners and the interest goes abroad.
- Thirdly, in what legislation is the debt. Is it in Greek law, in English law?
- And the fourth factor – in what currency is the debt. Now all Greek debt is denominated in euros, so it’s a foreign currency since Greece can’t issue it.
This means that in order to service the debt every year and pay the interest, she has to borrow. Bankruptcies of some countries were also caused by what? They could not service their part of the debt in foreign currency. There are no problems in the national currency. Greece is a country with a destroyed industrial base, with an unsustainable debt in foreign currency, which means that at the first breath of a breeze in the international economic arena, this country will get pneumonia. Because she has no power factors.
Asked where the Greeks are finally working as primary production has collapsed other than tourism, he replied:
“Services, general services and the public sector. There is a political trend that sees tourism as the country’s heavy industry and construction as the engine of the economy. They stopped lending for the construction of new apartments and construction collapsed.
The proof that the economy is lame is the fact that the balance of payments is in deficit. Let me remind you that Greece was self-sufficient in terms of sugar. That is, we received it from beets. We had five plants, the Greek sugar industry had subsidiaries in Serbia and other countries. Gradually they closed. The EU introduced quotas and sugar factories closed because the price of sugar depended on supplies, and as a result we began to import sugar from France.
We were also self-sufficient in grains, but gradually the EU abolished the tariff protection of products, and as a result, the Greek producer was forced to compete with foreigners.
The open border policy imposed by the EU benefits countries like Germany, which imports agricultural products from Turkey but exports its own industrial products. Conversely, countries like Greece are losing out. Because it doesn’t have competitive technology products to export to make up for cheap imports. This is not only about agricultural products, but also about textiles, cotton, etc., which are also now supplied from Pakistan and Turkey.
Then, speaking about tourism, in particular about the familiar all-inclusive vacation, he noted unprecedented things:
“All products included in breakfasts in hotels where tourists stay, hygiene items such as soap, shampoos, and even products served at the table such as soft drinks, beer, etc. are foreign, not domestic! This means no profit for the Greek economy! And this is for cost reasons.”
As the analyst notes, the Greek state should subsidize Greek products through VAT:
“The export of Greek products is not subject to VAT. A regulation could be adopted whereby businesses that buy Greek products and consumables do so with reduced VAT, as if they were exporting.”
Regarding the energy crisis, he said: “The first thing the government should have done was to reduce VAT and BAT so as not to cause a spiral of revaluation. Because the cost of fuel then flows to food, transport, etc. 60% of the price of fuel is taxes “Instead, it chose to distribute benefits! Instead of preventing inflation from rising, it chose to subsidize it.”
He concluded by saying that the only thing the political system is interested in is green growth, not industry, handicrafts, etc. He called climate change a big fool “because the Earth’s climate is constantly changing depending on what happens on the surface of the Sun. Instead, we don’t want to export hydrocarbons (and don’t do research) and want to import windmills, photovoltaics, etc. At that At the same time, we give subsidies for electric cars and electric bicycles produced abroad, stimulating foreign industry!The only hope is the political leadership that will present an alternative plan for the survival of the Greek people.With the existing political schemes, there is no hope.
Source: Pronews
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