The combination of the recession and the austerity program have resulted in sharp declines of all values in Greece, from labor to banks, from real estate to natural resources; a situation comparable in Ireland, Spain and Portugal. This means that foreign corporations, mostly German and French, would be buying assets at a huge discount and at the same time receiving assurance from the government about their operations. In short, the austerity program that has bankrupted the economy and sunk living standards will continue to keep it at low values of all assets for decades, thus allowing the perpetual hegemony of northwest Europe over the periphery.
Although there is a new package of an additional sixty billion euros for Greece, a package that may amount to as much as 100 billion so that Greece can service past debts, the ECB still refuses to consider debt restructuring. The question is why? Ireland and Portugal will probably follow Greece in case of debt restructuring and that could mean that the ECB will be holding bonds from these three countries that amount to more than half a trillion euros or one-quarter of the ECB's assets that total 2 trillion.
The ECB plans to ask banks to roll over Greek debt as a means of avoiding the inevitability of debt restructuring; at least for 2011. ECB owns a total of 195 billion euros in Greek bonds at nominal value, of which 50 billion it purchased in the secondary market at 40 billion and 145 billion by purchasing bonds from Greek banks to which it has loaned the sum of 90 billion euros. If Greek debt restructuring were to take place this year, it would mean a huge loss to the ECB, as it would have to accommodate both Ireland and Portugal and contend with a weak euro.
Germany wants the private bond holders to accept some sort of sacrifice, while the ECB is interested in safeguarding banks throughout Europe by having bondholders roll over debt. Having longer maturity bonds is a band aid solution that cannot avoid the inevitability of debt restructuring, but it is a calculated risk that looks better than allowing Greece to restructure now, let alone default as some short-sellers are hoping.
If the IMF-EU had invested the 200 billion euros (roughly $300 billion) in the Greek economy instead of debt payments, the country would be producing wealth sufficient for unemployment to be below five percent, and revenues would have risen to the level that all past loans would be serviced without the need for new loans in the next three years. In short, the IMF-ECB-EU loan program for Greece as well as Ireland and Portugal have been prescriptions for bankrupting the periphery nations as a means to lower their assets to the level that foreign buyers can acquire them. This is indeed how neo-liberalism and globalization ought to work, but what does this mean for the EU integration model as conceived and promoted in the past four decades?
The perception that Greece as much as Ireland, Portugal and Spain as EU members enjoyed national sovereignty is now replaced with the reality that it is nothing more than semi-colonies. Greece was no more than a semi-colony from Independence (1832) until the fall of the military dictatorship in 1974. This is more or less the fate that awaits Ireland, Portugal, and Spain. What is the public reaction?
On Sunday, 5 June 2011, tens of thousands of people poured in Athens and in other European cities to protest against the austerity measures that entail a massive transfer of wealth from the middle class and workers to the corporations. Given that the dominant EU countries want a patron-client integration model with the weaker members, a practical solution is for France and Germany to reduce southern European countries into their provinces and govern them indirectly in the same manner as Rome governed its provinces. At least in that manner, everyone would know who is really responsible for all policies that impact peoples' lives. The only autonomy that the provinces would maintain would be cultural, just as in the time of the Romans.