A number of politicians including President Sarkozy and German officials argue that Greece should have never entered the eurozone, because it did so by reporting false key statistics - the so-called 'Greek statistics' - regarding its economy and finances. This is undeniable, but what is also true is the role of Goldman Sachs involved in credit SWAPS with the full knowledge and complicity of all EU governments and of the European Central Bank. The question is why did the EU permit 'credit SWAPS' to be used in a fraudulent manner, and why did the EU not call for an investigation and why it permitted Greece to join knowing it was a high risk member? The current debt crisis, and haircut are the part of the price that taxpayers across EU are paying because governments permitted large financial firms like Goldman Sachs to make millions in profits.
Analysts agree that the details of the 50% haircut deal are not all in, and we still need to see the fine print of the broad deal on the Greek debt as well as the reinforcement of the European Financial Stability Facility (EFSF). From what we do know, it is essential to note that the haircut does not apply to the entire public debt of roughly 360 billion euros (165% of GDP) but to 210 billion. Of the roughly 100 billion haircut, Greek banks will need 30 billion in government-guaranteed loans (buffer loans) - money that Greece will have to borrow - and the pension funds will sustain losses of about 10 billion, as far as we know today. This may change within weeks, if not days.
Let us consider that the same IMF team leader that is heading the TROIKA group for Greece today, argued just two years ago in London that Greece had a 'serviceable public debt' and there was no cause for concern. Moreover, 18 months ago the same TROIKA convincingly argued that Greece would be able to return to the private markets for its borrowing needs and that GDP growth would be positive in 2012, arguments that had to be revised substantially.
The same TROIKA insisted a year ago that the only road to growth is austerity, and that GDP growth comes via fiscal austerity. The IMF and TROIKA now admits that it has made serious mistakes in its assumptions, but continues to insist that fiscal austerity, privatization, and sharp curbing of consumption is the road to growth - no talk of a development plan, unless of course individual companies and private investors wish to invest amid such a climate that exists in Greece.
This is only a tiny example of how a nation under austerity losses its sovereignty. Is Greece in a comparable position as Argentina ten years ago? In some respects it is better off so far. But the worst is yet to come and this is something that the average person knows as well as politicians. Would Greece under IMF-EU austerity be better off in 2020 than Argentina is ten years after it decided to end the austerity regime and go the route of national capitalism?