EU’s biggest Ponzi scheme

The Greek tragedy should be studied for what it tells us about the way governments administer affairs in the EU countries.

The policies favoured by the troika of creditors are worse than the deal offered by highway robbers. The deal offered by robbers had a pay-off of sorts: “Your money or your life”.

But the IMF and the EU have demanded both money from, and the lives of, the Greeks. This was not a bail-out. It was systematic destruction of the Greek economy and society. Over the past five years, the financial deals struck between Athens and its financial creditors led to a rapid rise in suicides among young and old alike.

The Syriza government received a mandate for change earlier this year, but it mishandled the negotiations. It could have explained the rational basis for structural change, one that was the opposite of austerity.

I explained that formula to Syriza’s finance minister, Yanis Varoufakis. He understood the economics at the heart of the proposal – that taxes should be abolished, and revenue drawn from rent – but he failed to advocate that agenda. Instead, he swapped epithets with the finance ministers of other EU countries; which led to his downfall after Sunday’s referendum.

Even so, the troika creditors should not have pushed for an increase in VAT on the leading sector of the economy: tourism. Higher taxes translate into lower revenue, fewer jobs and an even lower standard of living for a population whose economy has slumped by 25% since 2008.

Greece had requested a slight reduction in its sovereign debt. Instead, Europe’s politicians, led by Germany, urged Greece to borrow even more money, to be used to pay creditors. This was the economics of the Ponzi scheme writ large. No wonder the majority of Greeks voted “No!” in the referendum. But, unfortunately, with Varoufakis riding off into the sunset on his motorbike, no-one is now able to spell out the realistic scenario for rescuing Greece from the rent-seeking misdeeds that boxed the country into its current tragedy.