The Greek deal won’t fix anything

Since the Greek deal contains absolutely zero pro-market reforms, it won’t fix anything. Raising taxes, cutting down on tax evasion and smuggling, even if successful in raising tax revenue, simply entrench government at its current and possibly higher level. The Greek people need economic freedom, not more government jobs and increased welfare. There are four main pillars to economic recovery–cut government spending, cut government regulations, cut taxes, and institute sound money. These reforms will increase private purchasing power and build capital, yet none are being discussed. The entire emphasis is on how to squeeze the Greeks enough so that the government can repay its sovereign debt. I have advice for the other members of the EU–Greece cannot repay its loans, and it is foolish to try to collect. Write them off. End the fallacious idea that sovereign countries can guarantee one another’s debts. This institutionalizes moral hazard and leads to a tragedy of the commons. If you must keep the EU, return it to the vision of its founders as an association of sovereign countries dedicated to the free exchange of goods, services, capital, and people. Abolish the European Central Bank and reinstate sovereign currencies. Better yet, eliminate legal tender laws and allow each country to use whatever currency its citizens choose. My bet is that in relatively short order the entire continent outside the UK will become a Deutsche Mark zone.
Patrick Barron

From today’s Open Europe news summary:

Greece readies list of reforms for Eurozone following late night deal on Friday

Late on Friday night Greece reached a deal with its Eurozone partners to extend its current financial assistance agreement by four months. As part of the deal Greece will today send a list of reform proposals to the Eurogroup which will need to be “sufficiently comprehensive to be a valid starting point for a successful conclusion of the [final bailout] review”, once this is approved then the deal will be confirmed. Eurozone finance ministers will hold a call tomorrow.

The list is expected to focus on structural reforms in areas such as tax evasion, corruption and public administration. Bild reports that the package will be worth up to €7bn – €1.5bn each from raising taxes on wealthy Greeks and cutting tax evasion, as well as a further €2.3bn from cracking down on fuel and cigarette smuggling.

Speaking over the weekend, Greek Prime Minister Alexis Tsipras said, “We won a battle, but not the war. The difficulties lie ahead of us,” adding that the deal marked the start of “leaving austerity, the bailouts and the Troika behind.”

However, SYRIZA MEP Manolis Glezos said in an open letter on his blog, “By renaming the troika ‘the institutions’, the memorandum as ‘agreement’ and the lenders as ‘partners’…you do not change the previous situation.” He also apologised to voters for being complicit in SYRIZA’s approach. However, on Sunday Greek daily To Vima declared the deal an “honourable compromise”.

German Finance Minister Wolfgang Schäuble said, “Being in government is a date with reality, and reality is often not as nice as a dream,” adding, “The Greeks certainly will have a difficult time to explain the deal to their voters.”

Irish Finance Minister Michael Noonan said in an interview with RTE that the biggest risk was that Greek banks would have gone “belly up” on Wednesday, adding that the deal mainly “ensures Greece doesn’t collapse next week” and there will be more negotiations on what is “effectively” a third programme for Greece. Open Europe’s analysis of the Greek negotiations drew widespread coverage, see below for more details.

Source: Open Europe blog Eurogroup statement on Greece Reuters Reuters 2 The Financial Times The Wall Street Journal Handelsblatt Reuters Deutschland

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