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Monday, June 20, 2011     GET REAL

U.S. economic metrics similar to those of Greece; Inaction moves global economy to the brink

By Gregory R. Copley, Global Information System

Half-measure solutions offered by the Greek Prime Minister and the European Union on June 15-17 to resolve the Hellenic Republic’s structural economic and productivity crisis have failed, accelerating a range of potential problems for European and Mediterranean stability, and the global economic condition. The issues have been exacerbated by the resounding (but less than expected) re-election of the Turkish Government of June 12.


Greek 'Indignants' protest for the fourth consecutive week against new austerity measures in front of the Greek parliament, in the central Syntagma square of Athens. AFP/Louisa Gouliamaki
Looming behind the crisis is the reality that the United States of America’s debt and productivity statistics are little better, and perhaps worse, than those of Greece.

European Union (EU) leaders on June 17, helped ensure that the impact of the Greek economic meltdown would be softened and spread out over a further year by agreeing to a voluntary rescheduling of Greek debt.However, that move, which was far less than the Greek Government sought, and the Cabinet reshuffle by Greek socialist Prime Minister George Papandreou, appeared to offer little hope that it would enable or encourage the necessary radical transformation in the Greek and eurozone economic structures to ensure that EU economies would not fall further into malaise.

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The compromise gestures made by the EU and particularly German Chancellor Angela Merkel and French President Nicolas Sarkozy did nothing to assuage concerns that the eurozone would itself be forced to restructure within the foreseeable future (despite denials by the eurozone leaders), perhaps with the re-introduction of the traditional national currencies of some states, such as Greece, Spain, Portugal, and Ireland. Such a fiscal redistricting could also have a profound impact on the cohesion of the EU itself.

This situation could also have a significant impact on whether the EU itself would pursue even at a luckluster pace the candidacy for EU membership of Turkey, or whether the newly-empowered and re-elected (June 12) Turkish Government of the Adalet ve Kalkinma Partisi (Justice and Development Party: AKP), led by Prime Minister Recep Tayyip Erdogan, would itself even continue the charade of its membership application.

Turkey’s great advocates with regard to its EU membership application, the United Kingdom and (non-EU member) the United States, are themselves so strategically weakened that they can be of little help or interest to Ankara. But the ending of the game of Turkish interest in the EU, or vice versa, coming at a time of profound Greek economic and political malaise and overall EU weakness, removes almost all incentive for Ankara to compromise on its hard-line position with regard to its military occupation of the northern third of the Republic of Cyprus. Moreover, the situation also frees Turkey to push more aggressively in its territorial claims in the Aegean Sea against those of Greece. Greece has little room, diplomatically or militarily, to resist.

In either case, there is no player in the global arena willing or able to object to Turkey if it pursues a tougher line on the Cyprus or Aegean issues. The Cyprus Government attempted to make the most of the strong re-election results of the AKP in Turkey, and Cyprus Government spokesman Stefanos Stefanou noted, just after the election: The Republic of Cyprus is ready to build a zero-problem relationship with Turkey, and have a special relationship with both Turkey and Greece. This presupposes Turkey cooperates in achieving a just, viable and functional solution on the basis of a bizonal bicommunal federation, which will restore the country’s territorial integrity and sovereignty, as well as the human rights and fundamental liberties of all people, both Greek Cypriots and Turkish Cypriots. 

This was tantamount to Cyprus throwing itself at the mercy of Turkey.

Indeed, the Turkish elections gave a positive indication of the AKP’s continued electoral strength, but the results fell far short of giving the party the super-majority it had sought to be able to re-draft the Turkish Constitution to create a presidential republic with great powers for the proposed combined post of head-of-state and head-of-government. What may save Cyprus and Greece’s Aegean position is that Turkey is clearly still reluctant to act so precipitously that it alienates its former allies in the North Atlantic Treaty Organization (NATO) or to jeopardize its position in the Eurasian energy trading scheme, in which Turkey plays a strong part, and could play an even bigger role.

It is even possible, given this, that Turkish Prime Minister Erdo an could even propose from his position of unassailable strength in the region a solution to the Cyprus issue which would save face for Cyprus and at the same time buy Turkey a seat in the exploitation of the offshore gas developments in the Mediterranean between Cyprus and Israel. That could be the masterstroke for Ankara, rebuilding ties with Israel at the same time on Ankara’s terms, and undercutting the nascent Israel-Greece military alliance which is one of the few things inhibiting (or casting a shadow on) Turkey’s Aegean claims.

Hellenic Republic President Karolos Papoulias on June 17, meanwhile, swore in a new Greek Cabinet under Prime Minister George Papandreou, the second of his term. Panellino Socialistiko Kinima (Panhellenic Socialist Movement: PASOK) Prime Minister Papandreou had announced the new cabinet line-up on June 15. A parliamentary vote of confidence was scheduled for June 21. Most significant in the moves was the shift of National Defense Minister Evangelos Venizelos to the position of Deputy Prime Minister and Minister of Finance, promoting Deputy (or Alternate ) National Defense Minister Panos (Panagiotis) Beglitis [see biography, below] to head the Defense Ministry.

There was nothing, however, to indicate that the Government had done anything at all to introduce the kind of deep economic re-structuring of Greece which it has delayed attempting for the past two years. Indeed, the move by Prime Minister Papandreou to appoint Mr. Venizelos as Deputy Prime Minister and Finance Minister a post for which he has no experience seemed designed solely to make Mr. Venizelos, 54, the Premier’s political rival (and a constitutional lawyer) the scapegoat for the failure of the next half-hearted approach to national financial restructuring. Because, absent almost dictatorial-level redirection of the Greek economy, backed by strong security measures, the half-measures expected of the new Greek Government can only fail.

[Similarly, the appointment of the new Portuguese Government of an independent, Vitor Gaspar, as its new Finance Minister seemed like a gesture to distance the economic disaster which is likely to get worse from the new Government of the Social Democratic Party (Partido Social Democrata: PSD), led by Prime Minister Pedro Passos Coelho.]

What seems clear from the political unrest in Greece, which continued in the streets over the weekend of June 18-19, and from the unrest which has shown itself in other EU cities, including London, was that any European government which attempted to make the kind of reforms which would be meaningful in staving off fundamental national bankruptcy would face removal at the next election, and before that face major electorate street protests.

What is clear is that the United States of America has similar if not worse economic metrics than Greece, and that neither the U.S. nor any EU state was willing to take major steps to reduce government sector expenditures.

What is even more significant is the fact that none of the governments (in the EU or the U.S.) was prepared to develop programs to incentivize dramatically-better levels of inward investment through employment-generating tax cuts and other programs. Even the UK Coalition Government of Prime Minister David Cameron during the second week of June 2011 began to step away from election promises to reform the bloated, inefficient, and essentially failed National Health system. In Japan, despite the economic difficulties of the country following the tsunami and subsequent nuclear power failure of 2011, there has been little done to structurally make the country attractive to investment.

In Australia, the modest economic growth in a world of economic uncertainty seems to have inured the one-seat margin Government of extreme-left socialist Julia Gillard from any consideration of stepping back from introducing a proposed carbon tax which apart from further hurting inward investment would have no tangible benefit other than increasing tax revenues for a Government which has spent the surplus it inherited from the previous Administration.

The bottom line is that no elected government in the West seems prepared to undertake financial or economic restructuring on the level needed to begin the reconstruction of market confidence and productivity. As a result, the economic decline hallmarked by a continued dominance of spending over income will decline, accelerating the evolution of another currency or currencies as global trading mechanisms. This puts further pressure on the People’s Republic of China (PRC) to gradually build transparency into its own economic framework, and the value of its yuan (renminbi).

In the U.S., the recent economic restructuring has been insofar as it has brought the U.S. economy back to something closer to reality the work of the marketplace, with unemployment and continuing decline in the real estate sector gutting the economy at the same time that Federal Government spending has continued to increase. If Greece has wasted the past two years since it was outed as a bankrupt society by failing to act to solve its own problems, the U.S. has arguably spent the past two years making its economic situation dramatically worse through the combined steps of inflationary money supply and anti-investment legislation which has driven manufacturing investors from the U.S.

All of this points to the reality that Western economies have not merely moved closer to a double-dip recession, but that the dip thus far has only been a gentle slope toward the precipice.

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