JANE BURGERMEISTER REPORT: ‘German tax payers face 65-billion-euro bill for the Greece bankster bailout, says FDP finance expert’

German tax payers face 65-billion-euro bill for the Greece bankster bailout, says FDP finance expert

German tax payers could face a bill of 65 billion euros by 2015 for the bankster bailout for Greece alone, according to Frank Schäffler, financial spokesman for the Free Democrats, the junior partner in Germany’s  coalition government.

German tax payer’s are already the biggest private creditors of Greece after the ECB bought up Greek souvereign debt, reports the FTD. But the amount they are owed is set to soar as Greece’s national debt grows.

http://www.ftd.de/finanzen/:euro-krise-die-groessten-griechenland-glaeubiger/60066259.html

The German government buried a policy document by economic experts in autumn 2010 urging an insolvency mechanism to be introduced to help country’s that are burdened with an unsustainable debt, as reported on this blog.

An insolvency mechanism is what is required for Greece – and yet there are still no plans for one.

Instead of following the recommendation of economic experts and putting Greece through a managed insolvency, German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble are spreading hysteria, warning about a disorderly default and a worldwide financial crash to frighten lawmakers into putting limitless money into the giant debt hole of Greece as well as Ireland and Portugal.

The choice being offered to the people of the eurozone should include the option of a managed insolvency of Greece as well as Ireland and Portugal.

Merkel and Schäuble are falsely misrepresenting the choice as being between a disorderly default and a bank crash or limitless bankster bailouts.

Schäffler estimates that Greece’s existing debt of 350 billion euros is set to grow ever year by another 30 billion euros as the economy continues to contract under fiscal austerity measures prescribed by the EU, IMF and ECB. Greece’s national debt I, therefore,  set to increase to 470 billion euros by 2015.

By that time, the commercial banks would have been able to offload the last of their Greek bonds onto the ECB, leaving the tax payers having to shoulder all the losses when Greece eventually defaults or reprofiles while the private banks have taken all the profits.

Because Germany has a 28% share in the ECB, tax payers would have to contribute 130 billion euros of the 470 billion euros, Schäffler calculates.

Assuming ( optimistically) a haircut of 50% on Greek bonds in 2015, the loss for German tax payers in 2015 would amount to 65 billion euros.

Germany has an annual tax revenue of about 250 billion euros right now in a boom time for its economy – one which has benefitted corporate shareholders and not low paid workers, however.

Added to the amount Germans will be expected to pay for Greece, will come billions more for Ireland, Portugal and possibly Spain and Italy by 2015.

A debt reduction for Greece if it were carried out today would cost German tax payer’s only 15 billion euros, Schäffler says.

However, there is no sign that the German government is going to stop the gigantic sums of money flowing from tax payers to American, German and French banks as part of the bankster bailouts.

The German government has not only ignored the advice of experts to create an insolvency mechanism to keep the bankster bailout’s flowing.It has also violated the no bail out clause of the Lisbon Treaty, it has also allowed the Bundesbanbk and the ECB to violate Article 123 of the ECB rulebook prohibiting the ECB from buying debt instruments of governments.

The ECB is estimated to have 75 billion euros of Greek souvereign debt on its books. In addition, the ECB has hundreds of billions of loans to Gree, Irish, Portuguese and Spanish banks against shaky collateral under an emergency liquidity programme.

The ECB has, in fact, so many bad loans that economist Hans Werner Sinn estimates that it will be in debt to itself in just two years if it continues at this pace.

How can the eurozone central bank money-making machine destroy so much capital so fast that it will actually be in debt to itself in just two years?

As Harvard economist Kenneth Rogoff explains how Greece’s economy is being run into the ground.

“Today’s strategy, however, is far more likely to lead to blowup and disorderly restructuring. Why should the Greek people (not to mention the Irish and the Portuguese) accept years of austerity and slow growth for the sake of propping up the French and German banking systems, unless they are given huge bribes to do so? As Stanford professor Jeremy Bulow and I showed in our work on sovereign debt in the 1980’s, countries rarely can be squeezed into making net payments (payments minus new loans) to foreigners of more than a few percent for a few years. The current EU/International Monetary Fund strategy calls for a decade or two of such payments. It has to, lest the German taxpayer revolt at being asked to pay for Europe in perpetuity,” he writes.

http://www.project-syndicate.org/commentary/rogoff81/English