Monday, July 30, 2018

30/7/18: Burden Sharing, Reforms and Greece


Much has been said in recent years about European reforms, recovery, burden-sharing and Greece. Most of it draws links of causality along the following lines:

  • Greek crisis has been resolved on the basis of the country adoption of European and IMF-structured reforms, and no burden-sharing is needed to make things right;
  • European recovery has been organically linked to European reforms, which include future burden-sharing mechanism; and
  • No burden-sharing mechanism has been deployed during the European recovery period anywhere.
In other words, both, Greece and Europe at large are enjoying an ongoing recovery that has been underpinned by reforms, not by burden-sharing arrangements of any sort.

And yet, contrasting experts reports, Greece continues to provide evidence to the contrary:

  1. European recovery has been asymmetric to the Greek situation, where lack of tangible recovery is keeping the country constantly on the edge of slipping back into 'assisted living' via official external lenders;
  2. The above happened despite the fact that Greece has adopted more 'reforms' than any other European economy; and
  3. The above has happened during the extended period of asymmetric and massive-scale burden-sharing carried out by the ECB via its QE (Greece received no QE benefits, while the rest of the Euro area enjoys huge fiscal support subsidies from Frankfurt).
How do we know this? Why, look at the latest fiasco with Greek bonds (not covered by ECB's QE) in contrast with Italian bonds (covered by QE):

So, about the effectiveness of those reforms,  and no-burden-sharing, then...

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