German government economic advisor Lars Feld has warned that the tax payers of Europe, and not private creditors, will have to foot the bill for the upcoming default of Greece because the European Central Bank (ECB), in the meantime, holds so many Greek souvereign bonds in another bit of bad news as the financial meltdown of the eurozone accelerates.
Abandoning all pretence at performing its function of being a guardian of sound monetary policy along the lines of the Bundesbank, the ECB has been buying up Greek and other government debt even when it is rated as junk.
Feld said that he thought the ECB chief Jean Claude Trichet wanted to postpone an inevitable default by Greece until he had left the bank in October so that the 77 billion euro cost of servicing national debts that have accrued to eurozone tax payers — after bondholders have made a fast exit with the profits — would not appear on the bank’s balance sheets before then.
Economists have said that Greece, Ireland and Portugal and other eurozone countries are not suffering from liquidity problems and the solution is, therefore, not to make money available to them to service their souvereign debts by creating a transfer union inside the eurozone. Instead, economists argue the southern peripheral European countries and Ireland are insolvent, and unable to service the levels of fractional-reserve debt their governments have assumed, and so need to undergo an orderly default.
The IMF and EU “loans” at punitive interest rates are only sucking out gigantic quantities of money and assets from the various countries, paving the way for their final economic collapse.
Greece’s debt has soared to 340bn and is predicted to reach 158% of GDP by 2012 as a result of the bank-engineered scam.
A fiscal austerity package imposed on Greece by the IMF and EU has led to higher unemployment and a recession, as the Guardian points out.
The average family in Greece has seen its disposable income drop by up to 40% as a result of rises in tax and pay and pension cuts, reports The Guardian.
The recession has reduced the tax revenues available to service the national debt To meet the interest payments, Greece has to borrow money, leading to an increase in its overall debt and forcing Greece to borrow ever more money, resulting in a downward debt death spiral.
As the flow of assets and tax money coming from Greece has run dry, the ECB has started to buy up the bonds, leaving the bondholders with the profits and the European tax payers with the losses when Greece finally makes its inevitable bankruptcy declaration.
The tax payer bill for Greek souvereign debt is, however, just the tip of the iceberg as the ECB prints money to support souverign bonds and banks.
Following Greece ‘s 110 billion euro bailout from the European Union and IMF nearly a year ago, Ireland received a bailout in November to fund interest payments on an astronomical quantity of bank engineered debt which the government of Fianna Fail equated with souvereign debt. Last week, Portugal also asked for a bailout which could reach 80 billion euros.
Just like Greece, Ireland and Portugal have been forced to implement unsustainable and ruinous fiscal austerity budgets to service the high interest payments.
German government economic advisor Beatrice Weder di Mauro has warned of a domino effect as one eurozone country after the other collapses economically under the debt burden, and the debts are passed on to be paid by the core countries.
Economist Hans Werner Sinn has warned that Germany cannot pay its expected share and it’s pensions are at risk as the government prepares to throw ever more money into the black hole of interest payments on bank engineered fractional reserve banking debt.
A recommendation by a panel of German government advisors that insolvency mechanisms are introduced for the eurozone was brushed aside by the government.
Acting in the interests of the banks, eurozone governments moved at an EU summit in March to expand the pool of tax payer funds that banks and bondholders can drawn on to get interest payments on their fraudulent debt with Germany and other countries having to pay in cash for the first time.
Governments also put in place an embryonic EU economic government that can slash government budgets by setting pensions and salaries centrally.
Given the astronomical scale of the artificial fractional reserve bank debt loaded onto the eurozone’s national governments by the banks, the ECB will have ultimately to buy up the bonds, resulting in hyperinflation.
A European Stability Mechanism to be introduced in 2013 has a provision that mean that governments can ask some investors to take losses on souvereign bonds but the bar for this has been set very high, Weder die Mauro has warned.
She argued that an insolvency mechanism should be installed that is triggered automatically when debt levels get too high to be sustainable.
Anyone with a basic knowledge of economics can now see that the banks and their puppet governments are engaged in the looting of tax payers on an unprecedented scale, violating laws and ignoring economists’ recommendations.
The idea that the EU is run by a shadowy group of banksters is no longer a conspiracy theory; it is a verifiable fact.