Garvin Karunaratne Ph.D. Michigan State University.

This time it is Greece, a country that is unable to service its Foreign  Debt.

Just now the Hellenic Parliament is approving the austerity package approved by the Troica- the IMF with the EU and the ECB together. It is an austerity package that would cause more poverty among the Greeks. While the Parliament is approving the latest austerity demanded by the Troica, the people are on the rampage, setting fire to automobiles, and the authorities have even had to resort to  water cannon being used.

Once a country becomes indebted it is the IMF that takes control of its economy.  In the case of Greece it is the Troica- the IMF, the EU and the ECB. This is purely because the country needs funds to survive and it has to raise that money from the Banks and the IMF/EU/ECB and no Bank or investors will ever give a single dollar to any country unless the country is recommended by the IMF.

The IMF is in full control, though very covertly. This has happened again and again in Third World countries and Greece is the first test case from Europe. As the Minister of Finance in Zambia said in 2004, We are running the country but the budget is controlled by donors”  In The End of Poverty, Professor Jeffery Sachs,  referring to African countries, said that The IMF and the World Bank virtually ran the economic policies of the debt ridden continent”.

In the case of Greece, the control by the IMF is not covert. The Troica is in full control and does not hesitate to dictate terms.

In Greece, the attempt is to secure  a GBP 61 million bail out. On its part Greece has to follow more austerirty,  including the privatization of valuable State held assets to raise  GBP 50 billion, where the money will be used to repay debt and  pump liquidity into the Banks.  The Banks had stayed closed and limitations were placed on account holders withdrawing funds- limited to  Euro 60 a day.  The ECB had refused emergency funding to the Greek Banks. In the words of Premier Alexis Tsipras it was an unprecented act” and he questioned the right the ECB had to decide on such a strict measure.  Beggars cannot be choosers. Once an economy is on the rocks, with high debt, it is the creditors- that call the shots.

The Troica has been prescribing austerity over the years ever since Greece requested its bail outs beginning in  2010. Following this package of austerity, mainly dealing with increases in taxation, cuts on pensions and welfare payments has brought about untold poverty and unemployment. This process has only brought about a small saving that is easily spent  on luxury imports and on living beyond ones means. This process only helps the country to limp to an armegaddon in a few months.

The bare fact remains that the ruling Government in Greece is leftist and it has to be thrown out and it is my contention  that the draconian austerity measures that have been approved by the Troica is designed to cause a regime change.  Premier Tsipras had the nerve to request a referendum from the people whether the austerity package can be accepted and the people resounded with a blatant no”.  The Troica then reconsidered its earlier austerity package, came up with a new more draconian austerity package, that included the privatization of State Assets which  has been approved  by the Hellenic Parliament. This  amounts to a capitulation to the Troica.

What is important to realize is that the funds to be released, with all the austerity imposed,  are all meant to provide a modicum of liquidity to the Banks to keep the economy going and mainly  to provide payments due to the creditors. In short it is a method of doling out funds to get it back with profits.

Regime Change  through financial control organized by the IMF is the order of the day. Sadly this fact is not yet realized by the leaders of the countries. Many are the Regime Changes already done in the Third World and this is the first time that a  Regime Change is being done to a country in Europe. It is all done in a shrewd manner. The IMF  never dictates but its policies and preferences are known to the mandarins in the Treasuries of the countries  who have to act accordingly to keep the IMF happy to get their approval as Investors can be forthcoming only if the IMF approves. Countries are at times forced to increase their electricity and utility charges by ridiculous amounts like 70%.  At the same time the taxes to the high earners are not increased. The result is a rude shock to the economics of every family where the monthly charges increase by 70% and all services like eateries, restaurants have to increase their prices to combat for this increase. All this while the incomes of the people are stagnant. The result is  increased poverty and the people have their say at the next elections to vote out  the Government in power. This has happened again and again.

It is hoped that Premier Tsipras will get this message. The draconian austerity package is designed to vote out his Government, bring it to nonentity. His is a socialist government that has to be changed.

What has to be done is not to give in but to insist on a growth package. This happens to be the weakest link in both the Troica as well as the IMF. They yet think that growth can be brought about by increases in taxation and curtailing welfare payments and making a few changes in interest rates. They fail to realize that by such measures  no permanent solution can ever be expected. Instead the solution lies in a package of projects to create production and thereby create employment and also bring about incomes to the people. This involves restrictions on the use of foreign exchange(forex). The use of Forex has to be controlled, imports have to be restricted. There is no point in allowing forex to be used to import marble to adorn the bathrooms of Four Star Hotels,  as observed in my recent visit to Mongolia or to import Porsche and Mercedes automobiles, while the masses suffer from unemployment and poverty and a foreign debt piles up.. The IMF and the Troica should allow the country the power to control its imports and  restrict the use of forex in the national interest. The dues on the foreign debt should be withheld till the economy reaches even keel and can afford such payments. It has to be understood that the onus of responsibility for the debt  also lies with the creditors for having provided easy funds without ensuring that the funds were put to good use. The answer lies in the immediate planning and implementation of a series of production oriented projects creating the production needs of the people, bringing about  employment and incomes to the people, self sufficiency in the first instance followed by export orientation.. As stated by me in the context of Third World countries, The IMF should allow every  sovereign country the right to handle their own economies and should not impose conditions that lead to recessions.  … The countries should be given  investment and Aid to develop their resources in the national interest.”(From Karunaratne;  How the IMF Ruined Sri Lanka and  Alternate Programs of Success.(Godages, Colombo)

Premier Tsipras is on his way out  as has happened to many leaders, unless he takes full control of the economy and steers it to bring about development. It is hoped that Premier Tsipras will successfully ride the storm  and the eyes of the world look to him for leadership in a sea of debt ridden countries that see no salvation whatsoever.

The Author holds four decades’ experience in economic development in four countries and holds the Ph.D. from Michigan State University. His main contribution to world development lies in designing and establishing the Youth Self Employment Programme of Bangladesh and training Bangladeshi administrators to continue it. This is today the world’s premier employment creation programme and has by Feb 2011 guided 2 million youths to become self employed. He has also traveled all over Greece, clocking over 5000 miles in the pre EU period and is aware of the tremendous development potential.

Garvin Karunaratne

Ph.D. Michigan State University.

Author of How the IMF Ruined Sri Lanka and Alternate Programmes of Success”, (Godages)

20 th July 2015