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Greece will almost certainly not pay its £1.1 billion installment due to the International Monetary Fund (IMF) today as part of a repayment plan for the enormous and unsustainable debt that the nation has amassed.
For some months now, it has become apparent that should a default such as this occur, Greece would not only be forced to leave the Eurozone, but the entire European Union, exposing the European Central Bank to a 190 billion Euro debt which will never be repaid, equal to over one third of the Central Bank’s entire capitalization, secured on Greek banks as collateral.
Today, the will has been expressed by Greece’s socialist Syriza party to continue to ride the gravy train which has been overly generous toward an unproductive nation whose succession of extremely expensive bailouts has put immense fiscal pressure on the European Union’s economic area.
This has manifested itself in an intention by Greece to seek a court injunction against the European Union institutions, both to block the country’s expulsion from the euro and to halt asphyxiation of the banking system.
“The Greek government will make use of all our legal rights,” said the finance minister, Yanis Varoufakis in a report by the Telegraph.
“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable” explained Mr. Varoufakis.
The Greek electorate has made its stance clear with regard to proposed austerity measures and repayment of the swingeing debt over recent months, most notably by y in the general elections early this year, the party’s ethos being clearly anti-austerity, with a view to not settling the country’s commitment to the IMF, and encouraging a continuation of a state-sponsored non-productive economic environment.
In the 1980s, British prime minister Baroness Margaret Thatcher famously stated that “the trouble with socialism is that eventually you run out of someone else’s money.” That point has now been reached by the Greek domestic economic system, and despite crunch time having arrived, Greek officials are intent to take whatever action they can in order to not be forced to go it alone.
Any request for an injunction against EU bodies at the European Court would be an unprecedented development, and if successful would ensure a further burden on the European Union’s central banking system.
Greek officials said they are seriously considering suing the European Central Bank itself for freezing emergency liquidity for the Greek banks at €89 billion. The European Central Bank turned down a request from Athens for a €6 billion increase to keep pace with deposit flight.
This effectively pulls the plug on the Greek banking system. Syriza claims that this is a prima facie breach of the ECB’s legal duty to maintain financial stability. “How can they justify setting off a run on the Greek banking system?” said one official.
Mr Varoufakis said Greece has enough liquidity to keep going until the referendum but acknowledged that capital controls introduced over the weekend were making life difficult for Greek companies.
Indeed, should this case be successful, it will not diminish the liability that Greece owes to the IMF, as it is clear that even if Greece launches a lawsuit remain in the Eurozone, it is still unlikely to pay its debt, and could even expand the debt further along with very expensive legal fees, and the full backing of a court order to remain in the European economic community and therefore under the full responsibility of the European Central Bank.
As political commentator Daniel Hannan described during the early hours of this morning, the EU program was supposed to help Greece back to recovery. Instead, it has condemned that country to joblessness, poverty and emigration. The ‘common people of Greece’ understand this clearly, even if some of their politicians, who have made a good living out of the Brussels racket, do not.
Cutting the loss may well be the best outcome for the European Central Bank as well as the future buoyancy of the Euro currency, thus if Greece is unsuccessful in its attempt to block the injunction, that could well be the best of a series of potentially expensive outcomes.