“Bailouts and austerity measures create vicious cycle” – analyst
5 Jun, 2011 18:26
The current system under which Greece is being bailed out can only lead to another recession, believes Pierre Guerlain, political science professor from the Paris West University Nanterre La Defense.
"Europe and the IMF want Greece to tighten its belt more and more so there is no way Greece by itself can get out of the crisis," he said. "If you tighten your belt more and more, you create a recession and if you create a recession, the situation gets worse and worse and it is harder and harder for you to pay back your debts.""The bailout means you lend money, and this money has to be paid back," Guerlain added. "If you tighten your belt, it means that you create a recession. You do not create the resources to pay back your loans. I think that Europe and the IMF are trying to bail out the banks that lend the money to the Greeks, rather than Greece itself."Pierre Guerlain added that austerity measures are in principle unable to revive the economy, because in this situation people are spending less and less. Greece might receive the next 12-billion-euro tranche of its 110-billion-euro loan in July. Athens has promised to implement stricter austerity measures to stabilize its economy – a goal it has failed to reach so far.Spain may be a step closer to an EU bailout after Germany wrongly claimed the country's cucumbers had caused Europe's deadly E. Coli outbreak. Author and researcher Adrian Salbuchi believes there are powerful reasons behind what is happening when things like this arise in the mass media."There are increasing centrifugal forces within the EU that have already made a lot of people talk about partial fractures, partial break-ups," he said. "We have heard that if Greece does not find its way around the financial crisis, it might pull out of the European monetary mechanism – the Euro. Very often one can even imagine that Germany, or many powerful people in Germany, are wondering why they ever got themselves into the Euro to begin with.""It' is not good to just jump to the first obvious conclusion about a piece of news," he added. "We must try and find other layers of truth and reasoning."