‘New Greek bailout doesn’t make sense economically’

‘New Greek bailout doesn’t make sense economically’
It’s simply wrong to expect that further credit and rescue packages, such as the one approved by Germany on Wednesday, will help Greece to return to prosperity, says Dr. Thorsten Polleit, honorary professor at the Frankfurt School of Finance and Management.

The German parliament has overwhelmingly approved a third bailout for Greece. But it was only after hours of angry debate which saw leaders strongly criticized for their handling of the Greek crisis.

READ MORE: German parliament approves €86 billion Greek bailout

RT: How surprised are you that it was an overwhelming 'yes' in the Bundestag?

Dr. Thorsten Polleit: One should never overestimate the wisdom of the parliamentarians. The parliamentarians in the German Parliament voted ‘Yes’ in 2010 for the first package for Greece, and they voted ‘Yes’ overwhelmingly for the second package, and now again they vote for another package which doesn’t really do the trick, and further problems will occur.

RT: The opposition claims the German government actually is gaining a lot from the deal. What do you think that could be? For example, Gregor Gysi said Germany was earning €100 billion from the Greek crisis because of a favorable interest rate policy. Does he have a point?

TP: I don’t think so. This so-called rescue policy doesn’t really do the trick. The overall debt situation in Greece has become worse; in 2010 debt to GDP was about 140 percent now it’s close to 200 percent despite debt relief of more than €100 billion at the beginning of 2012. It’s simply wrong to expect that further credit, further rescue packages, as this, will help Greece come back to prosperity.  

RT: What’s behind the scenes here for Germany then?

TP: The Germans have extended credit by more than €100 billion and this won’t get repaid. I think it’s pretty sure that Greece cannot service its debt and the money is lost. I don’t think it makes much sense to come along and say “There are some benefits for Germany when it comes to this Greek rescue package”.

RT: Why is German Finance Minister Wolfgang Schauble so supportive of the deal now, considering he only recently entertained the idea of Greece temporarily leaving the eurozone?

TP: There is strong international pressure being put on the German parliamentarians I guess and they are talked into agreeing to this third rescue package, but from an economic standpoint it doesn’t really make sense.

RT: It is still unclear whether the International Monetary Fund will take part in the bailout. What happens if it doesn't?

TP: Behind the scenes, they will prepare a kind of debt relief. Technically speaking what we are going to see is an extension of credit maturities which boils down effectively to a debt relief but it’s kind of camouflage trick.

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