As unbelievable as it should be, the EU has just finalized a new bailout of Greece, thereby extending the misery. It remains hard to believe how this new bailout can solve the problem, or not damage the Greek economy even more. Even though they know the existing economic assumptions are wrong, they're still moving forward. How is this not complete madness? FT via Business Insider:
Under the tailored scenario described above, the debt ratio would peak at 178 percent of GDP in 2015. Once growth did recover, fiscal policy achieved its target, and privatization picked up, the debt would begin to slowly decline. Debt to GDP would fall to around 160 percent of GDP by 2020, well above the target of about 120 percent of GDP set by European leaders. Financing needs through 2020 would amount to perhaps €245 billion. Under the assumption that stronger growth could follow on the eventual elimination of the competitiveness gap, the debt ratio would slowly converge to that in the baseline, but likely only in the late 2020s. With debt ratios so high in the next decade, smaller shocks would produce unsustainable dynamics, leaving the program highly accident-prone.It's no wonder people are protesting in the streets of Greece. How could people not march at this point?
And keep in mind, they tried the same madness in the UK to similar results, and the Republicans, with the help of the Democrats, are cutting spending in the US as well. Was there ever a better definition of voodoo economics (or voodoo politics)?