The Oracle of the Wise

Despite the success of the “pro-bailout” parties in last weekend’s Greek elections, Greece is not yet out of the fiscal woods. JLH has translated an article outlining the German perspective on the Greek meltdown. He includes this note:

Here is a short article that was published yesterday at the German-language blog about Greece that reveals for the first time — to me at least — the existence of a German committee of “five wise ones” who are tasked with assessing the future.

One of the members of this group of five, who each serve for five years, has laid the blame for Greece’s problems at the door of the “Troika”, which refers to the European Commission, the European Central Bank and the International Monetary Fund, acting in concert.

The Five Wise Ones and the all-powerful Troika… Even the Grimms could not have created a more fabulous power structure! But wait. Wait until you hear the wisdom that flows from this moment of reflection. Just think, to create this much confusion in the USA, all we have is our president and Ben Bernanke.

The translated article from the Griechenland-Blog:

The Recommendations of the Troika Are Primarily Responsible for the Greek Crisis

June 19, 2012

Peter Bofinger, a member of the federal government’s “Council of the Wise,” lays the burden of the Greek crisis on the false prescriptions of the Troika.

“Not only Greece itself, but the economic prescriptions of the Troika are responsible for the deepening of the crisis in Greece,” emphasized the member of the federal government’s “Council of the Wise Ones” on economic matters, Peter Bofinger, and he notes: Exiting the crisis requires as an outcome the changing of the prescriptions, and not merely their cosmetic improvement.

“Greece must be saved. Brussels cannot whistle past the graveyard and watch as the country slides into anarchy and catastrophe. On the contrary, Brussels has a vital interest in helping Greece get back on its feet, chiefly through stimulus programs. Besides, the negative developments in Spain and Italy show that Greece is not the only party responsible for the crisis. The false prescriptions for its therapy bear the most responsibility for the crisis,” Bofinger said to the Sunday edition (June 17, 2012) of the Greek newspaper To Vima.

A Greek departure from the euro would be catastrophic for everyone

Mr. Bofinger characterizes a possible exit of Greece from the eurozone as “catastrophic for all” and expresses the hope that “those responsible will do everything in their power to avoid this greatest of all misfortunes.” He adds further:

“The Greek parties say, ‘No, we will not fulfill the obligations.’ and the other side replies, ‘OK, then we will throw you out of Europe.’ If it really comes to that kind of head-on collision, both sides will suffer colossal damage. An uncontrolled exit would be catastrophic for Greece. But the same would be true fort the rest of the Eurozone, because it would rattle countries like Portugal, Spain and Italy. The best thing for both sides would be a compromise based on finding new macro-economic conditions.”

The member of the federal government’s “Council of the Wise” also emphasizes: “Greece will not be able escape the crisis alone. The first thing it must do is to slow the rate of the collapse, by postponing the enactment of the savings measures. The second is to take recovery initiatives through structural reforms, like opening closed professions. All of this. however, is not enough for the country to come out of the valley of depression. There must also be financial support from outside.”