IMF Concludes Regular Mission in Bulgaria, Recommends Restoring VAT to Pre-Pandemic Levels
The International Monetary Fund (IMF) has wrapped up its regular mission in Bulgaria
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In an article titled “Greece: Down and Probably Out”, Professor Steve Hanke argues that another Greek debt default is just around the corner.
He begins by stressing that the Syriza coalition has accomplished “virtually nothing” during the first three months in office, with Finance Minister Varoufakis abusing exploiting the concept of austerity against the backdrop of government spending amounting to 58.5% of Greek GDP.
Hanke declares Greece “a serial deadbeat” and goes back in time to list previous cases of financial woes for the country, the earliest example being a default in 1832.
He goes on to say that Greece’s accession into the European Monetary Union (EMU) on January 1, 2001 happened amid suspicion that it had been accomplished through some “accounting trickery.”
The professor argues that Greece got into trouble when other countries stopped footing the bill.
He blames the International Monetary Fund (IMF), as well as the European Union (EU) and other creditors, for contributing to making the country a ticking bomb.
To illustrate his point, he says that the IMF provided Greece with credits worth 1,860% of its quota, against a standard of lending up to 200% of a country’s quota in a single year and 600% in cumulative total.
He warns that the situation in 2015 looks very grim despite the GDP growth of less than 1% in 2014.
Hanke says that the monetary approach to national income predicts further contraction of the Greek economy, adding that broad money growth, which has been in negative territory since December 2014, is currently contracting at a 9.77% rate.
He looks at the condition of the four largest banks, emphasizing that bank money makes up 84.26% of the total money supply in Greece.
Using a formula called the Texas Ratio, which measures the likelihood of failure by comparing a bank’s bad assets to its available provisions for bad loans plus its capital, he insists that Greece’s banking system, which produces about 85% of Greece’s money supply, is on the verge of being forced to shut down.
Hanke warns that another Greek debt default looms ahead, adding that economic collapse cannot be ruled out too.
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