Greece entering final death spiral as explusion from EU looms

February 15, 2012 – GREECE – The escalating brinkmanship came as fresh data showed that Greece’s economy contracted by 6.8pc last year and at an accelerating 7pc rate in the last quarter, far worse than expected by the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF) “troika.” The country appears to be in a self-feeding downward spiral that is playing havoc with budget targets, leaving Greece with a Sisyphean task of ever deeper cuts. Premier Lucas Papademos called his cabinet together late last night to find a further €325m (£272m) of fiscal austerity demanded by the troika, likely to be defence cuts and lower salaries. The coalition parties failed to convince the Eurogroup that they would stick to the deal, and the mood has been poisoned by EU demands for an escrow account to seize Greek budget revenues at source. Blackened buildings set alight by protesters on Sunday were cordoned off on streets around parliament in Syntagma Square, a vivid reminder to Greece’s politicians that any misjudgment could push the country towards anarchy. Approval of EU finance ministers is needed to unlock all parts of the complex €130bn loan package, including a 70pc “haircut” for private holders of Greek bonds, allowing the country to avoid default in March. Germany and Northern allies seem willing to force Greece out of the euro unless there is total compliance, calculating that the eurozone is now strong enough to stem any contagion. Luc Frieden, Luxembourg’s foreign minister spelled out the warning in crystal clear terms. “If the Greek people or the Greek political elite do not apply all of these conditions, I think they exclude themselves from the eurozone. The impact on other countries now will be less important than a year ago.” Mr. Frieden even suggested a return to the drachma. “It might be something which would allow Greece also to get a new start, to create an economy that can create jobs,” he said. The tone of recent comments from Germany, Holland and Finland suggest that the creditor powers have already decided to eject Greece, causing great bitterness in Athens. –Telegraph