The shortest ‘Grecovery’ in history

Greece is struggling to raise the money its needs to continue to access international rescue funds. Photo: Reuters

For a moment there were signs that the patient may be responding to treatment.

The Greek economy, the worst of all the eurozone’s basket cases, was perhaps only ‘resting’ after all. Maybe reports of its death had, indeed, been greatly exaggerated. Or maybe not.

News this morning that the attempt to sell off the Greek state’s biggest gas company, DEPA, has failed has sent the ‘Groptimists’ scurrying for cover once again.

The Russian giant Gazprom had been expected to snap up DEPA and its related oil facilities for around €1bn, but in the event it bid precisely nothing. And nor did anyone else.

Last night civil servants were sitting at their desks waiting for the 10pm deadline for bids, only to realise as the minutes ticked away that there was not going to be a single one.

Add to that the failure to sell-off the state lottery and various parcels of government owned real estate, and the scheme for repaying a decent slug of Greece’s national debt has hit the buffers.

Foreigners just aren’t interested, either because they don’t believe that talk of a ‘Grecovery’ is real, or because they still think a ‘Grexit’ is on the cards and all these assets will soon be available at half the price, in drachmas.

People reach out to grab free fruit and vegetables last month in Athens. Credit: Reuters

This failure alone would not necessarily condemn the Greeks to (yet another) round of doom-mongering, but it comes on the back of news that the government is going to need around €4bn more than had been thought from international rescue funds to keep going, plus a damning IMF report last week that said Greece had, effectively, been sacrificed by the EU and the European Central Bank in order to save the euro.

The IMF was brutally honest about its own failure to heed the warning signs, that the austerity being imposed on Athens was going to be entirely self-defeating, that if you insist on cuts of that scale you simply create an economic depression that makes a debt crisis worse rather than better.

Admirably candid, but of little consolation to suffering Greeks, especially when the Eurozone dismisses any suggestion of a ‘mea culpa’ of its own. "We were right then, and we’re right now", is the message still coming from Brussels and Frankfurt.

Presidential guards are seen through a burned EU flag in Athens on May Day this year. Credit: Reuters

The IMF is clear that another huge debt write-off is going to be needed before long.

And as the only people who still own Greek debt are other governments and central banks, this time it is going to cost (mostly German) taxpayers a lot of money.

Not what they want to hear in Berlin with elections just three months away.

The respected commentator Wolfgang Münchau wrote in the FT this morning that his own expectation is that:

Greece will remain stuck in a vicious circle of recession and debt deflation until it either leaves the Eurozone and defaults unilaterally, or there is a fundamental shift in policy

As of now, there is no sign of the latter.