The Humiliation of Greece
“How can one speak of default in the future tense when we’re already bankrupt… Don’t you see the people scouring through garbage and sleeping on sidewalks? Those who led us to bankruptcy – the troika and the government – now claim they want to save us from bankruptcy. It’s incredible.”
— Mikis Theodorakis, composer and songwriter
“Everything is changing. Everything is frightening.”
–Kathimerini, Greek newspaper
If Greece’s €130 billion loan was going to be used for fiscal stimulus, then it might be worth the commitment. Because that kind of money could put a lot people back to work and kick-start the economy fast. But the loan isn’t going to be used for stimulus. It’s going to be used to recapitalize the banks and pay off creditors, neither of which will do anything to boost activity or create jobs. So, why bother? Why dig an even deeper hole if it achieves nothing? If that’s the case, then Greece should just default now and start rebuilding the economy ASAP. There’s no point in putting it off any longer.
The troika (the European Central Bank, the European Union, and the International Monetary Fund) is demanding another €3 billion in spending cuts even though unemployment is tipping 20 percent and the economy shrank 7 percent in the last quarter. What sense does that make? You don’t have to be a genius to figure out that Greece won’t reach its budget targets if tax revenues continue to fall because everyone’s either been laid off or taking a pay-cut. It will just make a bad situation even worse. But the troika doesn’t worry about these type of things. They don’t care that their lamebrain economic theories have failed miserably so far, or that their austerity measures have been a complete flop. They just keep plugging along making the same mistakes over and over again, impervious to the criticism of reputable economists, oblivious to the abysmal results, they remain steadfast in their commitment to belt tightening, sure that a strict diet of breadcrumbs and water is the best way to nurse an ailing economy back to health. It doesn’t bother them that the facts prove otherwise.
Fitch isn’t convinced that austerity will work, in fact, the ratings agency lowered Greece’s rating to “C” on Tuesday, saying that they now think a default is “highly likely”. Similarly, a “confidential report” that was given to EZ finance ministers on Sunday –indicates there’s a high-probability that the slump in Greece will get worse and that the country’s debt-to-GDP ratio will still be 160 percent by 2020, a full decade after the implementation of austerity measures. So even if Greece sticks with the hairshirts and follows the troika’s diktats orders to the “T”, its debt could still be at “unsustainable” levels 8 years from today.
Then why take the loan to begin with? Why not just default quickly and get it over with? Let the creditors (mainly German, French and English banks) sort out the losses. That’s their problem. Look; if you can’t pay your bills, you declare bankruptcy, right? That’s the way the system’s supposed to work. The same rule applies to countries. If they get in over-their-heads and can’t service their debts; they call a “Time Out”, raise a white flag, and start over. It’s time for Greece admit that the game is over and call it quits.
Now we’ve all heard a lot about “lazy Greeks” and “profligate spending” over the last two years, but here’s the truth: The lenders that are always to blame. Always. It doesn’t matter if Greece is the biggest deadbeat in history; that’s completely irrelevant. It’s the lender’s responsibility to do due diligence to make sure that the borrower is creditworthy. The borrower has no responsibility in that regard. None. It’s not his job to sniff around to see if so-and-so is employed, or if he pays his bills, or if he has a good credit history or whatever. That’s the banks job; and they’re pretty good at it, too, (when they’re not scamming the system with toxic mortgages.) That’s because they have very strict criteria for lending, and if an applicant doesn’t meet that criteria, then –BOOM–out the door they go. So, if EU banks lose a ton of money because they didn’t do their homework and they were too stupid to figure out that lending to Greece was riskier than lending to Germany, then who are you going to blame? Greece? No way.
Of course, the people in power reject this line of reasoning because they don’t think banks or bondholders should ever lose a dime. That’s what this latest bailout fiasco is all about, trying to protect ignoramus bankers from losing doe on their crappy bets. But if the bankers don’t take the losses, then, who will? Working people? That’s how its playing out at present, but that’s also why Athens has turned into a war zone, because the wrong people are getting slammed for a crisis they didn’t create and shouldn’t have to pay for.. Here’s how Satyajit Das sums it up over at naked capitalism: “There is no longer any pretence of “assisting” Greece. It is about ensuring that German and French banks minimise their losses.”
See? This isn’t about Greece at all. It’s just another bailout for the big finance creeps. Here’s more from Das:
“It is probable that no funds will be released to Greece but rather placed in a special account from where it will be used to meet the country’s debt obligations….Germany and the Netherlands have suggested that the EU assume control of Greek finances and elections be suspended in favour of a technocratic government, having the confidence of Berlin, Paris and Brussels. In the end, the communique required Greece to pass a humiliating law giving priority to debt repayment over other government obligation.” “It’s all Greek to me”, Satyajit Das, naked capitalism)
Now that Greece has agreed to indentured servitude for the next millennia or so, the Eurocrats have decided to pile on more onerous conditions, like putting a taskmaster in Athens to oversee the budget to make sure that foreign creditors get their money before pensioners, dependent mothers, cancer patients, disabled veterans, homeless children, and unemployed workers. How’s that for priorities? At the same time, hardliners in Germany want the Greek parliament to pass a bill that would make it impossible for future parliaments to reject the terms of the bailout. In other words, Greece is expected to repeal the fundamental principles of democratic government in order to pay back the cutthroats that issued the loans. The next thing you know, the Greeks will have to post their firstborn as collateral on the loans. Where does it stop?
And–as we said earlier–the bailout doesn’t even fix the problem. The Greek economy will continue to decelerate while the nation’s debt-to-GDP ratio will continue to rise. So, once again, why agree to a deal that’s only going to make matters worse?
Here’s a clip from an article in Der Speigel that draws the same conclusion:
“Of course, the 130 billion would not solve the problem. It is only intended to buy time. Time until the financial markets have stabilized to the extent that they can handle the actual bankruptcy of Greece without a chain reaction. Without bank failures, no knock-on effects through the loss of credit insurance and no interest for the remaining problem of explosion of the Euro-zone countries.” (“Stop the 130-billion bank transfer!”, Der Speigel)
So, Greece is being sacrificed to prevent another Lehman Brothers; is that it? It’s being stripped of its sovereignty and its people are being reduced to a decade of grinding poverty because undercapitalized, over-extended and under-regulated financial institutions are lashed together in counterparty conga-line that could blow up at any minute and take down the entire financial system along with it. Is that it? Is the system really that fragile or is Lehman being invoked (much like 9-11) to achieve a different objective altogether; to replace elected representatives with agents of the bank Mafia who plan strip-mine the country of its national treasures while crushing organized labor beneath its bootheel.
But isn’t Greece at least partially responsible for the present crisis?
Sure. Corruption, cronyism and tax evasion are rampant, but the real problems didn’t surface until 2009 as composer Mikis Theodorakis explains in this post on his web site:
“Until 2009, there was no serious economic problem. The major wounds of our economy were the enormous expenses related to the purchase of war material and the corruption of a part of the political and economic-journalistic sector. For both of these wounds, foreigners are jointly responsible. Germans, for instance, as well as French, English and Americans, earned billions of Euros from annual sales of war material, to the detriment of our national wealth. That continuous hemorrhage brought us to our knees and did not permit us to move forward, while at the same time it made foreign nations prosperous. The same was true of the problem of corruption. The German company S, for instance, maintained a special department for buying off Greek stakeholders in order to place its products in the Greek market. Hence, the Greek people have been victims of that predatory duo of Greeks and Germans, growing richer at their expense.
It is obvious that these two big wounds could have been avoided if the leaders of the two pro-American parties in power hadn’t been eroded by corrupt elements who resorted to excessive loans in order to cover the leakage of wealth (the product of the Greek people’s labor) into the hands of foreign countries, resulting in the public debt reaching 300 billion Euros, i.e. 130% of GDI (Gross Domestic Income).”
Sound familiar? The banks lend gobs of money to crooked contractors and venal politicians who line their pockets while buying a bunch of useless military equipment in one big feeding frenzy. Everybody gorges at the public trough; everybody gets fat and happy. How many times have we heard that story before? And–Oh yeah–some of the Wall Street heavyweights also helped the Greek government hide the amount of red ink that was on its books so they could keep this larcenous sharkfest going as long as possible. Now that the bills have come due, the cockroaches have scattered, and working people are left to pick up the tab.
Is it any wonder why the victims of this baldfaced ripoff have taken to the streets and set Athens ablaze rather than accept their fate lying down?
No one thinks that this latest Greek bailout is anything more than a can-kicking exercise designed to prolong the inevitable. Eventually, Greece will default, and the reason it will default, is because the policies that have been implemented have made failure unavoidable. The vicious belt-tightening regime imposed by Brussels and Frankfort wasn’t intended to lift the economy back to productivity and growth; it was intended to punish, humiliate and create a “permanent state of colonial dependency”. It’s just “shock therapy” in different wrapping.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press. He can be reached at email@example.com