The odious, illegitimate debt of Greece


Henry IV at the gate of Canossa

"It was just a bunch of bankers printing money and throwing it at each other, like those traders in the pits over on Wall Street..."

Originally published 14/04/12

by Kevin Barker | info@thenotion.ca


I'm pretty happy overall. I like sunshine, holidays, and reading USA Today. Zippidity do dah! My pet peeves? Rude people and that brass-plated rag called The Economist.


Last week it published the usual apocalyptic yarn on Greece complete with somber overtones and the stupifying revelation that there's corruption there. Well no shit, Sherlock! Even the striped-ass baboons of Madagascar have worked that one out. The better question (not asked, natch!) is how and why Greece fudged its macroeconomic data over the past ten years.


Or even who. If I were King Poobah Banker of the ECB, or Ms. Merkel, I'd be demanding full, retroactive disclosure of their real balance sheets going back to 2002 as a pre-condition of any bail-out package. Call it truth and reconciliation. Public companies who cook their books have to restate their earnings, why shouldn't Greece? Because a few of the fancier fish would get fried as well, that's why. Also why The Economist publishes mamby pamby stories that dance around the hard questions.


Postscript: July, 2015

Greece  did indeed write and even publish an exhaustive report into the entire Greek bail out story, and it's more complete than I expected; nine chapters, ranging from their debt position before the involvement of the Troika (ECB,IMF, European Council), right up to a detailed explanation of the more draconian conditions of the debt mechanism, (€40 billion had to be spent on military), its impact on their social classes, and a legal argument for the suspension of debt obligations.

Look, this wasn't a bailout


It was the excuse for a bunch of bankers to print money and throw it at each other, like those traders in the pits over on Wall Street. A few jackals like Dan Loeb at Third Point LLC picked up some points feeding off the scraps, approx. $500 million according to the Greek government; Germany alone made €400 million from the first loan according to Der Spiegel.

Other goodies in the report

The president of the Eurogroup, Jean Claude Juncker, stated that the disbursements from the bilateral loans in 2010-11 would recapitalise banks and pay wages and pensions. They didn't. Almost all of it went to creditors; the balance, less fees and structural costs, went to the Greek budget. Everybody got bailed out except Greece. It didn't even see the principal.


Just so that you know?

Lending money isn't the onerous task the Troika would have us think. It's really a very good business if you can offload the risk, and only slightly less lucrative if you can't. Euros don't cost anything to make. They only have value after being issued as debt, to the so-called P.I.G.S. for a start - Portugal, Italy/Ireland, Greece, and Spain - who spend it on cars and cell phones and the rest of the junk made by Europe's A listers.

According to Euclid Tsakalotos, Greece's new finance minister, PIGS accounted for 17% of Germany's balance of trade surplus in 2007, or 1.43% of its GDP. That percentage is small, but in dollars it calculates to $48.6 billion. Include Italy and the figures are roughly double. That's a lot of juice! These countries are flush. Germany had a budget surplus last year of 0.7% of GDP. Norway posted 8.50. Holland had 10. France is a mess.

" ...Greece will pay a risk premium on the bail-out, like Venezuela paid to Goldman Sachs for taking its paper during the Chavez years ..."

The latest three-year deal with Greece - its third in five years worth some €86 billion Euros - has more in common with a bond sale than a bail out. Most of the rescue funds will come from the ESM, or European Stabilisation Mechanism, funded by contributing nations out of their account surpluses. Or borrowed for next to nothing. Greece however will pay a "risk premium" on the bonds, or the loan, or whatever you call it, just like Venezuela paid to Goldman Sachs for taking its paper during the Chavez years (GS earned aggregated returns of better than 500% on Venezuela bonds over the decade). Ka-chinnnng! Ring the cash register, boys! There's life in the old girl yet!


The terms include transferring Greek assets to a Brussells controlled "fund" which will "monetize" them, ostensibly to generate €50bn over the life of the loan. Perhaps they'll "securitize" them as well. You may find the Parthenon bundled with the Greek Power Authority on the shelf of investment products at your friendly neighbourhood financial institution.


I guess the financial annexation of Greece by the EU, specifically Germany, is the price someone has to pay for economic anschluss in Europe. Oh dear, did I just borrow some of the vocabulary from the Reich? Yes, I suppose I did.

Obviously Europe is warning the rest of its malcontents it won't tolerate Alexis Tsipras and Tsakalotos and the rest of their kind in its group. Tsakalotos, an Oxford economist only slightly less buttoned down than predecessor Yanis Varoufakis, would undoubtedly agree. An interesting character in his own right, Tsakalotos seems to offend an entirely different class of people, namely Oxfordian economists. What they mostly object to is his use of an obscure typeface in the publication of a 2010 treatise on the Greek crisis, which seems petty inocuous unless you understand that economics is as much a religion as a science for those at the top. Their published papers are deemed holy scripture.

This sort of criticism merely obscures the point he is really trying to make, and which is studiously ignored by our own business press; that a single currency is inequitable unless both the countries with surpluses and their southern counterparts, who run deficits but nonetheless constitute significant demand for exports, are prepared to make adjustments. I mean, who really needs whom? The Mediterranean is brimming with youth, in Greece the biggest age group is 24 to 50. The north is full of dried up septuagenarian Lutherans like Merkel who don't spend and save. Do the math.


What Brussells no doubt ultimately wants, or rather needs, is some kind of Scandinavian tax structure in the sunshine belt. I'll go way out on a limb here and suggest nobody pays taxes in Greece; from the oligarchs to the stall guy on the street. However, the lack of one didn't keep the IMF and EU member states from falling over themselves to lend money. The first IMF bail out was 3,200% of Greece's quota. They had to know the data it was based on was fictional. Average incomes of $30,000 per year? Really? That's the same as South Korea. Were they expecting olives and ouzo to generate that kind of dough-re-mi? It was a feeding frenzy, and everyone got into the act; funding agencies, nation states, vulture funds, some guy named Luigi, etc.


In scanning the crowd of villains in this story I can't seem to find the Greek people anywhere. But wasn't it their profligate spending that led to this sovereign credit event? That's just so much fiction. Gee, America's in debt but it's ok with sinking $400 billion into its new Harley, the F-35 fighter jet ("... but honey, we need an F-35!").

The chances any of the suits will make a trip to the confessional are next to none. They'll go to war first, with Putin, who wants to run the south stream gas pipeline through Greece to southern Europe. Not so coincidentally, Putin has a proposal to expand the Nord Stream line from Vyborg in the Russian Federation to Greifswald, Germany. That's got to be a tempting proposition for Merkel huh? An abandoned mine site on the line at Waren, Germany would become the largest underground gas storage facility in Europe. I doubt NATO is doing cartwheels over that. Well, she'll deal with that after dispatching Greece.

Anyway there's a precedent of sorts; Russia sold us out to the Germans in '39 so now the reverse scenario is conceivable. It's an energy pipeline pincer movement. But gosh, we have our own pipeline we want to run through Greece. Actually we have two, the Trans Adriatic and an earlier one called Nabucco. The west makes its plans; Putin laughs.


As for all the squawking from Merkel and her demagogues in the Troika camp, oh please! Iceland bailed and nobody said a word. But Reykjavik isn't in Eastern Europe and we weren't in a cold war so nobody needs them to buy €40 billion worth of military hardware, though the IMF would undoubtedly finance it, benefitting the likes of Dassault and Thales Group. Unless Putin tries a sneak attack over the north pole nobody gives a damn about Iceland.

To be perfectly honest the squawking from Tsipras and the Socialist camp seems a little overdone too. The two sides aren't that far apart on those sticky VAT and luxury tax demands. A point or two. Big deal. The bitter pill for Greece is the IMF demand for primary surpluses; which is a polite phrase for the selling of Greek assets to fill up the kitty for interest payments. I think all western nations got that memo this year; sell assets if you have to but post an account surplus in case we need to call in the loans. What are they expecting, financial armageddon? Krist, not another one!


The Troika's proposed changes to the Greek labour code comprise the matching shoe to this; gut the labour code, grab the assets, fire everybody, roll back wages and the pension funds, pay off the Troika, move the circus to Ukraine and repeat. It's a win/lose proposition, and Greece knows it.


The IMF added urgency to the demand for surplus by divestiture last week when it affirmed in a preliminary report (jotted on the back of a Starbucks serviette no doubt) that failure to do so will weigh on Greece's economic growth. Well NON-divestiture will certainly weigh on its capacity to pay interest, which is what the IMF really cares about. I mean come on! The world's financial mafia isn't losing sleep over economic growth in Greece. It's just business, like when the mob puts one in your ear.

The report adds that maturities of the European loans need to be extended. This shows the Fund at last getting religion on what Tsipras has called the unsustainability of the debt, but only in the context of recent events; according to the IMF it was the new liquidity demands which skewed the repayment metrics, and not the Troika's package. Apparently some narrow window of opportunity was lost by all the finagling over the latest Troika offer. I don't think anybody believes that.


Quite frankly I don't see either side managing to save face through all of this. The Troika's refusal to accept Greece's extremely moderate demands means it would rather see an entire generation of working poor than lose a lousy point or two off their book. Shame on them! For its part I don't see how Syriza can appease its support base even with a no vote on Sunday; the government was elected to spearhead a freedom revolution against the 1%, not win a raft of tiny changes to the country's tax regime.


Whatever. Even a capitalist like me will admit that Socialists and the courts, the real ones, have their uses. Don't forget, it was a Spanish judge who indicted Pinochet back in 1998 because the Chileans and the British didn't have the guts to. Once those wheels start turning anybody could be next, even those fancy fish I referred to earlier.


It's the socialists and lawmakers in history who save us from ourselves, not the bankers and generals. Syriza and the Podemos people's party over in Madrid are off to a rocky start, but for the free world it's the only game in town.

- Kevin Barker | Contact: info@thenotion.ca 


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