Trust the FT to deliver the goods on Greece. Today they carry this article:
What else the article says beyond the headline does not really matter much: the headline is the story that after five years of misery having been imposed, wholly unnecessarily, on Greece there are many who would argue that the misery should persist to ensure we do not “frighten the markets”.
So who are “the markets”? Let's be blunt, it's banking and related financial services entities. That's it. No one can pretend that “the markets” are anything else but the vested interests of the City of London and its related entities around the world. It is this elite who must not be “frightened”, poor little dears that they are.
And let's be clear what they must not be “frightened” of: it is the fear that they might lose some money, which might impact on their bonuses. That is what we must not do.
So what Gideon Rachman is really saying that he is making a choice between the interests of the Greek people and democracy and the interests of a small, wealthy and powerful elite here and is siding firmly on the side of the elite. Although it is wholly irrational to think that Greece can ever repay its debt, or recover from the situation it is in that has been imposed upon it by others and is not of its own making, he would rather people suffer, and he would rather the process of democratic choice be over-turned, than ask bankers to face up to what might best be called the bleeding obvious, which is that Greece cannot and never will pay, just as Spain and Portugal and maybe Italy might not pay either.
Of course there is a crisis. But rather than face it Rachman would have people suffer, and quite literally died through lack of healthcare, than have bankers face facts, including the fact that they have called this one wrong.
It's very hard to grasp that mentality. It's not hard to point out that it is loathsome. And that it is dangerous. And in that case it is, of course, right to side with Syriza in its desire to free Greece from the punishment that those who think they have a right to pass judgement are seeking to impose upon Greece, and other countries.
There must be only one winner in this argument, and it is Greece.
NB: It is fair to point out that the FT does carry other views on this issue as well.
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The markets include pension funds and retail banks, both of which we depend heavily. Would you like to see your pension which you invested in for many years become almost worthless? Would you like our banks become unable to lend for mortgages and loans? Why should we suffer because the Greeks decided to take on more debt than they could ever manage in the event of a global downturn? If I took out a loan and lost my income, I still owe that money, I could go bankrupt and deal with the fall out that comes with that. Or I could tighten my belt and continue to make the payments. I know what I’d rather.
First if all almost all Greek debt is owned by the ECB. There is no risk of a pension fund going bust as a result of its actions.
Second, Greece did not take out a loan. It had a situation imposed on it. That’s very different.
Third, would I prefer that people could live rather than have my pension impacted a tiny amount? Of course I would
And fourth, do I think banks will never face bad debts? Of course I don’t
And fifth, are we talking about belt tightening? No, we are talking about destrcution of a state. Please do not make such stupid (I mean the term) comments
If you want to know where your risk to your pension is it is in mis-selling and fines on banks – whose values vastly out weigh Greek debt
It seems to me there is an enormously higher risk to the destruction of pension value, and everything else finanancial and otherwise that we hold, by the risk of war. We know very well what happened in Europe the last time a country was completely trapped and unable to grow by its peers. It would be foolish to make the same mistake again.
I agree
The Soviet Union collapsed? The end of the communist bloc? You’re showing your true colours.
I’m a practicing chartered accountant who has been the director of quite a number of entrepreneurial companies
True colours? Yes, I’m in favour of the law being upheld and all business operating on a level playing field
And as a Quaker I am in favour of social justice
But the rest just shows how absurd you are
Apologies, I didn’t realise this was a parody site. Carry on.
haha
Oh sorry the other way. The sulking corner is over there to the right 😉
Richard gave you five completely reasonable replies. If you have a rebuttal offer it. Don’t hide with sarcasm and snivelling rhetoric.
I think branding a reasonably insightful and worthwhile comment “stupid” leaves little point in him responding. Very rude and no decency. How dare he not agree with Richard.
The comment was stupid
I am a friend of the truth
Personally I thought your response was stupid:
1) he was talking about the markets reaction to a default, not who owns the debt.
2) Greece had a choice between leaving the Euro or accepting the bailout. It chose the bailout and austerity
3)your pension will be impacted more than a tiny amount
4) defaulting on debts have massive future implications in terms of borrowing. Only way to borrow in future is at sub-prime rates
5) it’s not destruction of the state, it’s the reduction of a state that was unsustainable and relied on borrowing to keep it going.
Bottom line is they borrowed the money and enjoyed its benefits while it lasted, I’m fed up of paying for other people’s mistakes so why should I pay for the Greeks. The Greeks elected the government who got them
Into this situation so they can’t claim it’s not their fault.
Respectfully, your commentary is more than a little absurd
First, Greece is already effectively out of the market – almost none of its debt is there so contagion need not be an issue
Second, when the crisis happened Greece did not have an effective choice
Third, for reason noted pensions need not be impacted
Fourth, corporate losses have impacted pensions vastly more
Fifth, so will QE and I do not see you complaining
Sixth, this is destruction of a state – GDP has declined 25% – mainly in the private sector
Seventh, you reveal your own rather unpalatable prejudices in your commentary
perhaps a second opinion by an Economic Noble winner might help?
http://krugman.blogs.nytimes.com/2015/01/26/greece-think-flows-not-stocks/?module=BlogPost-ReadMore&version=Blog%20Main&action=Click&contentCollection=Opinion&pgtype=Blogs®ion=Body#more-38039
No, Greece didn’t have this situation imposed on it. Greece had far too much debt, and needed a bailout. Twice. So it went cap in had to the troika – by this point the only people willing to lend to it, and asked for money. In return for 200bn odd Euros of financing, they imposed conditions on Greece. Which is pretty normal when a creditor extends credit to a hugely distressed debtor.
It’s horse before cart to suggest that Greece has no culpability in the situation they find themselves in. You’ll remember that Ireland was also bailed out, with similar conditions imposed, but are not in the siutation Greece is.
It is also laughable to suggest that bank fines vastly outweigh the value of Greek debt, or are more of a risk to pensions. If Greece defaults, it will dramatically affect the European financial system – pushing yields higher on all European periphary debt, which pension funds hold lots of. Banks getting fines might marginally affect their share prices, but it’s very unlikely there will be any systemic risk from that, and the affect on pensions will be minimal at best.
If Greece had been a company it would have got a fair deal
Why does a country get something so much worse?
If Greece was a company, it would have gone into administration and sold for parts. If it was a bank it would have been bailed out by the government and answerable to them and the tax payer. In fact just like Greece is answerable to the EU.
Greece would have been out of bankruptcy now
Fair deal?
Greece asked for the money, and got a bailout of 110bn. Then they got another bailout of 130bn, which also included longer payment terms and lower interest rates. Then private holders of Greek bonds took a roughly 50% haircut on their holdings – a massive debt write-off.
I’m not sure how many companies would get such generous terms without being wound up, or how this wasn’t a fair deal for Greece – when no-one else would lend to them they managed to get long term financing at 3.5% rates (when at the time the market rate was well over 10%, peaking at over 30%) from the troika.
http://en.wikipedia.org/wiki/Greek_government-debt_crisis#First_Economic_Adjustment_Programme_for_Greece_.28May_2010_-_June_2011.29
Individuals get such terms
That is the fair comparison
Greece is not a company
It is people
We accept bankruptcy not just for compassionate reasons, although they are appropriate, buit because pragmatically it works
Why don’t you agree?
Or would you rather people suffer?
I have no problem with Greece going bankrupt – which is exactly what is going to happen to them.
I do have a problem with the revisionism – that it is that fault of the Troika/markets/banks/neoliberals fault.
Greece and it’s government borrowed too much, and spent too much. They have too much debt which they will struggle to repay. They have been given multiple lifelines, which they are in the process of spurning. Trying to absolve Greece of all blame in this is nonsensical.
If and when they default, massive losses will be felt all over Europe, whose taxpayers will be forced to take much of the pain. Greece itself will be forced out of the Euro, which might in the long term be beneficial but short term will force a massive devaluation on them, making them poorer.
There is no pain free way out for Greece now, but they sowed the seeds themselves.
The obvious solution would have been for the troika to tell the various banks (whose loans Greece want to the troika fo funds to repay) to sod off and that they would lose their shirts.
When you are in the business of lending vast sums of money to countries at high levels of interest with the aim of making a profit, as all of those large banks were, you are quite at liberty to say “no, you are too high a risk”. everybody knew that Greece was a basket case financially, but the desire to squeeze a quick profit out of Greece overrode the risk considerations that all banks are supposed to weigh up before lending.
So what actually happened was that irresponsible lending by greedy bankers was unpayable (which the man on the Clapham omnibus could have poitned out even at the time) and, instead of doing as Iceland did and saying (as their prime minister did in so many words) that private losses would not become public debt, the troika’s cadre of bankers/1%ers/vampire squid supporters agreed to take on teh liabiltiy and exculpate the banks. Idiots. Consequently, the likely price of digging their elite chums out of a whoel largely of their own making is a destablised Europe and the possibility of the collapse of the Euro project, along with untold misery for about 10million Greeks.
In these situations you also have to ask who is really at fault: bog standard Greeks (who actually can’t dodge tax – they have a pretty similar PAYE system to that over here), or the corrupt elite who still tax the shipping industry (and thus is magnates) at 0%? There is a moral issue here. Despite all the usual unthinking ‘sick man of Erope’ commentary, most of the tax dodging wasn’t done by ordinary people because a) the tax system doesn’t permit and b) what they didn’t pay was far outweighed by what the wealthy didn’t pay.
For a more extreme example, look at post-apartheid South Africa: the ANC were so focused on sorting out the political situation that, sadly, they entirely forgot to sort out the economic situation. One key reason why SA is in such a hole today is that the country is crippled with debts run up largely by apartheid era whites who spent the money on improving white facilities and security – i.e. oppressing blacks. The only sensible thing to have done in 1992/3 was to write off the whole lot – but the poor, largely black, population is now paying that debt (and being starved of the public services that they so need) even though they didn’t benefit from it at all.
Like I say, an extreme example – but it’s the same idea: money borrowed for elite goals has been squandered and now, instead of their elite buddy bankers paying what the market would deem the right (catastrophic) price for that risk, the poor sods at the bottom have got screwed AND the rest of the normal people of the EU end up picking up the tab into the bargain.
Is there a senior figure in Europe anywhere who’d honestly admit to the scale of this corruption? I doubt it.
Thank you
And well said
Tom
Do you know anything about South Africa?
During apartheid SA was mostly shut out of debt markets. As such, there was very little debt inherited by the new ANC government in 1994. Even today, after 20 years of democracy, the country has very little debt – just over 40% of GDP. So little debt in fact in both government, public and private space that there was very little fallout from the financial crisis in SA.
As to the poor, largely black population paying that debt….SARS data shows that just 3.3m people (of a population of 52m) pay 99% of taxes.
Hear hear Tom!
The banks and financiers new this would worsen the Greek situation and then hoped that the resulting chaos would enable the further transfer of remaining public assets to the private sector as well as other ‘transformations’ deemed necessary by the neo-lib orthodoxy.
This was vulture capitalism in the raw. How to buy a country on the cheap – load it with crippling debts. Who’s next I wonder?
Greece isn’t getting bailed out – their creditors are. Apparently, only 10% of the bailout money actually goes to the real economy of Greece.
Richard
You are always telling us that you are a democrat. Indeed underpinning your view on Syriza’s plan is the need for the democratic will of the Greek people (or at least the minority that voted for all this) to be respected. And it appears significant to you that the larger part of the debt is held by the ECB and IMF. Great.
However, the Greeks aren’t the only demos in the equation. They made an open deal with other sovereign peoples, such as the Germans. And that deal, which they were NOT forced into, quite expressly provides for no debt mutualisation; the Germans would not have entered into the deal if it had. So why exactly should the clear will of that democratic sovereign people be ignored?
The ECB is not German is it?
Richard,
As always, it is difficult to determine which is more compelling: the insight provided in the blog itself or the deft handling of the comments ‘below the fold’. Of course it is vital that you continue putting your oar in regarding these issues. Given the length and breadth of those of us who follow your site, I would go further than that and say your are putting OUR oar in. After some thoughtful reflection, I believe we can all agree that the oar is in need of some additional enforcement, not ideologically but in practical terms.
Like most people, I believe, my pension is important to me. I worked many years to create a modest retirement. However, and this is key, my retirement rings hollow, especially in light of the plight faced by our Greek friends. This had led me to the thought of how we can all contribute to a practical solution. I think each of us should size up both our respective pension pots, as well as our retirement needs, and draw a line underneath the amount with which we can, as individuals, live without. The excess could then be provided, through our respective national governments, to the Greek government in a bid to offset the neoliberal dogma which has been wrought on the country. Here in the UK, we could efficiently accomplish this via DFiD or another competent governmental body. I am not saying this would not require some choices and belt-tightening on our part, but when the alternative is the Greek people going to the wall, that really is not a difficult choice, in my opinion.
While it would be best for this to be a coordinated effort across all national governments in Europe, I readily admit that different legislative calendars, and in the case of Germany, outright hostility, might slow the effort to have a truly coordinated effort, that does not meant we can not begin to fight back against the neoliberal agenda of the markets. While legislation would ensure a more efficient delivery of these volunteered funds, we simply do not have the luxury of waiting.
Like the pots and pans campaigning during the war, this is a way that we can not only sit around wondering what to do, but actually show our spirit by doing something, in a meaningful, and, preferably, coordinated manner, today.
Needless to say, yet another blog which has helped stir the pot, to say the least!
Fascinating comment
One reaction blog to follow
To paraphrase George Bernard Shaw:
“We’re gonna need a bigger oar”
🙂