I have been following the Greek story for a number of years and intensely the last months and weeks.
In short, the story began in earnest when Greece adopted the Euro 1 January 2002, only 13 years ago. At that point, the country could no longer control its currency exchange rate, but suddenly it had almost unlimited access to low interest loans. For a country like Greece, this was an arrangement certain to fail. Greece was never qualified to adopt the Euro, but with the help of Goldman Sachs and its own corrupt elite, the books were cooked and Greece became an Euro member anyway. At that point the rules was well and truly bent, but the EU did not have any problem with broken rules in 2002.
Enter the money-lenders. Big, privately owned German, French and other banks offered huge loans for big projects like the Olympic Games in Athens 2004, plus a number of other large projects. As long as the economy was booming, no-one seemed to care about repayment.
In 2008, the financial crisis arrived, and Greece was hit like no other country in the EU as it entered into recession. The huge Euro debts it had acquired could not be paid back. If Greece had not already converted to the Euro, it could have devalued the Drachma and that way made imports more expensive and exports cheaper. That would have made Greek export more competitive, lowered domestic interest rates and they could have worked their way out of the problems, like many other countries had done before them. But since Greece no longer had the Drachma, it could no longer control its currency exchange rate and devaluation was not possible.
Greece was unable to pay its debts in 2010 and was bankrupt because of domestic and foreign mismanagement. A Greek default in 2010 would have caused major discomfort to the debtor banks. This did not happen, however, because the so called “Troika”, namely the EU, ECB (European central bank) and the IMF (International Monetary Fund), “helped” by giving Greece more loans, 110 billion Euros. Almost all of these new loans never entered Greece, it went straight into the bankrupt banks outside of Greece to cover the bankruptcy. It wasn’t Greece which was “bailed out”, it was the banks! Through this brilliant move, the debt was now suddenly on the tax payers of Europe. This is how you rob people, both in Greece and elsewhere in the EU.
The next stage was the stage of “reforms”. Now, in return for its “help”, the Troika demanded severe cuts in the Greek economy. This caused the Greek GDP to contract by 25-30% and caused mass unemployment, especially among young people. The ability to pay back the loans was steadily diminished because of this, and the problems naturally kept growing. Greece had no chance to limit its deficit to 3% as required by the EU, in 2009.
Greece is far from guilt free in this. Businesses didn’t pay enough taxes and the corrupt government enlisted banks like Goldman Sachs and JPMorgan Chase to cook the books once again, while the EU looked another way. The result is that in 2015, the Greek debt is about 180% of GDP, up from 100% in 2010, and 3 times the maximum allowed in the EU. As the the EU austerity policy forces the reduction in GDP, the debt/GDP ratio just grows. It is almost like someone wanted it to be that way.
Enter the January 2015 elections. The traditional corrupt Greek politicians (PASOK and New Democracy) were essentially swept aside and a new party, SYRIZA, comes out victorious. Their message is to end the damaging austerity policy and find an agreement with the EU so that the debt can be paid back. and the economy rebuilt. For this to happen, the Greek economy must grow. As it stands, it is mathematically impossible to pay back the debt, it will just increase to infinity because of interests and the ever smaller size of the Greek GDP.
So what does the so called “EU leaders” propose to solve this conundrum? More austerity! It defies any logic, regardless of how you look at the former and current Greek politicians handling of the matter. The only logic that makes any sense is that the plan is to loot the country completely, both for the sake of the remaining Greek assets and as a “reminder” to other countries that may be on a similar path (make that Italy, Spain, Portugal, Ireland and maybe France).
After months of negotiations, where the Greek negotiators have bent over backwards to try to find a viable deal, i.e. one that allow them to pay their debts without killing the economy and the people, the only replies from the unelected EU bureaucrats have been more “reforms”, i.e. more of the same austerity policy that has transformed Greece from a problem area and into a disaster zone.
This behaviour from the EU is simply criminal, as it is well understood by the EU politicians and unelected EU bureaucrats. The former Greek finance minister Yanis Varoufakis said: “What they’re doing to Greece has a name: terrorism”.
In a surprise move on June 30th, the Greek prime minister Alexis Tsipras called a national referendum July 5, asking the Greeks if they would accept the conditions put forward by the EU and Troika. Instead of suggesting a referendum to the Troika, something which has led to “regime change” in Greece only a few years ago, Tsipras announced the referendum directly on TV. This was too short time for the media and EU machinery to manipulate the process, although they tried very hard to tell the Greeks to accept more austerity and that anything else would be catastrophic.
The result of the referendum was that about 61% voted OXI (“no”) to the EU conditions. This was a stunning lesson in democracy from the country where democracy was born, and the EU was totally naked. It was now much harder for the Troika to impose the policy that has been proven to not work (assuming their aim is to help Greece). Still they tried, disregarding mathematical laws.
This time, it seemed very important for the EU to “follow the rules”, rules they had themselves broken long ago. The reason for this irrational stance is that if the EU writes off enough of the Greek debt (it will never be repaid anyway), the tax payers of the Eurozone will be handed a huge bill. One suspects the bureaucrats think there could be “blood in the streets”. Secondly, many of these taxpayers live in France, Italy and Spain, countries with problems similar to Greece. The dominos will simply start to fall and the Euro and the EU will become history very quickly if countries like Spain have to pay the Greek debt.
So what is the best scenario for Greece and the EU?
The best scenario for Greece is to defaults on its debt, exit the Eurozone and adopt its traditional currency, the Drachma. Then devalue it to make export more competitive. This will be extremely hard on the Greek people, the times ahead will be very tough. However, through this move they regain their sovereignty and with time and hard work they will come back stronger than before, I am certain Greece will again be proud.
The EU will be able to show how deep the solidarity goes towards smaller countries. The EU will also be able to prove its assurances that the rest of the EU will be just fine after Greece exits the Eurozone and possibly even the EU. The fact of the matter is, however, that the EU has now been exposed, the peoples of Europa have seen who the unelected EU-bureaucrats and EU-politicians are, and who they represent. It is not the peoples in Europa.
Edit 11. July 2015: Yanis Varoufakis has written an article titled “Behind Germany’s refusal to grant Greece debt relief” in which he writes:
“Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.
In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.”
“Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.”