More About Greece

As I said in the last post, I really do not understand what is going on. As far as I can see, there are an awful lot of other people in the same boat. Political pundits don’t seem to know anything about the economics, and economic pundits don’t seem to know anything about the politics.

Perhaps a reader can shed some light.

Smokingscot, in a comment to yesterday’s post, put me right about the Cyprus banking crisis. Essentially, it had little to do with the Cypriot economy or government. The banks had been taking in so much in deposits and investing them that, when large numbers of depositors wanted to get their money out again, the banks were not sufficiently liquid. Had they failed, they would have take the deposits of ordinary citizens down with them. That is obviously a simplification, but it helps to clarify things somewhat.

What no one seems to be talking about is how the Greek banks (or should that be the Greek government?) came to acquire such an enormous amount of debt. You see? Even that simple question – bank debt or government debt – is obscure.

I mentioned the Olympics; other people have mentioned an airport construction; others have mentioned daimler buses carrying one passenger going nowhere. What other infrastructure projects were financed to build up such a massive debt?

Or is it that the Greek government has been issuing the equivalent of Treasury Bonds which its banks are obliged to take up? And have these banks been getting finance from the EU central bank to take up these treasury bonds?

Without that sort of information, how can any lessons be learnt? There again, the EU would regard such information as being ‘not for the common man to know’. I doubt that even Cameron, Merkel and Holande really know how these debts came about.

So let’s have a little think.

If the loans were for infrastructure projects, then the Greek government could hand those ‘assets’ over to the EU in settlement of the debt. Olympic stadia, swimming pools, roads, etc, could all be handed over, and the EU could exact tolls for their use. The EU could take possession of the treasury bonds and expect to receive the interest thereon.

Another question which pops into my my mind is: what exactly is the crisis? Is it just that Greece cannot pay the interest on the loans at this time? Is that what its about? It seems to be so, since all the talk is about ‘restructuring’. To me, that implies several possibilities – extending the loan period, cutting the interest rate, changing some of the loans from loans to grants. But, as some people have pointed out, other countries with similar plights would demand similar treatment, and WHO IS GOING TO PAY?

Which leads me to another, and final, point. Are the billions of Euros being splurged REAL MONEY? I do not know. Certainly, workers have to be paid, but not necessarily in cash; supplies have to be paid for, but not necessarily in cash. One of the problems that Greek banks have is that they seem to have been cut out of the international bank transfer system by deliberate action of either the EUCB, the IMF, or the World Bank, or a conspiracy of all three. Thus, trade is being disrupted, even if the traders have the funds to trade. If that is so, then we are seeing a conspiracy of the EU Elite autocrats, and not politicians like Merkel and Hollande. M & H are just ‘front men’. The real powers are the Elite Autocrats.

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OK. On the news just now, Merkel and Hollande had just talked from behind podiums. They have called upon the Greek government to make proposals. Erm… They did that a few days ago and their proposals were rejected out of hand.

What is absolutely clear beyond doubt is that the Elite Aristocrats cannot overturn the mandate that the Greek people have given to their government. No amount of squirming will do. Either they remove the shackles on trade and ‘take a haircut’ by giving the Greek government ‘time to pay’ the interest (the capital can wait…. and wait….), or the reduce Greece to chaos.

There is, of course, another alternative. The EU could back-pedal and shrink. Germany, France, Italy, and even the UK, could form an inner group, using the euro with free movement of people and goods. Latin countries could be associates, if they wish to be, and enjoy free trade but accept their limitations.

What, for me, is the most important thing is that the EU ceases to be the creature of the UN, and that the WHO is kicked out, along with all its multiple agencies. Site the WHO headquarters in Somalia and let’s see how many academics want to work for the WHO.

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I must to bed. I have a dental appointment tomorrow. Woe is me!

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2 Responses to “More About Greece”

  1. nisakiman Says:

    This is a hugely complex subject, Junican, and one that defies a simple answer. First, you have to put it in the context of several generations of a voracious, venal and nepotistic political elite who siphoned off the bulk of the country’s wealth for years. Add to that the vainglorious demand to host the 2004 Olympic games (of which the new airport was a large part), which saw further billions disappear down the back of the sofa.

    So now we have an anyway poor country with massive debts.

    Add to that the unsustainable pension system (“You can retire at 50 on a full pension – all you have to do is mark ‘X’ here on voting day, and we’re good to go…”), the falling birth rate (one of the lowest in the world), a moribund industrial base competing (ha ha) with the dynamic German model, and an inability to make any economic adjustments within the Euro straightjacket and we have an economic disaster just waiting to happen.

    Then to pile insult onto injury, of the ‘bailout loans’ paid to Greece, at least 80% went straight back to the European banks in interest payments, so Greece saw very little benefit, but ever increasing interest demands from the central banks.

    Then mix in the ‘austerity’ demands to keep the (interest payment) funds flowing, and the current disastrous outcome was assured.

    And I’ve barely scraped the surface.

    • junican Says:

      In the UK, there would be calls for ‘a full public enquiry’ into how this mess came about. I think that it is odd that the Greeks are calling for such an enquiry themselves. At least the Syriza government seems not to be corrupt (yet).
      As regards pensions, I read somewhere that the retirement age is 58, but I have just read that people have to work for 35 – 37 years before they can retire. 58 does seem rather young by today’s standards, but I wonder if there is some good reason for it. For example, what is the nature of the work that people mostly do in Greece? Is it manual mainly? Is it agricultural? It could be better to let older people retire early, if that his the case, and get younger people, with families to support, into that sort of work. Are the costs of these pensions greater than would be the case of paying unemployment benefit to families? How big are Greek pensions? I have just found this from the Guardian:

      “Third, Greek pensions aren’t so generous. About 45% of pensioners receive pensions below what is considered the poverty limit of €665 per month.”

      I suppose that it is inevitable that the bail-out went to banks since it was the banks which were not being paid on the loans. Is that not why the bail-out was needed? What did not happen was an enquiry into what should be done. Instead, the EU demanded ‘austerity’ which can hardly be anything other than depression of the already weak economy!

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