Sunday, July 5, 2015

One good thing about a possible "oxi"

My dear friend Tobi posted a rant today on the Greek crisis, replete with charges of “the facts… getting completely distorted by politicians, demagogy, journalists & propaganda often viewed ideologically.”

He recommends that we watch a 40-minute video to get the real story. The link takes you to a speech given by Junker. I kid you not – to get the “real story,” we are to listen to a single person deeply involved. The next time your children get into a fight, be sure to send one of them into the next room. I’m sure the other has the whole story.

Let’s be clear about this – we are talking about people acting like children. There is blame to go around, and those who speak German can start with Harald Schumann’s video.

Tobi writes that “18 democratically elected heads of state have been negotiating for five months with the Greek government.” Actually, negotiations and been going on for years, and they are held mainly with people from the troika: the European Commission, the ECB and the IMF. The latter two are not democratically elected to office, while Commission officials are appointed by elected representatives.

The fuller story starts before Greece enters the euro zone. In the 90s, Germany wanted a currency union with Benelux and France, but France wanted Spain and Italy as well, and Italy wanted Greece. Because the Greeks did not fulfill the requirements for the euro zone, they worked with Goldman Sachs to cook the books.

The troika, especially the Europeans, justifiably resent this fraud. Less justifiably, they now aim to “teach the Greeks a lesson” for this previous cheating, as US finance expert Tim Geithner once stated. The Greek public is learning the lesson, not the Greek politicians of yore.

Maybe Goldman Sachs should chip in to rescue Greece.

Not even experts know what will happen if the Greeks vote yes or no today. Both outcomes are unclear. The Greeks cannot legally leave the euro zone, nor can they begin printing their own second currency. Likewise, the EU cannot kick Greece out of the euro zone; they can simply stop providing it with money, at which point the Greeks would have no choice but to print their own, which they cannot legally do. I therefore do not know what to hope for from the referendum today.

But the real story is that debt held by private creditors has been shifted into governmental budgets. The troika is not bailing out the Greeks; it is bailing out big banks, especially French and German ones. Bloomberg summed up the picture nicely a few weeks ago.

Yes, the Greeks need to start collecting taxes properly, especially on the rich. Towards that end, European tax havens need to hand over Greek millionaire and billionaire tax invaders. Varoufakis claims that 80 billion euros is in Swiss banks alone. (Greek debt is around 330 bn.) There’s a lot of culpability to go around.

In the end, there is no clear decision for the Greeks to make today in the referendum, and the problems are not being dealt with anyway. The Greek public is suffering inordinately; big banks are practically completely off the hook. Yet, when a lender signs a loan with a borrower, there are two parties involved. The lender specializes in loans and should not be let off the hook. Greece was a bad borrower the whole time and should not have been given this money. Private banks should have to cover defaults without passing on these losses to taxpayers. We should not bail out banks. Indeed, there has never been a time in history when borrowers were forced to pay when they could not, as we know from books like Debt: the first 5000 years and documentaries like this one. Throughout history, debt was simply canceled when it got out of hand, as it certainly is now in Greece. After World War II, German debt was reduced by around 50 percent.

These private banks are big boys and knew what they were doing when they lent money to Greece. They should have taken a haircut – but now, taxpayers will take it. The signal to banks is: be as risky as you want, losses will be socialized.

The referendum in Greece today will not solve that problem, which is the real one. A “no” vote would merely tell the world that the Greeks have had enough. The other consequences might make this option undesirable, but it is hard to know what the consequences would be. And though it is easy for me to say from Germany, 2,000 kilometers from Greece, I wouldn’t mind the Greek public saying, “Enough!”