With an overwhelming majority of the Greek people having voted “no” in a referendum that would decide whether Greece would continue to borrow its way into a hopeless debt spiral, the bankers who own the country’s debt are recoiling in confusion.
The storyline floated in the global media is suspiciously pat. A lazy, indolent and corruption-prone bunch of Greeks borrowed more than they could repay from French and German banks and are balking at repaying what they owe. Well, on its face, that characterization has some truth to it. After all, the media has been replete with stories about part-time cab drivers who were able to obtain million euro lines of credit from Greek banks with “lenient” lending policies.
But that only tells half the story. The other half of the tale is that international banks and financiers used the cover of the European currency conversion to misprice Greek debt and thus “enabled” the nation to borrow far more money at much lower interest rates than it would otherwise have been able to do on its own.
The facts speak for themselves. Both the Greek trade and budget deficits rose from less than 5 percent before 1999, when it joined the Euro, to over 15 percent in 2009, when, in the wake of the global financial crisis, the true extent of Greece’s financial crisis finally came to light. Today, largely as a result of the austerity policies imposed by the banks and their economy-shrinking aftereffects, Greek debt hovers well above 20 percent of GDP.
The fact is that the creditors who are now so quick to try and impose austerity measures on the Greek government in return for continued financing were the same creditors who cynically calculated that no matter how high of a tab Greece ran up, it would be eventually bailed out by the Eurozone. There are significant economic, political and historical reasons why these creditors would come to this conclusion—not the least of which is that Greece’s tendency to resort to authoritarian, military-style governments in times of crisis poses a real geopolitical threat to Europe.
But historical ramifications aside, the international banking cartel’s estimation of the Greek peoples’ total capitulation to banker rule may have backfired. Why do I say this? Just look at the bankers crowing about how terrible the Greek voters’ decision was for Greece. In a note published this week, cynically titled “Greece: Time for Adults to Speak,” Bank of America Merrill Lynch analysts assert that the voters’ decision to refuse draconian austerity measures as a condition of continued bank financing puts them in a worse negotiating position should they return to the table with European Central Bank leaders. The note reads, in part, “The paradox is that Greece will now have to agree on a new program with the creditors, with tougher conditions than in the proposal that the referendum has just rejected.”
That’s wishful thinking on the part of the banks. Greeks have already suffered the worst they could possibly suffer. Remember all the suicides by distraught pensioners, unemployment rates above 50 percent and the mass exodus of the well-educated and wealthy that occurred at the height of the Eurozone crisis in 2010 and 2011? And don’t forget that the European Central Bank has already renegotiated the terms of the Greek debt repayment several times, and each subsequent iteration has imposed terms that make it less likely, not more likely, that Greece will ever be able to repay its debt in full.