Well no one is having fun anymore. Here’s Paul Price’s take on the latest Greek drama.
Fun, Fun, Fun … ‘til her daddy takes the T-bird away
By Paul Price. Edited by Ilene.
The popular press has made Germany into the villain of the current Greek drama (and popular bloggers point out the role of Goldman Sachs.) Why, they ask, should Berlin be dictating how the Greek government runs its own country?
Understanding the reasoning for that is quite simple if you think in terms of the Beach Boys’ old hit song, Fun, Fun, Fun.
Greece is the wayward “daughter.” Substitute average retirement at 57.8 years old and cushy government pensions for all with the “hamburger stand.” Think of Germany as the “dad” who recently wised up. Understand that Greece “shouldn’t have lied” all along about its financial status.
Dad was funding the sweet life for his partying daughter while supplying the goodies and footing the bills. She told him the cash was all going towards her betterment and growth when, really, the money was simply being used to have a great time.
No wonder her old man got pissed off.
What would you do in that situation?
You’d probably take away the keys, ground her and cancel her credit cards.
When your kids get jobs and become financially independent they’ll have every right to tell you to “f*ck off.” Until then, while they’re still on your dime, it is only natural to expect they will live under your house rules.
Greece’s proposed referendum expects to ask the kids whether they want to keep partying or if they’d prefer to stay home, study and hunker down.
Which way do you think the vote will go?
Is the responsible parent really the “bad guy” in this story?
Okay, okay. It’s a little more complicated. There’s enough blame to go around and many complicit players. (Like with the subprime mortgage crisis in the US.)
Germany and the rest of Europe would have been better off writing down Greece’s debt in full, back in 2010-2011, rather than lending the country more money to keep up the facade that Greece could avoid default. In effect, the troika (the European commission, the European Central Bank and the IMF) paid off some bondholders and screwed the citizens of the EU, who must now share in the bad debt that the IMF and ECB bought from Greece during the last bailout.
And as the troika lent more money to Greece, the country dug itself deeper into debt. European citizens are now on the hook for much larger write-offs on Greece’s bad debt.
So it’s natural to ask: Where did the previous Greek bailout money go? It didn’t go towards assisting Greece in becoming an economically stronger, more solvent debtor. No. According to The Guardian,
Only a small fraction of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 found its way into the government’s coffers to soften the blow of the 2008 financial crash and fund reform programmes.
Most of the money went to the banks that lent Greece funds before the crash.
Unlike most of Europe, which ran up large budget deficits to protect pensioners and welfare recipients, Athens was then forced to dramatically reduce its deficit by squeezing pensions and cutting the minimum wage.
Less than 10% of the bailout money was left to be used by the government for reforming its economy and safeguarding weaker members of society.
Greek government debt is still about €320bn, 78% of it owed to the troika. As the Jubilee Debt Campaign says: “The bailouts have been for the European financial sector, while passing the debt from being owed to the private sector to the public sector.”
It appears that game is now coming to an end.
Prime minister Alexis Tsipras’ act of putting Europe’s proposal to a referendum takes the question directly to the people. They are faced with two no-win results. If Greece votes no, it stands a greater chance of being forced out of the eurozone; it will need to resurrect its own currency and will likely suffer devaluation and inflation. Like the daughter waking up in the street after daddy takes away the house, the car, the spending money, the cell phone, she will have to impose her own austerity measures all at once.
If Greece votes yes, its people will remain debt slaves to creditors trying to impose austerity policies that no one will agree with. Greece will remain buried under debt it cannot repay. It will have to adopt austerity measures to pay back the debt, or fail to and hope it can get further bailouts in the future.
Bloomberg’s flowchart below shows the possible outcomes of the Greek Referendum.