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thens, June 29, 2011 – Athens in recent days has
experienced continuing popular protest, sporadically violent, against
the economic austerity program demanded of Greece by the IMF. This
reaction has been more severe than most of those seen elsewhere since
last year’s Wall Street “sub-prime” mortgage scandal, or
collaborative swindle as we might indelicately call it, that provoked
global economic crisis, its prime (or “sub-prime,” let us say)
victims being the ordinary citizens of recklessly indebted national
economies, such as those of Greece and the United States.
Among worldly Greeks, most recognize that Greece itself
invited what the ordinary Greek citizen interprets as victimization –
in particular as victimization by the German government and banks,
implacable critics of Greek profligacy, and until now opponents of
any “bailout” for Greece. The Germans have never paid war
reparations for what they did to Greece, the Greeks will tell you, as
they also accuse the Germans of having stolen Greece’s national gold
reserve during the war.
Ordinary Greeks are nonetheless aware of their country’s
national fiscal insouciance during the good years of the past two
decades – when Greece won the UEFA European Football (soccer)
Championship in 2004, and brilliantly staged the summer Olympic
games, while the Greeks enjoyed unprecedented individual prosperity.
The Harvard-educated Andreas Papandraeou (father of the
present Greek prime minister George Papandraeou) spent years in
political exile in the United States, ending as head of the Economics
Department of the University of California at Berkeley (of all
things, in view of what has followed!). He returned to his homeland
after the collapse of the Greek military dictatorship of 1967-1974,
becoming prime minister in 1981. As one Greek remarked at a recent
meeting here of economic and political observers, the Athens Seminar,
“Andreas brought back from exile an American-style populism, to a
Greek population lacking the economic prudence instilled in most
American families by their native Protestantism.”
The conservative New Democracy governments that followed
the departure of Andreas and held power from 1985 to 2009 contributed
to national irresponsibility. When they left office, Greece had a
deficit of 12.7 percent of GDP, four times the Eurozone limit. The
country had entered the European Union on false pretenses, tolerated
by an EU leadership that believed “Europe” could not be fully
European without Greece’s membership.
Andreas’ son, George, born in the United States and also
educated at Harvard (and in the United Kingdom and Sweden) during his
father’s foreign exile, inherited leadership of his father’s PASOK
(Pan-Hellenic Socialist Party). Possibly he did so reluctantly, as
one of his actions has been to change the electoral system in an
attempt to end “dynastic politics” in the country.
As foreign minister he put and end to the ancient
hostility between Greece and Turkey, sending Greek firefighters to
help the Turks in a national emergency. He was elected Greece’s
prime minister in 2009, just in time for the world crisis – for which
the electorate is now holding him responsible.
However today – June 28 – he won his second vote of
confidence for his austerity program (155 to 138) within days,
despite a 48-hour general strike and massed protestors outside the
parliament. Angela Merkel called this “really good news,” although
the immediate financial community comment was confused, with a
negative bias (as usual). Greece – a miniscule nation of only 11
million people – has recently been the most convenient press and
popular scapegoat for the Eurozone crisis.
The result of France’s effort last weekend to rescue
Greece and the Eurozone still has unclear results. Nicholas
Sarkozy’s weekend announcement of an innovative rescue plan was a
typical French effort to support Europe while fashionable opinion
forecasts default for Greece (and possibly the whole
Eurozone). The French Treasury, the Bank of France and
national bank confederation (the largest European holders of Greek
debt) propose to “roll over” half the Greek debt for thirty years,
allowing debt-holders to take an immediate reimbursement of 30
percent, with 20 percent invested in a “guarantee fund” of 30-year
zero-coupon bonds, with triple-A ratings presumably underwritten by
the IMF, European Central Bank, or the EU itself.
The great advantage of this to banks is that it would allow them to remove
Greek debt from their balance sheets, lodging the debt in an ad hoc
vehicle known on the markets as an SPV. The guarantee fund and the
SPV are designed to attract participation by other European and
foreign banks. The plan in part resembles the “Brady Bonds” solution to
Latin American debt in the 1980s, which allowed creditors to exchange
defaulted bank loans for secure instruments, usually backed by U.S.
Treasury Bonds.
The French invented “Europe” with the coal and steel
community treaty in 1951. They have since driven it forward with
such projects as Concorde, the Airbus industrial airspace alliance
(Boeing’s deadly enemy), the European space agency and its Guiana
launch center, which dominates world commercial airspace, the
European high-speed train network, and the Franco-British European
military link now being tested in Libya.
President Sarkozy’s debt relief plan has won qualified
interest thus far, including from the most important European
financial paper, The Financial Times, but people at the fatally
influential rating agencies are talking about it as a disguised Greek
default. George Papandraeou’s parliamentary victory on Wednesday,
with Angela Merkel’s endorsement, may prove crucial factors in what
will follow.
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