Greeks Off the Cliff

So the Greeks have voted NO to accepting more austerity as the price of more loans from the Big 3 European banking institutions.  At least most Greeks.

The final results of Greece’s bailout referendum are in, with all 19,159 precincts reporting. The “No” side won with a higher than expected 61.31 percent, while “Yes” got 38.69 percent.

A total of 6.16 million Greeks voted in Sunday’s referendum, or 62.5 percent of eligible voters. The poll needed a minimum 40 percent turnout to be valid.

As usual, one has to wonder about the 37.5% who chose not to vote, in perhaps the most direct and pressing question any electorate has ever been asked to vote on.

What happens next is not at all clear, though certainly more negotiations will take place between the Greek government, their creditors and at least one of the 3 banks, the IMF.  If that fails, as would seem likely, bankruptcy will be declared, ties will be severed between the Eurozone and Greece, and somehow a new currency will be put in place.  One hopes smart people are at least at the drawing boards for that.

It seems to me that in calculations and negotiations not all the externalities are factored in.  One easy postulate for Germany and France, for example, it that a severe weakening of Greece and its economy would make its shores the destination of choice for migrants from the Middle East. Certainly, Turkey, Greece’s near neighbor and once-upon-a-time applicant to join the Eurozone, will be having second thoughts, if only because of the bad management of the whole slow growing crisis.

Not only that, but as with drunk driving charges only being brought against the drinker and not the salesman behind the bar, most of the opprobrium has been directed against Greek pensioners. Here’s a counter-view by an investment banker.

The northern Europeans … were outright enablers of Greek excess. Not only did they aggressively seek to provide loans to Greece during the bubble era (through their private banking sectors and the bond markets), but in what can only be seen historically as a panicked response to preserve the euro system, the euro group (through the European Central Bank and its individual country central banks), together with the International Monetary Fund, bailed out European banks and the bond market by socializing Greece’s bad debt and placing taxpayers throughout the euro zone at risk of sharing the losses thereon.

Paul Krugman has also been a strong opponent of the austerity hawks in Europe, and today repeats his belief that Greece exit from the Euro currency may be better than staying in.

The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding.

Though it’s a lot to ask, I know, I hope the analysts and scholars are hard at work figuring out how it came to this.  When is lending bad policy? How is any group of people rescued from bad luck + bad decisions+ co-dependency with others?  How can improvident loans be identified and those who made them be recipients of the largest ‘hair cuts?” Given the data banks of information of economies rising and falling, how can better predictions be made?  A surplus of questions is swirling, even with a drought of wisdom.

How this might affect “us” depends of course on who “us” is.  If us is drawn narrowly to be our close family, perhaps not too much — some fear of stock market gyrations and uncertainty.  If us is instead, we the people of the world, some of us have been suffering outside their share of human misery already, and may suffer more.

Bernie Sanders has called on the U.S. to understand the problem in also ours, as I’ve wondered for months why it has seemed to be only a German-Greek fight.

“It is unacceptable that the International Monetary Fund and European policymakers have refused to work with the Greek government on a sensible plan to improve its economy and pay back its debt,” Sanders said in an exclusive statement to The Huffington Post. “At a time of grotesque wealth inequality, the pensions of the people in Greece should not be cut even further to pay back some of the largest banks and wealthiest financiers in the world.”

All the best to the Greek people, one of whomcalled yesterday, elated by the vote but completely unsure how he or the country was going to make it through the next year.


If you really want to get down in the weeds about Germany’s claim to the moral high-ground over indebtedness, here are two interesting articles by Eric Toussaint: #1 Greece-Germany: who owes who? (1) London 1953: cancellation of the German debt and #2 Creditors are protected, the people of Greece sacrificed

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