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Greek Crisis – a guide for the perplexed: Part II – The Greek Crisis in Brief

June 27, 2015

The following is from an appendix in an upcoming book to be released in the next few days. No Hair Shirts Energy & Climate Policy for Greece. The book discusses energy and climate policy as a means of battling austerity. It starts with methods to relieve some of the immediate pain. For any non-Greek readers, the book includes an appendix discussing the crisis. This post excerpts the second chapter of that appendix, which  tries to combine concision with accuracy in describing the current Greek crisis. If you don’t know the larger European context you might want to read the first post in this series before preceding.  And don’t forget to read the third excerpt combating widespread falsehoods about Greece and Greeks.  The  second excerpt, covering the current crisis, follows:


The Greek centrist social democratic government of PASOK led by George Papandreou took power from the conservatives in 2009 and discovered that the previous governments had collaborated with corrupt bankers to disguise loans as complex financial derivative investments. This fraud falsified key economic indictors and allowed borrowing money that could never have been paid back, even before the crash. Thus the crash left Greece with a much bigger debt compared to its economy than the rest of Europe.

The EU and international institutions made a deal with PASOK to bail out Greece’s creditors (including those who had been co-conspirators n the fraud, and probably the originators of it) and some of Greece’s top bankers, but not the Greek people. If the EU and done nothing, the debt instruments would have been worthless, and the banks would have collapsed. The EU bought the worthless debt instruments at a discount from their face value. The claim was that in selling at a discount, the banks and bond holders were taking a hit. The truth was, that the banks and bondholders had already taken a hit. The bonds and instruments were worthless. By receiving anything for those bonds they were being bailed out, not (as claimed) “taking a haircut”. As penalty for the fraud that had primarily victimized the Greek people, the Greek health care system was destroyed, their pensions cut, and their education system crippled. Paying back the remaining debt was still impossible, so the EU arranged to lend almost enough to Greece, to make interest payments. Each year, Greece paid out 100% of what they received in loans, and a bit more as debt repayment, leaving zero aid for the Greek people, and less total money for the Greek people each year. As a condition of continuing to pay interest to itself, the Troika constantly added to austerity requirements. This austerity program produced a 25% unemployment rate and a GDP that shrank at a faster rate than that of the United State during the great depression. PASOk fell to the conservative New Democracy party, which implemented worse austerity than occurred under PASOK.

Syriza, a coalition of most parties to the left of PASOK defeated both the right wing New Democracy Party and the centrist “Socialist” PASOK party in January of 2015. It was elected on a platform of raising taxes on the rich and cracking down on widespread tax evasion by the wealthy, lowering taxes on the working class, providing free electricity to those who had their power cut off , restoring pensions, free education, union rights as well as health care. Syriza also promised to end various other EU imposed austerity measures, such as the requirement that Greece maintain a government spending surplus during a depression. It also promised to crack down on the culture of corruption in Greece that crossed party lines and end oligarchic control of institutions that were supposed to be democratic, possibly by replacing those corrupt institutions with new more democratic ones. It cannot carry out much of its program under the intolerable conditions currently imposed on Greece.

Syriza has attempted to negotiate with the Troika that consists of the European Union, European Central Bank and International Monetary Fund. It has shown willingness to dial back its program, but not enough to suit the Troika. The absurdity of the Troika position in these negotiations can only be conveyed by a skit. :

TROIKA: You have anemia. To cure it you must stay the course: One bowl of gruel a day, and leeches applied to your body twice daily.

Syriza: Come on. An anemic needs to eat more than gruel. PLus, possibly iron infusions, at least an iron supplement.

TROIKA: Pish-posh. I’m the doctor..

Syriza: If I stick to the gruel diet, can I at least have an iron supplement, and stop the leeches?

TROIKA: You will follow the full plan. In fact, cut the gruel to half a bowl a day.

Syriza: how about an iron supplement and fewer leeches?

TROIKA: No. Half a bowl of gruel a day, and twice the leeches! And stay away from iron supplements. Trust Doctor Dracula.

Syriza: Maybe I’d be better off leaving this hospital!

TROIKA: No! Stay here and stick with the plan. If you do, as a compromise, we will let you drink the Kool-Aid.

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