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On DailyKos I’ve been reading a drumbeat of calls for austerity and budget cuts in American social spending. Everyone is concerned about the deficit. The question is, what do we do about it? Can it be done through growth, as Krugman has been arguing, or cutting social spending (we can’t cut defense spending, no!)?

Without addressing the American situation, I look at Greece and can’t help but notice the current framing of the narrative both inside Greece and outside Greece. Outside Greece, we hear about the lavish pensions and living high on the hog by Greek people (Greece is after all, one of the PIIGS, debtor eurozone nations leeching off the rich). Inside Greece, we hear that the previous administration is to blame. Both narratives are false, but they have been framed for a reason. The first framing deflects attention from the complicity of European governments, banks and corporations in fleecing "Main Street" (I was trying to think of an equivalent for Greek Main Street), Wall Street momentum plays, and the second tries to give a weak Greek government the ammunition it needs to make the changes that need to be made.

The following diary addresses the reality of the Greek debt problem with lots of statistics, while casting an eye toward how those statistics are interpreted in the media. Reading the media over the last few months on this particular issue has been unnerving. Too many journalists are comfortable with making pronouncements or regurgitating things they’ve read without researching the facts. I am not a journalist. On the European Tribune blog, I wondered for a few months how the Greeks got themselves in trouble, and just how they lied on statistics. My research revealed that they didn’t lie on statistics and that the debt is mainly to blame on Greek corruption, both internal to Greece and in the EU itself.

Greece is one of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) with high deficits and high debt. The debt levels are by no means limited to these countries, however, but these countries are also falling behind in GDP. No growth. Ireland actually preceded the Greeks in this austerity test by the deficit hawks, and Ireland is largely being credited for doing so.

http://www.newstatesman.com/...

The Irish government rejected fiscal stimulus and slashed public spending instead. The result is economic meltdown. Is this a foretaste of life in Britain under the Tories?

Celtic Tiger to Celtic Tories would seem an apt way of summing up the story of Ireland in recent times. From poster child of free-market globalisation everywhere from Hungary to Honduras, the UK's nearest neighbour is now enforcing the most savage cuts in public-sector pay, child benefits and social welfare payments of any EU government. Such is the level of misery being endured by the increasingly bewildered citizens of this little republic that even Brian Lenihan, the man principally responsible for inflicting it, has publicly acknowledged that fellow Europeans are "amazed at our capacity to take pain".

But the moral rectitude of Ireland and the kudos the Irish people deserve is apparently based less on their ability for pain than their agreement to take on 60 billion in toxic bank waste through the NAMA program.

http://bocktherobber.com/...

This is why Ireland is virtuous after being so piggish. It’s odd, isn’t it, that there was a lot of opportunity to coin acronyms in the Wall Street meltdown, but the media never got around to it.

Ireland differs from Greece in a variety of ways. Though its public deficit was high, it wasn’t near as high as Greece’s. Nonetheless, I’ve taken to adding public debt, corporate debt, state debt with toxic bank waste these days since they have become so fungible in recent years. I’m not sure it matters anymore. So, if Ireland is the model for Greece (a model of fiscal rectitude) will a Greek default (failure) be a model warning for the USA?

There are politically–motivated actors involved as always, and by political motivations I’m referring to economists of ideological bent. On the one side, we have those arguing the need for stimulus. They are losing their argument to ascendant neoliberals who dominate Brussels and Berlin. For instance, this is Axel Weber:

http://www.telegraph.co.uk/...

The Bundesbank, headed by ultra-hawk Axel Weber, said the decision to bring in the IMF makes matters worse, arguing that the EU would impose tougher budgetary discipline.

The report mocked the IMF as the "Inflation Maximising Fund", saying the body had gone soft under Dominique Strauss-Kahn, a French socialist and Keynesian. It has shifted focus from fiscal cleansing to "growth-oriented" financial policies.

Imagine now, the IMF is being mocked as a Keynesian enterprise. The European Central Bank’s director, Trichet, is firmly in the Bundesbank camp as well, having made frequent calls for devaluation.

These were the bank-connected honchos in charge of Europe when the Wall Street meltdown occurred. How did they respond? Austerity for banks?

http://www.spiegel.de/...

The German government whipped its €480 billion bank bailout package through parliament in record time, but now the program has run into trouble. The banks are still fighting for survival, the money market isn't functioning properly, and taxpayers' money is being burned.

Maybe the Greeks were reckless and profligate, while the Germans ran into economic headwinds?

http://www.thelocal.de/...

So, the German state-owned bank, KfW, was dabbling in Wall Street speculation? And got burned? Financial gambling isn’t reckless. Is that the idea?

I’m not even going to mention our TARP program and the way US taxpayer money made banks whole all over the world. Oh wait, I am:

http://www.bloomberg.com/...

You can see here the developing narrative. Profligate citizens are pigs, reckless bankers are unlucky. This narrative would soon come to bite back the narrative makers (Weber, mocked the idea of helping Greece because of the free-spending Greek peasantry, until he realized his fund friends from across the pond, were interested in burning his house after they were through with Greece). But for the moment, no one can say that the current debt crisis—stemming largely from the bank crisis—was not predictable:

http://www.telegraph.co.uk/...

Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states," the EC document, seen by The Daily Telegraph, cautioned.

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems."

This is the scenario in its most reductive terms:

Banks: Help us, we're drowning.
Gov't: OK, here's a bailout.
Banks: Your balance sheet sucks, we're shorting you.

I’m going to bring some of the run-up in global austerity pushes back to Greece now.

Fundamentally, the question I have been asking myself is, why on earth did European banks, mainly French and German banks, lend Greece over 85% of its 270 billion euro debt?

The media’s answer: those banks were not aware of the Greek economic situation since Greeks were lying about their balance sheet.

Below, I will show that this media narrative about Greek lies is not true to the extent that the so-called lies covered up knowledge and information about Greece’s debt.

The meme about Greece’s lies is good deflection though since it puts the onus back onto the average Greek citizen.

I have been asking for quite awhile how Greece lied about its statistics since my previous research into the matter in Eurostat records revealed that Greece has been showing a debt to GDP of between 95% and 115% (115% was actually also in 2004) for over a decade. I was wondering how the media kept reporting that Greece has been caught out for fudging statistics for years since Eurostat was showing the same debt for over a decade.

After wondering for awhile without ever having the question answered by journalists, I did some digging. I found a definitive source on the matter. A Eurostat document was published on January 8, 2010, about the nature of Greek economic statistics.

http://epp.eurostat.ec.europa.eu/...

In the Eurostat report on Greek statistics released on January 8, 2010, Eurostat says that Greece sends predictive tats late in the year, causing Eurostat to print those statistics always with reservations. This has been going on since 2004. Subsequently, Eurostat sends a team to Greece to conduct a methodological review. The results of that analysis are then published in Eurostat records. Early conclusion: Greeks are late. As someone with Greek ancestry, that is not a surprise.

My earlier confusion about the nature of the Greek lies came about because I was following the statistics as determined by the Eurostat review, and I had been assuming these were the reports given to Eurostat by Greece initially as predictions. The numbers I was looking at were actual and real numbers that came in late after an extensive review. Eurostat blames incompetency in its review of the lateness of statistics but I think Eurostat is being too kind. The numbers were late because Greek cabinet heads and their minions tried to curry favor with both supporters and with their boss, the prime minister. They report cuts without making them. It is then left to the finance minister to clean up that mess by conducting a review.

So, however you blame Greece’s yearly problem with statistics, the truth about Greek finances is revealed yearly. What occurred when the new government took over in 2009 was no surprise to anyone. The only surprise was the revision of figures for the first 6 months of 2009. (And, of course, anyone paying attention expected that surprise). Indeed, one wonders why the previous government called early elections at all. There was something afoot internally already. Regardless, the new government has tried to pin the problem on the previous gov't even though both gov'ts were guilty. The reason for this is probably in order to push reforms without having to incur blame for the situation.

The media takes its cue from the framing of the current gov't however, and repeats the line that the previous gov't was mendacious (which it was) but the context of that mendacity is missing. To say that Greece gave messy statistics every year (true) is not to say that we discovered the lies this year (untrue) even though this is precisely how PM Papandreou always frames the problem (for political purposes). Furthermore, among the types of items kept off the books by the previous government were billions in military expenditures paid for in supplemental bills. This will figure greatly in my analysis of the greater part of the problem in Greek debt.

One more note, I saw yesterday that the former FM of Greece during the 1990s gave a speech at his alma mater, the London School of Economics, where he made the point that the annual reviews of the economy were real and true while the predictives were not. His statement was met with laughter in the audience. Today I read that Greece is looking for a PR Firm:

http://www.businessweek.com/...

To sum up, banks may argue they didn’t know about Greece’s troubles, but it’s a lie.

The framing provided by the French FM on this issue, and its talking point quality, plainly reveals the agenda, which not only has to do with lending practices inside the eurozone but fears of speculative contagion to other countries:

http://online.wsj.com/...

This narrative deflects from the political and corporate complicity in the fleecing of average citizens (which I haven’t explained yet). The attention to Goldman Sachs’ currency swaps with Greece is also a deflection, and I wrote a diary about it a while back.

http://www.dailykos.com/...

One additional bit of info not in that diary is a comparison of the currency swap deal to other similar deals by other European countries:

http://www.reuters.com/...

Bankers noted, however, that Germany is no stranger to off-balance sheet vehicles. KfW, the German state-guaranteed development bank borrowed 50 billion euros last year, a sum that does not appear on the state's budget.

It is not just derivatives. European sovereigns' game of shifting liabilities off their balance sheets once provided fruitful ground for the now tarnished securitization sector.

Italy kicked of the craze 10 years ago by selling a 4.5 billion euro securitization backed by unpaid social security payments at the Istituto Nazionale Previdenza Sociale (INPS).

The early years of the single currency was marked by a series of similar asset-backed securitizations for Italy and other states such as Portugal, Greece and Belgium.

Then in May 2005 Germany joined in, selling 8 billion euros of civil service pension rights backed by payments from former state-owned companies Deutsche Telekom (DTEGn.DE), Deutsche Post (DPWGn.DE) and Deutsche Postbank (DPBGn.DE).

For me, the question is, one, was Greece hiding liabilities? The eurozone accounting office got around to changing things finally and now, those debts are logged as of five years ago. Two, were the deals fraudulent? I would say the Goldman Sachs deal with currency swaps was not fraudulent. The deal was a straight currency swap where Greece traded euro debt for dollar debt at the currency conversion rate at the time. Essentially, Greece was shorting the dollar. Greece won on this bet bigtime as the dollar tanked. 1 billion in debt was converted to 600 million in debt. Of course, Greece at the end made a balloon-payment to Goldman of 300 million. So, it’s only a 100 million net for Greece. But the outcry against this deal is heavy on misrepresentation. H. Morgenstern at the New York times conflated the currency swaps with credit default swaps and all kinds of swaps; I was surprised she didn’t mention the wife-swap craze in Italy. As well, the incentive for Greece to hide its debt was questionable since the deal happened after Greece was admitted into the Eurozone. Every loan that occurred after this deal was logged as a debt would come into question if Goldman was held responsible for lending money to Greece. Not only that, the deal was announced in the trades at the time, Eurostat remarked that current EU accounting would not log the deal as debt, and it showed up on the National bank of Greece's website (they purchased some of the swap from Goldman) as Titlos SA. It was a known entity, not a secret.

This doesn’t absolve Goldman of all to do with Greek problems. Macroeconomically, their FU to the American people reverberated across the globe and caused the sort of risk-aversion and illiquidity that has brought Greece to bankruptcy. For many years, even with a huge debt to GDP, Greece was not adding to it, they were servicing the same level of debt, they were borrowing in the markets, and doing just fine, until this recession. The economy was productive enough (though bogged down by debt overhanging for many years) to pay for the bureaucracy. Until, to paraphrase Warren Buffett, the tide receded and we saw Greece was naked.

On a more direct level, Goldman also was involved with the CDS market in Greece last summer. This why I always considered the currency swap story a red herring. A Wall Street Journal article had a story about a dinner party last summer between hedge fund guys and Goldman:

http://online.wsj.com/...

The big bets are emerging amid gatherings such as an exclusive "idea dinner" earlier this month that included hedge-fund titans SAC Capital Advisors LP and Soros Fund Management LLC. During the dinner, hosted by a boutique investment bank at a private townhouse in Manhattan, a small group of all-star hedge-fund managers argued that the euro is likely to fall to "parity"—or equal on an exchange basis—with the dollar, people close to the situation say.

After that dinner the funds did short the euro, but the investment banks also originated a bunch of CDS at a low price. A huge amount. The CDS index on Greek debt showed a jump from 9 billion in contracts to 85 billion on Greece in one month (acknowledging of course that the CDS index is a bit of a joke since it isn’t transparent and we have no idea what is out there). That panicked the markets and sent Greek yields higher long before Greece restated 2009 in the 3rd quarter.

Subsequently, the CDS were sold mainly to European banks that hold 85% of Greek debt. Sold at a huge premium. Pump-and-dump. In short, the CDS market factors in behavioral psychology. It's easy to prove. People get panicked, and there's a momentum play afoot. People profit from shorting initially, and then going long. But it's the collusive effort that gets the ball rolling. 9 billion to 85 billion in a month. That's what freaks people out.

Before the IMF and EU had to step in this week, interest rates on Greek bonds were pricing in default and by now they are totally untethered from any mathematical analysis of the Greek situation. Some 2-year notes are giving yields of 26%. In other words, market psychology is the dominant factor in determining interest rates. It's simply amazing that Greece can have the same financial situation in January as it does in April, and yet the reactions to its problems are totally different. Greece sold over 5 billion of 10 year notes at 5.9% in February. Keynes said the market can remain irrational longer than one can remain solvent. In economics, this situation is called "an ideological litmus test for adherence to the Efficient Market Hypothesis." I have to credit Migeru over at the European Tribune with that formulation.

My point is only backed by the fact that Greece sold many billions of 10-year notes with 5.9% yields in February. The only thing that changed is Angela Merkel's split personality. Speculation started the ball rolling. By now, Greece is not a speculator's story. It's an EU story. With EU support in January, the same speculators who went short Greece actually went long Greece until they realized that Germany was dithering. Greece might have been able to finance its debt in the market with a real European backstop, a backstop that didn’t exist even until, well, today, this weekend.

Of course, I shouldn’t blame Angela Merkel for dithering and signaling that Greece did not have European support, thereby inflaming market psychology. I don’t blame her too much because I think the men behind the curtain are all deficit hawks and that EU leaders are taking orders from bankers. It was only when Axel Weber realized that his deficit-hawk drumbeat was bringing the eurozone into serious danger that he gave Merkel his blessing.

So, I’ve given the flipside of two memes, one inside Greece (that the previous government was more to blame than the current one) and one outside Greece (the selfishness and piggishness of Greek citizens is to blame).

There is another narrative out there that I should mention and it is put forth by economists like Joseph Stiglitz and Paul Krugman who believe the structure of the Eurozone makes some countries less competitive and creates export/import imbalances. This may be true (I don’t want to get into it too much, but if more than .5% of Europe’s GDP were devoted to structural funds, I don’t think we’d worry so much about imbalances) but I think Krugman is looking at Greece as a case study, looking up Greece’s statistics (a horribly lopsided trade imbalance) and not accounting for the fact that 50% of Greece’s GDP is in shipping and tourism (which don’t count as exports even though both are huge sources of external dollars). In other words, Krugman assumes that Greek debt was run up by Greeks taking money on credit to buy products from other countries, mostly from Germany. I would not doubt that this is a contributor to the debt, but not nearly as much as Krugman seems to assume. While Krugman’s hypothesis seems to explain why German banks would lend Greeks so much money (a dynamic which may be similar to American banks giving out subprime loans to customers), it doesn’t account for the fact that Greek private debt is among the lowest in the eurozone. The run-up on credit cards in Greece was not that high. So, unlike some other eurozone indebted countries, Greece may not be subject to this question of competitiveness as much for two reasons. One, its main sources of wealth come from two places where they will remain competitive, tourism and shipping. Two, there is very little external investment in the country from multinationals, and in other bad-off eurozone nations, the problem has been that multi-nationals are picking up stakes and leaving because of high-costs due to the euro. Not so in Greece.

Now, finally, after so long, the meat of the diary: how did Greece get itself into debt? Theoretically, Greece's debt is viable--in anything but the nastiest recession since the 1930s--but now Greece is almost broke. Greece gets blamed for a bloated bureaucracy, and it has one, and it could certainly restructure, but if you do the math, 440k bureaucrats making an average of less than 20k a year... well, they could never run up a bill of 270 billion in debt. Again, here are some numbers:


440k bureaucrats (670k if you count state assets such as trains, etc.)
Less than 20k average salary
270 billion euros debt
250 billion euros GDP
105 billion gov't budget

Crunch those numbers, and you will have a hard time making it to half of 270 billion.

Greece suffers from corruption, both an oft-remarked upon internal corruption at the level of bribing local officials and state-authorities, but more importantly at the highest level, the people in charge of approving multi-billion contracts. After doing some research into state projects over the last decade, I determined that the EU enterprise is corrupt in the sense that there's a lot of payola for political favors. Greek politicians took so much bribe money from European corporations and governments in return for the approval of projects. And I can name at least 75+ billion worth of deals that did not add value for Greece (in terms of a sustainable economy), things such as the Olympics (99% is Greece's fault, 18 billion), or submarines, tanks, eurofighters (over 4.8% of GDP annualized for a decade, that’s 12.5 billion a year or 125 billion over a decade with 2.3% of GDP going to service that military equipment with new parts and technicians), a Greek gov’t bailout of Greek banks for getting involved in Wall Street’s derivative mess in the amount of 20+ billion, and also many other projects such as the Rio Antiro world class superlong Bridge to Nowhere (4 billion). Thyssen Gruppe is reported to have bribed Greek officials in the amount of 83 million euros for the approval of building submarines at $2 billion. Siemens was caught redhanded. These companies were also caught bribing officials all over the union. Sure, a few politicians were caught, they'll go to jail, but the bribes happened, the debt added, and too many politicians got away with it. Many of these are totally useless projects. The great part of the debt went not to average Greeks who are scratching out a living, but to corporate and bank welfare in Greece and indeed across Europe.

I'm not absolving the Greek bureaucracy since it's at a high level and unhealthy for the nation, but they could never get Greece into the level of trouble it's in currently. Another argument about Greek bureaucracy that is sometimes made is that the Greek social system is threadbare, welfare doesn’t exist as such, and that the bureaucracy is a form of welfare/workfare (i.e. the bureaucracy IS the safety net). I’d argue that this can be a disincentive for bureaucrats with actual work to do, and that Greece needs to fix this problem. PM Papandreou’s "blame the other guy" framing of the problem is devised to fix this aspect. More importantly, however, Greece needs to fix the internal corruption problem by itself to prosper, and not only get by, while Europe needs to lay off the corporate welfare kick.

Here are just a few articles on Greek corruption and quid pro quos:

http://www.ekathimerini.com/...

More than 80 million euros was paid to middlemen and officials in Greece to secure the sale of four German-made submarines to the Greek navy in 2000, sources told Sunday’s Kathimerini.

Sources that are close to the investigation being carried out by prosecutors in Munich said that the total amount of under-the-table payments in relation to the deal was 83 million euros.

Two German companies, Ferrostaal and HDW, won the contract to supply the submarines at a total cost of 1.8 billion euros. However, Ferrostaal was until last year a subsidiary of the MAN manufacturing group, which is under investigation for the payments of bribes to public officials in several countries.

http://www.reuters.com/...

http://www.nytimes.com/...

I’d add a couple anecdotal points. The question of the Greek black market and tax evasion is a mystery. The best analysts who have looked at it thoroughly have pegged it at 26% of taxes. Some look at this figure and add 26% more tax income for Greece, and they say, Voila, problem solved. Of course, eurozone tax evasion is at 19% and American tax evasion is at 17%. Wisely, Greece is only trying to collect a modest sum of 2% more. The EU has rejected this since they don’t believe it can happen. I’d side with the EU on this one because the big money has long fled the country, and Greece’s average per capita of 30k is a mystery. Where is that money going? The gap between the middle class and rich is enormous.

Some other numbers:

Greek tax revenue: 105 billion (9.8k euro per capita or 12.8k US dollars per capita)

The USA per capita tax is 8.6k.

Seems as though the Greeks pay a lot more in taxes, and if so few are reporting more than 100k in income, then that probably means most of the tax burden is falling on the middle class and the poor--unless a lot of that is corporate tax. But Greece's biggest corporations are the shipping companies, and they are exempt from tax--as are their owners-- for obvious reasons: they can register their ships elsewhere, if they want. (There is a tonnage tax for ships however). Also, Greeks are being accused of not getting receipts from taxis and doctors and such, with which to report on income tax for proof of expenditures. Here are some anecdotes about the reality of Greek worker’s lives. How much do they make?

http://www.timesonline.co.uk/...

"I am having to make ends meet with €1,200 a month," said Irene, a senior ministry official and former diplomat with 28 years seniority. "That's not much money after taxes." She was talking in a café which she plans to boycott because it has just added 30 cents to its three-euro coffees. "I told them we have to pull together or we all lose."

http://news.bbc.co.uk/...

Kriton Orfanos, a psychologist at a family centre in Athens, has lost 10% of his salary and fears that his future pension will be slashed from 1,100 to 650 euros (£953 to £563) a month.

There have also been retirement stories about Greeks getting a pension early, yet Eurostat is showing a retirement age of 61.8, which is later than Germany. Here, the retirement age for pensions is at 65:

http://www.reuters.com/...

Greece will keep the retirement age at 65, Labour Minister Andreas Loverdos told reporters on Tuesday, days before a cabinet meeting discusses a pension reform bill. "We managed to maintain the (retirement) age limit at 65 years," Loverdos said, referring to talks with European and IMF officials on austerity measures.

Germans get their pensions at 67 and this is why some have said Germans are footing the bill for an earlier retirement age in Greece, but this logic applies to all of Europe since Germany is the biggest net contributor of funds to the EU and it has the latest retirement age, so it funds EVERYONE's earlier pensions. of course, if countries moved their age back to the German age of 67, one suspects the Germans would move it back to 69 to preserve this sadomasochistic exercise.

Greece has some solutions outside the austerity measures:

Greece’s economy could grow quicker than people think because of the rebound in China spurring on shipping, because of the euro dropping making Greek exports cheaper and making holidays in Greece cheaper. The state owns 250 billion worth of land that it could sell. It still has many state assets. I also read yesterday that Greece is last in the EU at procuring EU subsidies allocated to it. For the 6 year span from 2007 to 2013, Greece had only applied for 10% of the $22 billion allocated to it. Belgium, by comparison, lands 65-70% of the funds allocated to it. That's a difference of 2 or 3 billion euros a year. Cutting the red tape to spur international investment would be a big help.

Finally ECB and eurozone monetary policy could change. Think about it, if the ECB took Japan’s approach, it could buy Greek bonds through intermediaries, but egos are at stake and some still want the euro to be the world’s reserve currency even if it means people will starve and be out of a job. Heck, the ECB could buy those Greek bonds yielding 26% at the very bottom of the market, knowing it has the ultimate power to loosen monetary policy. But this is just a fantasy with the deficit hawks in place. And it’s rather like buying bonds low while controlling the mechanism that will lift bonds higher (no, I’m not forgetting inflation and how everything will be worth less, but we’re talking about Greece here and 26% bonds!! Those are irrationally cheap).

Come to think of it, several legal scams are currently at play. The Bank of Greece, bailed out to the tune of 25 billion by the Greek government, has bought lots of CDS on Greek debt. So how does that work? A bank with a huge government stake will reap huge profits if the state defaults? And then lend money back to the state? Think about how you can game this CDS system. You lend me 100 bucks, then buy 1,000 worth of CDS on the debt, I refuse to pay it back, and we split the 900 profit!

Ultimately, I would argue that the bailout of the Greek people is not really a bailout of them but rather a bailout of German and French banks (not to mention a guardrail against Credit Default Swaps on Greece’s debt, or the possible contagion of default on other indebted European nations). Many EU countries will contribute. In order to save its banks, Germany, through KfW bank, will be selling 3-year notes to Greece at the rate of 5.33% interest. Germany has access to this money at the rate of 1.25% so this presents an arbitrage play for Germany, and according to Wolfgang Munchau writing in the Financial Times, this presents a "net transfer of wealth from Athens to Germany." (His article is no longer linkable because of the FTs subscription service). For the Greek people, they would do better without a bailout but rather a Greek-lead restructuring. For Greece’s political elites, this is a no go, since they strongly feel the country’s long-term future is benefited inside the eurozone (and I agree, though I’m totally confused as to what is better, restructuring or loans) and they also feel that Greece cannot afford to lose the political backing it receives for national issues (backing which comes as a result of trade deals between the Greek gov’t and European corporations), nor does Greece want to be even more of a pariah with European colleagues for having caused a pan-European meltdown after a default. Some Greek citizens might argue that given their current reputation and their troubling DNA, their sense of pride isn’t worth much. Most Greeks would prefer a default, a restructuring of their economy, rather than the austerity measures that will keep the country paying high interest for a very long time.

Finally, if Greece is a test case for the further dismantling of Amerian education and such (our schools are being ravaged right now) then consider that, first, this scenario has already played out a few times in the USA:

http://www.globalresearch.ca/...

And once the giant shit machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes — schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed — yes, that's right, bribed, criminally bribed — the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the fuck off, so they could have the rubes of Jefferson County to fleece all for themselves.

You tell me, who is to blame? The citizens who elected the politicians? Or the crooks?

I wrote another DailyKos diary about the bond vigilantes coming after American municipalities next, and it’s scary as hell:

http://www.dailykos.com/...

These are the funds who stalk the $80-trillion global fixed income market, forcing unpleasant decisions on governments who don't have the stomach for real budget cuts. They had their way with Canada in the early 1990s and now are toying with Greece.

But they are already eyeing new targets. They are watching California, as they are Michigan, New Jersey, New York and other states that have been piling up debt. Positions in credit default swaps on state bonds are building as bondholders and speculators place their bets.

In some respects, it's easy pickings.

The cause of the states' predicament is easy to spot: plunging tax revenue from a recession and burst housing bubble has left income far short of spending. States have been working to cut outlays, with California even slashing funding to its treasured state university system, but it's not happening fast enough. There are few options, given that some states have limited powers to increase taxes.

Years ago, we saw some big cities default, and this was before the era of CDS and derivatives. Right now, such a default (remember Bridgeport, CT?) could reap huge damage on the American economy. Is the answer to fire teachers or to curb gambling on municipals or preventing the fleecing of municipals?

Originally posted to upstate NY on Sat May 01, 2010 at 05:17 PM PDT.

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Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

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