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EuroZone Profiteers: How German and French Banks Helped Bankrupt Greece


#1

EuroZone Profiteers: How German and French Banks Helped Bankrupt Greece

Pratap Chatterjee

Alexis Tsipras, the prime minister of Greece, has called a national referendum this Sunday to call the bluff of the European Union and International Monetary Fund who are trying to force his country to accept severe austerity in return for effectively rolling over much of the countries’ debt.


#2

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#3

Note that Stiglitz stated "It has gone to pay out private-sector creditors – including German and French banks." Accent on the word "including." While it's convenient to point exclusively to European bankers, the article "Goldman Sachs Doesn’t Have Clean Hands in Greece Crisis" published today by Pam and Russ Martens highlights how Goldman Sachs actually helped Greece get into this mess, just like Wall Street investment bankers did to counties and cities and school districts across America. Thus, it's no coincidence that the Grisis echoes pre-recession issues brought out by the actions of American investment bankers.


#4

When she became managing director of the IMF in 2011 LaGarde chastised Greeks for not paying taxes even though IMF directors pay no income tax on their salary which was around a half million Euros per year at the time.


#5

Note also that the necessity for infinite expansion within a finite system drove the banks to seek expanded markets. What will happen when the markets are mortgaged out again? Will they offer sub-prime loans to Martians?


#6

Everydody should have known that the lending to Greece is unsustainable, the ECB did not do its job as supervisor of the financial system. Now surely they have to shoulder the blame.

More details, from a macroeconomic view-point here:

radicaleconomicthought.wordpress.com/2015/07/01/the-terrible-twins


#7

There are two important omissions from the article. The first is that sub-prime lending in itself was not really the problem. If it were only sub prime lending, the global financial system would not have collapsed. It was teh collatoralised debt obligations (CDOs) which were created from mortgages that really brought the system down. CDOs were a collection of A, B, C and junk loans bundled together and called A+ because the "genius" financial gurus believed that by bundling good and bad loans together that they had averaged out (and reduced - or even eliminated) risk. Then they sold these CDOs to governments, superannuation funds and large institutional investors. They even used the CDOs as the basis for all sorts of derivative products. When people found they could not repay, it wasn't just their mortgage that went bad. The whole system of complex financial products, complete with complex derivates, all loaded up with debt fell over.

And it is true that Greece debt to GDP was high compared to the EU average from as far back as the 1990s. It had been growing since the 1980s, but actually stablilised around the 2000s. That didn't stop any of the wealthier countries lending them more money. And then having to bail out the financial markets and subsequent austerity when these rich countries found themselves in trouble caused the GDP to crash and Debt to GDP radio deteriorate. Commentators blame this situation in part on tax evasion. But that is really only a small part of the story. If tax evasion were the cause, every large developed nation in the world today would be on the edge of collapse (and maybe they are?). I don't see that Greece is so very different from many other nations in how they borrowed to build infrastructure or how they failed to clamp down on tax cheats (particularly of the corporate kind).


#8

Can I please recommend you the 2014 documentary €uroestafa (€uroscam)? It presents a lot of these arguments but in the Spanish and European context, looking also at social implications. It is based on the research of Richard Verges on the German origins of the Spanish construction bubble and credit crunch. The documentary has subtitles in English if you click on the top left corner.https://youtu.be/gCYWojgPYE4