Tag: Greece

Criminals of Greek Debt: They need solutions, Not more Austerity

The news about the Greek financial mess is everywhere. Most people mistakenly believe that the fault lay solely on the people of Greece. It is true that part of the blame goes to years of corruption and tax avoidance by its wealthy. But how many people are talking about the role that Goldman Sachs played in this catastrophe.

Wall Street padded profits by leveraging the Greek economy with secret debt deals based on cooked up books. This entire crisis threatens to trigger another world economic crisis and it all stems from a secret deal that Goldman Sachs’ Lloyd Blankfein engineered.

According to a report from Bloomberg, Blankfein worked with former head of Greece’s Public Debt Management Agency,Christoforos Sardelis, to help the Greek government hide the true extent of its national debt.

The first part of the debt deal was struck in 2001, when Greece owed about 600 million euros ($793 million) more than the 2.8 billion euros it had borrowed. Goldman then cooked up an off-the-books derivative for Greece that disguised the shortfall but increased the government’s losses to 5.1 billion euros.

In 2005, the deal was restructured and the 5.1 billion euro debt was locked in. After that, Goldman and the rest of Wall Street pulled the global economy to its knees—whacking Greece even harder.

The complexity of the deal helped Goldman reap a bigger payday. In fact, the loan was so confusing that even the Greece government had trouble understanding it and thought it was much cheaper than it actually was. The Bloomberg report simplifies the situation with this telling quote:

Like the municipalities, Greece is just another example of a poorly-governed client that got taken apart … These trades are structured not to be unwound, and Goldman is ruthless about ensuring that its interests aren’t compromised — it’s part of the DNA of that organization.

Did any of its executives ever go to jail? Of course not. They all got fat bonuses and promotions. Blankfein, now CEO, raked in $24 million in 2014 alone. Meanwhile, the people of Greece struggle to buy medicine and food. Where is our outrage?

Okay. So let’s say that the Greek people bear some responsibility for mismanaging their financial situation and letting the sharks rake them over the coals. What’s the cost of this lesson. According to economists Thomas Piketty and Jeffrey Sachs in a letter published by The Nation, Euro austerity measures have hit Greece’s vulnerable population the hardest.

40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent.

Most people agree that debt restructuring must be part of any solution for economic reforms in Greece. But what the European powers have done is add additional eleventh-hour, draconian demands that Greece slash pensions even further, privatize even more core state functions, and attack unions and workers’ collective bargaining rights.

What has the U.S. done? We’ve stood by and done nothing. Not only do we have diplomatic influence, we are also a charter member of the IMF – we can actually vote in favor of better terms for Greece. Obama and Secretary of the Treasury Jack Lew could use these tools to help steer this crisis away from catastrophe.

We can demand action, help push the powers along for solutions, or we can idly stand by and watch the people of Greece absorb the full brunt of an American-made economic implosion. We can also draw a line in the sand and let everyone know that austerity is off the negotiating table.

If we don’t, then guess who are the criminals of the Greek debt?

Post note: Yeah, I shamelessly pulled text from a Moveon letter that I got. So what? It’s a serious situation. I donated and I’m activating.

 

Lessons from Greece: Austerity and Trickle Down Economics Do Not Work

There are pundits who use Greece as an example of how not to run a country. I’ll use Germany on how not to make lasting unions.

Germany’s financial institutions – the lenders, investors, regulators, negotiators, and politicos – are the ones driving the lesson of austerity. It’s been a hard lesson for Greek politicians. But it’s been a painful one for the common Greek people.

The Greek economy has gone through the shredder – contracting by a stunning 25% since austerity measures have been put into place seven years ago. This has not helped Greeks repay their debt and it has actually made things a lot worse. It’s true that Greeks have a poor record on tax collection and that tax reform is probably long overdue, but at this point of the game, how do you squeeze water out of a rock?

Yet, even as the pain of poverty laps up around the legs of the common Greek worker, the Germans have demanded even more austerity measures than before – and this was during earlier negotiations. This is why we’re at the Grexit scenario – a full or partial departure of a valuable NATO partner.

What does a “Grexit” mean to us? According to some folks who keep eyes on global strategy issues, Greece is already sliding closer to Russia, which is bad for NATO. If you care at all about global military strategy – something bad for NATO means that it’s probably bad for US.

Americans should also take heed that austerity doesn’t work, trickle-down economics doesn’t work (period), and unrest follows when things get bad enough.

What does austerity do? It shrinks payrolls, reduces worker benefits, and in the case such as Greece – it tends to eliminate good paying jobs. And what happens when you shrink payrolls, reduce worker benefits, and eliminate jobs? Economies tend to not grow.

What does trickle-down economics do? For the common worker – nothing. But it does ensure steady cash flows to the wealthy. Do the wealthy spend money? Sure. But as our own experience has shown us, the outflows are no nearly enough to bolster real economic growth.

Is it any surprise that Greeks have revolted over the thought of handing over BILLIONS of Euros to creditors in the form of interest payments? The Greeks have rejected Euro bank polices that would chain common workers to decades of debt repayment. More power to the Grecian people – they’ve figured it out.  And they’ve put a name to their suffering and it is German Chancellor Angela Merkel. The list of credits should also include the cadre of heartless “profit at any cost” financiers who are squarely responsible for everything that happens next.

In the U.S., we have a name to put to our lackluster economy and horribly distorted distribution of wealth and it is every Republican, Tea Partier, and Libertarian who has put their name of government shutdowns and forced budget sequestration. Like the Germans, the GOP has repelled civil policy-making and, thus, repelled civil negotiations with the workers of America.

Americans have learned, as have the Greeks, that the ideology of austerity and trickle-down economics is bad for economies, bad for workers, and bad for civil society. Austerity and trickle down economics do not work – they’ve never worked. It’s time that we stop believing that they ever will.