(Addendum: as David Dayen notes, the austerity measures I discuss here just passed;
In brief, the present riots in Greece are a reflection of the reaction in that country to the losses their economy has suffered, and to bank demands that the workers, alone, pay for them. The label of ‘austerity’ has been applied, but Greek working people are well aware that this means for them, not for those that caused the losses. Loans made to their government were based on fictitious potential earnings, as were the projected gains in our own toxic loan mortgage mess.
In a recent visit to Greece, I was glad to see the terrific new museum in the Plaka, the Parthenon, area that is supposed to house the sculptures that Lord Elgin carted off to London from their home in Athens. That is one of the great works now being shown as a reason that Greeks should give up salaries and benefits they were given to convince them that their leaders were doing a great job.
The loans that are now proving bad were not made because of popular demand, but because the Greek government wanted to keep on enjoying a hollow economy and fictitious projections. Now the people who benefited from public works that were ‘gifted’ them in a popularity contest their leaders were throwing are being told it’s their fault, pay up
Whether and how to involve the banks, hedge funds and other private holders of Greek debt in a new aid package has been hotly debated for weeks, with some officials worrying such a step could unleash contagion that envelops new countries like Spain, with disastrous consequences for the currency bloc.
On Wednesday, France said it rejected any restructuring of Greece’s debt and would not change its stance.
But the German government, worried about a backlash from angry taxpayers and a possible rebellion in parliament, has been pushing hard for some form of private creditor involvement.
In a June 6 letter sent to the heads of the European Central Bank, International Monetary Fund and his euro zone counterparts, Schaeuble demanded a “quantified and substantial” contribution from bondholders as part of any new Greek package.
“Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years,” Schaeuble wrote in the letter, a copy of which was seen by Reuters.
It was sent two weeks before a June 23-24 EU summit, at which the bloc’s leaders are expected to put the finishing touches on the new deal for Greece.
Such a swap would amount to a restructuring of Greece’s privately held debt, even if it was done on a voluntary basis, and ratings agencies have warned that they would view it as coercive and classify it as a default.
The banks are being taxed to give up their gains, rather than shrug them off under the ruse that they, the banks, were innocent when they made loans that could not be justified by actual economic conditions. As usual, the bankers are squealing that they were deceived and abandoned.
The banks’ bottom feeding tendencies are justified by the pretense that they must answer to their shareholders, and only by producing maximum profits are they doing their actuarial duty. The bankers like to claim they are subject to laws that demand they ignore the larger picture, the viability of a whole economy. The claim is that immediate, maximum, profits are their duty and law.
When the world is in crisis because bankers have followed a dictum that bankrupts every economy where banks have not been strictly controlled and regulated, that crisis is itself the counterargument. By dishonest loans to shaky officials in highly suspect economic conditions, the bankers involved made big money, especially in the form of their own rewards and incentives.
The same scenario is playing out now in this country, in less volatile form. Because the electorate in this country is much worse informed, and misled by countless business reporters claiming that unless workers give up all their rights and take ‘haircuts’, timid business will lack the ‘confidence’ to invest in our economy. Of course, the business ‘confidence’ must have been lacking for the past ten years, since no investment in the U.S. economy occurred during that time.
We are all Greek now.