Behind Germany’s Refusal to Grant Debt Relief: Financial Eugenics and the Will to Power

"What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage in the sense of ethical responsibility to stand up to it."

Jamie Galbraith, Greek Revolt Threatens Entire Neoliberal Project

It is probably less an issue of ethical responsibility and more an act of self-interest for most.  Having taken their fill of the Third World, and now working their way into the developed nations, why would anyone assume that Greece would be sufficient for the maw of neoliberal greed.

The above interview with Galbraith is worth reading.  For one thing it contains the seed of the current spin that Tsipras called the referendum in order to lose it, and to somehow save himself and betray the Greeks.   And for another you will be able to read what Jamie Galbraith really thinks, the parts that the friends of the financial establishment have carefully excluded from their versions of the story.

The calling of the referendum was politically brilliant, because it defused the notion of an extremist government standing irrationally against the Troika.  This derailed the path towards a 'color revolution' backed by the oligarchs, to take out these mad leftists who were not speaking for the people.  

Remember the economic decision involving Europe which provoked the recent coup d'état in the Ukraine?  In that case the government did not have the backing of the people, and it took hold, at least in the Western portions of the country.   Wash, rinse, repeat.

Of course the Greek referendum was famously too close to predict when first called by Syriza, and surprisingly late in the game for most everyone else as you may recall   And Tsipras called it to lose? How soon some choose to forget.  But it changed the course of events in a dramatic way.  As it was it did not help their bargaining position, but as Galbraith says they did not expect it to improve their bargaining position because their counterparts were implacable and not negotiating in good faith.

But it put the field of play into better terms if your goal is playing for survival, and time.  Syriza is knocking down all the rationales and excuses to visit harsh terms on Greece that the Troika and their enablers are using.  They are exposing the Eurocrats for what they really are.

Empires set on unsustainable foundations are like financial bubbles and Ponzi schemes.  They are inherently non-productive and consuming, so they must continue to grow, or choke on their own detritus.   Transferring wealth as your major economic policy requires a steady source of new supply.

Most of the American media has fallen into line with the neoliberal agenda. It might seem surprising, but power has its attraction under corporatism, even for people who would ordinarily consider themselves to be 'liberal.'

There are concerning things happening in the Western world, and a lack of traction towards individual freedom amongst 'the great democracies.'

We look with a sense of foreboding at Germany's growing desire to bring their version of order and efficient management of lands and people to the rest of Europe.

The growing militancy in Japan, and Abe's aggressive pushing aside of constitutional restraints, is undernoted in the West, but of great concern to those in Asia.

Greece would look to the US for assistance in vain, given that Obama's representative to the continent is Victoria Nuland, the bearer of color revolutions and the reaping of ancient lands and cultures for profit.  

No, even the developed nations of the West have been caught up in the will to power.

What is good? All that enhances the feeling of power, the Will to Power, and the power itself in man. What is bad? All that proceeds from weakness. What is happiness? The feeling that power is increasing--that resistance has been overcome. Not contentment, but more power; not peace at any price, but war; not virtue, but competence.

The first principle of our humanism is that the weak and the failures shall perish. And they ought to be helped to perish.   What is more harmful than any vice?  Active pity for all failure and weakness--- Christianity.

Friedrich Nietzsche

At least in this latest incarnation of the will to power some, including the Pope thank God, are speaking out early, publicly, and strongly against the rising tide of injustice, the senseless abuse and indifference towards people, especially the vulnerable and the weakest, and the impulse towards dehumanizing bureaucratic rule and neo-totalitarianism. 

How many human lives, how much misery, how much of the richness of the land, are we willing to sacrifice to the indifferent god of the markets and its insatiable Banks.

As always silence is complicity, and apathy is a comfort to something as old as Babylon, and evil as sin.

Behind Germany’s refusal to grant Greece debt relief

Posted on July 11, 2015 by yanisv 

Tomorrow’s EU Summit will seal Greece’s fate in the Eurozone. As these lines are being written, Euclid Tsakalotos, my great friend, comrade and successor as Greece’s Finance Ministry is heading for a Eurogroup meeting that will determine whether a last ditch agreement between Greece and our creditors is reached and whether this agreement contains the degree of debt relief that could render the Greek economy viable within the Euro Area.

Euclid is taking with him a moderate, well-thought out debt restructuring plan that is undoubtedly in the interests both of Greece and its creditors. (Details of it I intend to publish here on Monday, once the dust has settled.) If these modest debt restructuring proposals are turned down, as the German finance minister has foreshadowed, Sunday’s EU Summit will be deciding between kicking Greece out of the Eurozone now or keeping it in for a little while longer, in a state of deepening destitution, until it leaves some time in the future.

The question is: Why is the German finance Minister, Dr Wolfgang Schäuble, resisting a sensible, mild, mutually beneficial debt restructure? The following op-ed just published in today’s The Guardian offers my answer. [Please note that the Guardian’s title was not of my choosing. Mine read, as above: Behind Germany’s refusal to grant Greece debt relief ). Click here for the op-ed or…

Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.

In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.

Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.

To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
Once the sordid operation was complete, Europe had automatically acquired another reason for refusing to discuss debt restructuring: it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.

Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.

In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.

Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.

With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.

Europe did not know how to respond to the financial crisis. Should it prepare for an expulsion (Grexit) or a federation?

One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.

 

Greece and Goldman: Can the World Afford the American Elite's Addiction To Abusive Banking Practices

 

Und das große Feuer in Soho
sieben Kinder und ein Greis -
in der Menge Mackie Messer, den
man nicht fragt und der nichts weiss.

Und die minderjährige Witwe
deren Namen jeder weiss
wachte auf und war geschändet -
Mackie, welches war dein Preis?


Kurt Weill, Bertholdt Brecht, Die Moritat von Mackier Messer, 1928

Here is an example of the consequences of the failure to reform the outsized and kleptocratic financial system after bailing it out, even years after the latest financial crises.

The former Greek government was certainly more compliant to Western banks and political suggestions.  It was the introduction of a 'reform government' in Syriza that rustled the feathers of the international kleptocrats and their organizations.  

But we have heard all this before, many times, from investigative reporters and whistle-blowers such as John Perkins, on the 'economic hitmen.'

I would like to see Europe and Asia begin to take stronger measures to prohibit these banking cartels with long records of banking violations and market rigging from doing business in their regions and with any of their official financial instruments.

The US apparently does not have the political will to reform its banking system.

How much damage will they stand by and permit these sorts to visit on their people, who always seem to be picking up the pieces, through austerity and privatizations of their national assets.   Will these new trade agreements even allow them to exercise their national sovereignty to protect their people from fraudulent financial practices and price gouging in the future? 

The apologists for white collar criminality like to say, 'don't hate the player hate the game.'  But the only way to make the game honest again is to have these bent players take responsibility for their actions, and for the judges to start handing out red cards to any repeat offenders.

That would be more statesmanlike than visiting harsh punishments, and austerity, and slanders on their victims.  

Wall Street On Parade
Goldman Sachs Doesn’t Have Clean Hands in Greece Crisis
By Pam Martens and Russ Martens
June 30, 2015

Are Goldman Sachs executives Lloyd Blankfein, Gary Cohn and Addy Loudiadis losing any sleep over elderly pensioners waiting outside shuttered banks in Greece, desperately trying to obtain their pension checks to pay their rent and buy food? Are these Goldman honchos feeling a small pang of conscience over the humiliation by creditors of this once proud country?

Perhaps Blankfein, who famously espoused that he’s “doing God’s work” might shed a tear or two for the small child clinging to her elderly Grandmother’s hand as she searches in Athens for an ATM that will give her $66 from her bank account – the maximum allowed per day under the newly imposed capital controls.

According to investigative reports that appeared in Der Spiegel, the New York Times, BBC, and Bloomberg News from 2010 through 2012, Blankfein, now Goldman Sachs CEO, Cohn, now President and COO, and Loudiadis, a Managing Director, all played a role in structuring complex derivative deals with Greece which accomplished two things: they allowed Greece to hide the true extent of its debt and they ended up almost doubling the amount of debt Greece owed under the dubious derivative deals.

A February 2012 BBC documentary on the Goldman Sachs deal provides a layman’s view of the dirty underbelly of the deal, calling it “a toxic import” from America that is “hastening” the downfall of Greece...

For the unschooled to the ways of Wall Street, one might jump to the conclusion that Greece and its finance officials were knowing participants in the deal. That would be a reasonable assumption were it not for counties and cities and school districts across America that were similarly fleeced and hoodwinked by investment banks on Wall Street.

In March 2010, the Service Employees International Union (SEIU) released a study showing that from 2006 through early 2008, Wall Street banks are estimated to have collected as much as $28 billion in termination fees from state and local governments who were desperate to exit abusive derivative deals. That amount does not include the ongoing outsized interest payments that were, and still are being paid in some cases. Experts believe that billions of these abusive derivative deals may still remain unacknowledged by embarrassed municipalities.

Back in 2010 when German Chancellor Angela Merkel first heard of these derivative deals to hide sovereign debt among European Union partners, she had this to say: “It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped to fake the statistics.”

Well, that’s exactly what happened...

Read the entire article here.

The European Union, Greece, the Will To Power, and the Viceroys of Monetary Repression

"Talk to IMF people and they will go on about the impossibility of dealing with Syriza, their annoyance at the grandstanding, and so on. But we’re not in high school here. And right now it’s the creditors, much more than the Greeks, who keep moving the goalposts. So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default, to encourage the others?

At this point it’s time to stop talking about 'Graccident'; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen."

Paul Krugman, 'Breaking Greece.'

"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."

Even more than she thinks about all those now struggling to survive without jobs or public services? "I think of them equally. And I think they should also help themselves collectively."

How?

"By all paying their tax. Yeah."

Christine Lagarde, Can the Head of the IMF Save the Eurozone 

 

This is no longer about the Greek debt. This is now about a small group of technocrats dictating domestic policy, and alas, enforced 'obedience' from a distant a central authority, using the power of monetary rather than military control.   It is painfully obvious.

So where are the economists?  Where are the analysts who pretend to authority on monetary matters, but who in fact blow with the wind from one incompatible position and crackpot theory to another, wherever their advantage may be?

Why are they not pointing out that monetary and public policy union over a large and diverse geographic area without 'fiscal transfers' between local economies, as exists in the US between the states for example, is inherently unstable, if not barking mad?  

You cannot have one distinct part of a region setting monetary and fiscal policy to suit their own needs, and expect the rest of a vast area with varying economic situations, demographics, and cycles to dance to their indifferent tune.   We know this.

This is not some theory.  This is hard experience, and one of the great issues of the 19th century in the US where New York Banks set monetary policy and drove the economies of the rest of the nation, particularly the agricultural areas of the West, into near rebellion through their callous disregard.

What are these people thinking?  This is not a political and economic union. This is neo-colonialism.  This is degenerating into a despicable parody of the white man's burden.  And they know this. 

So what is the purpose of their experiment?  What are they trying to prove?  That they are superior, apart from the power that they obtain solely from their privileged positions?

I was just listening to Larry Summers, speaking condescendingly (in his mind I am sure it was compassionately) about not trying to change the Greeks and countries like them culturally, but instead bringing them along gradually while offering 'competent administrative assistance.'  

Are you kidding me?  From the serial destroyers of wealth at the EU and the Fed?  What do these fellows imagine themselves to be, the new Viceroys of India?

Are they trying to show that if the world moved to a single currency that the different regions around the globe would still be able to maintain their national sovereignty while operating under a centralized monetary control in the City of London and Wall Street?   Well, if so, they have failed. 

They have shown such a notion to be ludicrous, a mere pretext for the eventual tyranny of an aloof central authority of self-defining and self-deluding 'superior beings,' whose burden it is to bring order and self-control to the weak minded inferior races.  

Inferior races!  This is Greece, the cradle of Western civilization.  This is the country that stood against the onslaught of the fascists, and bought time for the Allies.   This is the nation that was placed under a series of authoritarian puppet regimes by the Truman Doctrine as their thanks.  How convenient are our memories.  

And this is a nation that has been brought very low, into the spiral of a depression, by the monetary chicanery and neo-colonial vendor financing of Brussels and Berlin, through the puppet governments and Western economic hitmen under which they have suffered for far too long.

This is nothing more than the high water mark of a long trend to the will to power, that is as old as Babylon, and evil as hell.

Social change happens slowly at first, and then all in a rush. We have seen this recently in the States, and the rate of change, when it comes, can be breath taking. 

And the things that these hypocrites fear most are being brought about by their clumsy and incompetent pretensions.  There is no irony sweeter than the course of history, and human nature.

 

An Open Letter About Austerity, Debt, and Public Policy from Alex Tsipras

As we read this, let us keep in mind that the Banks were mired in bad debts that were created by their fraudulent activities and speculation, and that they were massively bailed out by the people, in the most gentle and accommodating of terms if not outright subsidies.

And now they would prey on those who have saved them, seeking to extend more debts, and harsher terms, not only to Greece but to the poor and middle class of their own countries, in order to make them like slaves to unresolvable burdens, stripped of freedom and assets by a corrupt judiciary and politicians.

Even now, QE is being extended to buy unpayable and overvalued debts from the Banks, to free their balance sheets, and to give them more power to financially oppress the public.

"Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds bigotry, nationalism, even violence.

In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.

In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the 'extend and pretend' tactic would lead my country to a tragic state. That instead of Greece's stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.

My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.

Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the 'serpent's egg' hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.

Despite the evident failure of the 'extend and pretend' logic, it is still being implemented to this day. The second Greek 'bailout', enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, "haircut" our social security funds, and financed a ruthless new kleptocracy.

Respected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!

Allow me to submit to you that this sorry attempt to recruit a new version of 'Greek statistics', in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.

Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country's stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end 'extend and pretend' logic not against German citizens but with a view to the mutual advantages for all Europeans.

Dear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.

Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.

A great opportunity for Europe is about to be born in Greece on 25th January. An opportunity Europe can ill afford to miss.

Alex Tsipras, An Open Letter to the People of Germany About That Which You Were Never Told

 

Related: 
Greek PM Freezes Privatisations

Anti-Austerity Party Gathers Support in Spain

Two Pictures From Greece

"Greece leaves behind catastrophic austerity, it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish."

Alexis Tsipras

"I have nothing to ask except that you move aside, so that you may not, by blocking the sunlight, steal from me what you cannot give."

Diogenes

Therese Duncan, Reaching Arms, The Parthenon, 1921 

"Until now we used to say that the Greeks fight like heroes.

Now we shall say: That heroes fight like Greeks."  Winston Churchill

 

 

Related:  Open Letter to the German People from Alex Tsipras

 

 

 

Greece's Humiliation: Are the Greek People and Their Nation To Be Sold Into Indentured Servitude?

"The law says, should any future Greek government try to default in any way on its debts – by setting up a debt commission or by any other means, even one accepted by international law and precedent, then Greece chooses to relinquish all claims on the assets of the Greek people and the nation and equally relinquishes all legal protections from its creditors/bond holders."

Golem XIV


"If the Russian people managed to halt and reverse the German torrent at the doors of Moscow, they owe it to the Greek People, who delayed the German divisions long enough so that they could not bring us to our knees."

Georgy Constantinovich Zhoukov


"On the 28th of October 1940 Greece was given a deadline of three hours to decide on war or peace. But even if a three day or three week or three year deadline was given, the response would have been the same.

The Greeks have taught dignity throughout the centuries. When the entire world had lost all hope, the Greek people dared to question the invincibility of the Germans, raising against it the proud spirit of freedom."

Franklin Delano Roosevelt


"Until now we used to say that the Greeks fight like heroes. Now we shall say, that heroes fight like Greeks."

Winston Churchill

I am not familiar enough with international law and debt to know if the terms of this Greek debt deal are truly unique, breaking new ground.

But the terms are striking, and symbolic of the neo-feudal social organization that had been prevalent in the colonial Third World.

It would seem to be better to take the Icelandic option, and leave the Eurozone, and refuse to surrender their sovereignty, though the heaven's fall.

The Humiliation of Greece

by Golem XIV on DECEMBER 20, 2012 in LATEST

It’s not often we get to witness the moment when a leader sells his nation for money. Such a moment occurred in Athens last week.

At the behest and on the authority of Prime Minister Samaras and President Papoulias, an amendment to Greek law was drawn up last week. There was no debate in parliament, the vote is still to be purchased. But unless this amendment is challenged or changed, the change it will bring in will alter the future of Greece and its people every bit as much as the day Greece joined the Euro, perhaps even as much as the day Democracy was re-instated after the long rule of the Generals. Only this change will be a giant step away from Democracy and towards subservience to an unelected elite.

You can read the law in its original here. Here is a translation of the key part.

«The Beneficiary Member State, the Bank of Greece and the Hellenic Financial Stability Fund each hereby irrevocably and unconditionally waives all immunity to which it is or may become entitled, in respect of itself or its assets, from legal proceedings in relation to this Amendment Agreement, including, without limitation, immunity from suit, judgment or other order, from attachment, arrest or injunction prior to judgment, and from execution and enforcement against its assets to the extent not prohibited by mandatory law».

The law says, should any future Greek government try to default in any way on its debts – by setting up a debt commission or by any other means, even one accepted by international law and precedent, then Greece chooses to relinquish all claims on the assets of the Greek people and the nation and equally relinquishes all legal protections from its creditors/bond holders. In other words, if a future Greek government tries to default, Mr Samaras and Mr Papoulias have guaranteed that the Greek people will forfeit and lose any and all rights to their nation’s assets including its national companies and natural resources and the law will not protect them. All those assets will be open to seizure by Greece’s bond holders. The vulture funds, vulturecrats and all the bond holders have been handed a loaded gun and a license to loot.

No nation has ever done this. The question is why are Greek politicians trying to do it and why now?

For the last two years two questions have echoed round and round Europe and occupied the elite who rule/own it – how to stop Greece defaulting and how to recapitalize its banks – so that neither can pull down the things Europe really cares about – Germany’s and Frances’s banks?

I believe passing the above law is an important part of the answer to both those questions. In fact, if passed in to law, it will, I think all but complete a Troika formulated policy begun with the much talked about but little understood, partial Greek default and bond swap, that was the first station of Greece’s cross. What is that policy?

Stop Greece from Defaulting.

There has been and continues to be much talk about ‘helping Greece not to default’. In actual fact there is very little real ‘help’ at least not for the Greek people. The intent of Troika’s policy for Greece has been far more directly to simply ‘stop’ Greece defaulting no matter what harm it does to Greece or its people. The policy has actually been to crucify Greece if necessary, and to deny her, no matter what, the release of default.

I believe this new proposed law is intended to put beyond all reach the release of default.

But first lets clear this law is not a one off. It is a continuation of a policy that the bond swap began. The bond swap dealt with only one part of Greek debt closing off only one potentially open door to default. The present proposed law closes off all the other exits in one stroke.

So let’s start by clearing away some of the misdirection that the mainstream media has so helpfully piled in our way concerning the debt swap that Greece undertook in March 2012 and about which so much has been written. First the debt being swapped was purely Sovereign debt that was held privately. I. E. by banks. So it did not cover sovereign debt held by other nations or central banks, nor any private debt, such as that issued by Greece’s banks. Only sovereign debt held by banks and other financial institutions.

Needless to say the debt/bond holders of those institutions have used every column inch they could buy or influence to tell the approved story of how they, the ‘wealth-producers’ of the world, as they like to style themselves, have been robbed by a nation of feckless, work-shy,’socialistic’, tax-avoiding, recidivist crooks. What actually happened is nearly the opposite.

Certainly, Greece did default/restructure this debt. So on the face of it it cannot be denied that the bond holders took a loss.  But as I have pointed out before, private companies default all the time. Default is not a crime against business, it is part of it. Neither restructuring debt nor defaulting it is  a crime.  Let’s look at the case of Chrysler – again. The management simply did the mathematics and knew that unless they could reduce their burden of debts they would not be able to get out from underneath them in order to make a profit going forward. Given that situation the management (Who by the way were the culpable ones for piling up that much debt) simply said – if we do not reduce this debt then the business is dead. Better to default some of our debt and allow a business that can make money to emerge.

That is all default is. A sensible way out of a disastrous situation.

Now when Chrysler defaulted they forced a settlement on their creditors of 29 cents on the dollar. According to the BIS (Bank for International Settlements)

In February 2012, the Greek government launched an offer to exchange €206 billion of bonds held by private sector investors for new bonds with a face value of about €100 billion.

So Greece offered very nearly 50 cents ‘on the dollar’. To me that’s a bail out in all but name because it is above what the bond holders would have got had they been selling in the open market. The Greek government made no attempt to get the best deal for their people, but instead offered the open hand of generosity for their banker friends while beating down on ordinary Greeks with a closed fist.

But the settlement with the bond holders was never simply about money ‘now’, it was perhaps even more about altering the future. This was a ‘restructuring’ with one purpose – to make future default or restructuring impossible. The bond holders got paid 15% of the face value of their bonds in cash up front. The important point, however, is that the rest of their 50 cents on the dollar came in the form of new bonds issued to replace the old. The important point, perhaps the main point of the exercise was that the old bonds, which were ‘Greek Law’ bonds were replaced by ‘English Law’ bonds. The difference between Greek law and English law bonds is important and valuable to those holding them.

In Greek law bonds there can be are what are called Collective Action Clauses which allow the government to impose on the bond holders an agreement which is binding on them all so long as a majority votes in favour. Thus in a restructuring the government can dictate terms and as long as a majority of the bond holders agree, however reluctantly, the rest have no choice but to acquiesce. This is what Chrysler did. This is exactly what the Greek government did to debt it had issued under Greek Law. In English law these clauses do not appear. Which means that individual bond holders, of debt issued under English law, can hold out against imposed restructurings and refuse to settle. The effect is to make it very difficult for a government to force a settlement on bond holders. Hold-outs can always block it and force a higher price.

What the Greek government did, with the blessing of the Troika, was use the collective settlement not only to offer the holders more than they would have got in the market – which mean as far as the markets were concerned that the banks were better off after the default than before – but to replace all the Greek law bonds which allow restructuring with new English law bonds that make it impossible. The deal made this restructuring the last Greece would be able to do.

So while the mainstream press obediently peddled the ‘poor bondholders being forced to accept default’ story – the real story was that thanks to English law bonds for the old Greek law ones, no future Greek government that was not convinced of the merits of destroying Greece for the sake of Europe’s big banks, or wanted to re-negotiate – like a possible left wing, Syriza government –  no such government, no matter what it promised those who voted for it, could ever again impose a collective default settlement upon the new debts.

The bond settlement was not just about giving to the bond holders it was about taking away from the citizens of Greece. Taking away from them their ability to chose certain futures.

Foreclosing the future 

Now let’s look forward to what might happen if the present coalition were to lose the next election and Syriza were to gain power. The Syriza leader, Mr Alexis Tsipras, has already called for a debt commission, and in any election that call or something similar, will be a central promise of Syriza to the Greek electorate.

But now consider what the chances would be of making good on any such promise. If Syriza were to take exception to the generous deal given to the bond holders and if they tried to change that deal in any way, it would be a technical default and the English law clauses would prevent any new deal being forced on the bond holders. The clause would stop any attempt by Syriza to reduce Greek debt by that route. That avenue was closed when the present government signed its generous restructuring deal.

So much of the ‘poor bond holders’ story. But the bond story only dealt with one part of Greece’s debt. It left untouched the part of Greece’s Soveriegn debt held by governments, central banks like the ECB and Fed, and by other international funders such as the IMF or the various European bail-out funds like the EFSF etc., and did nothing to ‘save’ Greece’s banks from the mountain of bad private debts they still held or which they had pledged as collateral to the ECB. These debts are what new law is for.

The New Law.

On the surface the new law pertains only to the debts of the Greek state and its institutions. And on their debts the proposed new law is rather clear. It says, should any new future Greek government, no matter the mandate given to them in an election, try to default on any of Greece’s remaining sovereign debt, now held mainly held by other governments, central banks and international financial bodies, then the Greek state and the government of the day would have no protection in law against suits brought against them nor even against injunctions served to restrain their assets prior to an actual judgement. This means a Greek government would not even be able to fight such a case because while they were trying to fight, all their sovereign assets would already be frozen.

IF a Greek government tried to default not only would it not be able to force a settlement on its English law bond holders, but nations and central banks to whom it owed money would simply be able to claim and then seize Greek national assets. They could start with those already held by them, such as Greece’s gold held abroad, but also claim ownership of any other asset such as Greece’s infrastructure of roads, rail, power, water, oil and lands.

In one fell swoop the new law would radically alter the situation of those institutions, such as the ECB, who are sitting on billions of Greek government bonds pledged as collateral by Greek banks. Up till now a default would have left the ECB, like everyone else, holding worthless paper and heading for the nearest court to file suit in the hope of eventually getting a judgement in their favour. Whose court and what judgement  no one has been clear about. In short the EBC and everyone else were holding debt that was not secured against any specific claim against Greece’s assets. They were, in effect, unsecured bond holders. The ECB would not like to see it that way but I think that is how it is.

The new law changes this. And I think the European poweres are well aware of this and it is why they insisted on this law being written. For let us be clear this law was created by the Troika for the precise purpose I have outlined. The law, or the idea of it, was there in the 400 pages of the memorandum that was drawn up to govern the Greek bail out back in February. The eventual adoption of the law, is there in the fine print as one of the preconditions for the bail out to be fully released. And now the Greek quislings have done their master’s bidding.

Because if the law is adopted, then suddenly, in a default, every one of the Troika institutions could point to Greek law and say, by your own sovereign law the Greek bonds/debt we are holding are secured against your national assets. Any default and the ECB could claim whatever it wanted to cover the value of the bonds it held. My guess is the ECB might fancy Greece’s financial sector, thus making the running of Greece’s economy from Frankfurt much easier than it is now.

Of course a Greek government would not have to roll over and agree. A Greek government could still alter the law and say we are still ‘the will of the people’ and we will not surrender any assets no matter what your claim. But in return Greece’s gold would be seized as would any other Greek sovereign assets held abroad. Greece would also find suits imposed on any banks that tried to do business with them. The suits would all be based on the new, proposed law.

Taken together the earlier bond settlement, replacing Greek law bonds with English law bonds, plus the as yet to be voted upon new law would make it almost impossible for an any future Greek government, to ever again default or restructure sovereign debt. Together they are, I think, how the Troika plans to stop, prevent, and outlaw Greek people determining their own future..

This is how the Troika intends to crucify Greece...

Read the entire essay here.