The 1% are the only beneficiaries of Greek austerity, not ordinary Greeks
by Linda Beale
The 1% are the only beneficiaries of Greek austerity, not ordinary Greeks
An interesting post over on Naked Capitalism on the Greek austerity measures being demanded by the EU leaders (Germany, mostly) and the IMF: Marshal Auerback: Greece and the Rape by the Rentiers (Feb. 10, 2012).
The austerity demands, in order for a sovereign nation to pay back its debt to mostly big banks that lent money recklessly in the leadup to the financial crisis, make no sense at all. If you impose austerity, you clamp down on the economy. If you clamp down on the economy, the poor and near-poor who are already struggling will struggle even more. Unemployment will increase. Desperation will set in and crime or revolution will follow. The 1% at the top do okay at least for a while–after all, they’ve been hogging all the good stuff for a decade at least, and many of them (if the scofflaw wealthy in this country are any guide) will have sequestered funds away in hidden offshore bank accounts to bide them through the rough times or even support them if they expatriate to avoid the mayhem. When austerity measures include privatization of public assets, that same top 1% is able to acquire very valuable assets for a song and then charge “rentier” rewards for the public to use their own assets.
That’s the story that Auerbach tells for Greece, as he wonders why they don’t just get the hell out of the Euro zone and go back to their own currency. They probably will default anyway. But they will have paid a high price for trying to avoid default–the huge cut in wages, increase in unemployment and suffering going on now, and the privatization of even more of their public goods. Greece plans to sell six national companies–energy companies and refineries are included. The banks must be shitting in their pants in excitement.
originally published at ataxingmatter
“The austerity demands, in order for a sovereign nation to pay back its debt to mostly big banks that lent money recklessly in the leadup to the financial crisis, make no sense at all.”
It would help, just a little bit, if before commenting you at least tried to work out what was happening.
Those “big banks” are all signing up to take 70% losses on the loans they made. They know the place is screwed and that when borrowers are screwed then it’s the lenders that get shafted.
The people who will get paid back at 100%? That’s other governments, the ECB and the IMF.
Greece ain’t being screwed to pay back the banks at all.
Linda,
You might also note that Greece has no path forward that is sustainable without austerity. They are in desperate need of German taxpayers to cut them a check to cover their debts. The Germans are rightly tired of sending good money after bad. Now that the gravy train is cut off Greece’s leaders must decide how they are going to survive going forward.
If they want German cash and to stay in the EU, they get told how to operate and loose even more of their soverignty to Brussels. That’s the price they must pay for their governments poor finacial management. No one ‘owes’ the anything.
If they are willing to default and leave the EU, bringing back the dracma, that’s there other choice. The pain will be great here as the dracma will start off basically worthless compared to the Euro. But this will allow them to revive their tourist trade and what exports they can put togther (agriculture I believe). But this will also require a huge cut in their government and an increase of taxes since no one will be lending them money anytime soon.
Either choice will be painful. You keep trying to find a 3rd way that doesn’t involve some pain (or more likely a lot). Short of the Germans just sending them money there is none.
And I see nothing wrong with privatazation. Why should you? My bet they would be much more efficient out of the Greek governments hands.
The bottom line is Greece is over its head in debt, has little chance to fix the cultural issues that got it there, and probably would be best served by leaving the EU and Euro as orderly as possible. But all options will cause lots of pain in the short term. Finding a way to kick the can a little longer will only make the final reckoning that much more painful.
Islam will change
yeah, that austerity is working just fine:
For Greece a tear, for Brussels a blush – Very quickly: some of you will have seen that Greece’s tax revenue from VAT collapsed by 18.7pc in January from a year earlier. Nobody can seriously blame tax evasion for this. It has happened because 60,000 small firms and family businesses have gone bankrupt since the summer. The VAT rate for food and drink rose from 13pc to 23pc in September to comply with EU-IMF Troika demands. The revenue effect has been overwhelmed by the contraction of the economy. Overall tax receipts fell 7pc year-on-year. This is a damning indictment of the EU-imposed strategy. Greece is chasing its tail. The budget deficit is stuck near 8pc to 9pc of GDP because the economic base is shrinking so fast.
via: Ambrose Evans-Pritchard
We’ve seen this show how many times? It never works and many people die do to the militarization that comes next.
It will be at least 3 generations wasted all because the IMF, EU and WB are allowed to conflate the model for running a business as the correct model for running a nation and it’s economy.
Idiots just won’t accept that a market is not an economy.
buff
it is a classic move on the part of banks to led poor people more than they can ever afford to repay.
then they can foreclose on the family farm, and the money they can make on that far, far outweighs what they “lost” on the bad debt.
buff
it is a classic move on the part of banks to lend poor people more than they can ever afford to repay.
then they can foreclose on the family farm, and the money they can make on that far, far outweighs what they “lost” on the bad debt.
The proper course of action is to kick Greece out of the Euro, and give them a little money to transition back to the Drachma. That is the best long term solution, for Greece, to the government created idiocy that is the Euro.
Linda writes: debt to mostly big banks that lent money recklessly in the leadup to the financial crisis
You mean the banks that recklessly bought Greek governmnet debt, while Greece lied for years about its government finances. And the deafult on that debt causes banks to fall below required capital levels? There ought to be a regulation for that.
coberly,
What are you talking about? that has nothing to do with what Greece is up to nor what is going on. The banks are going to take a huge hit.
Islam will change
like i said, the banks can take a huge hit if they get the land at a bargain price. take a look at what the banks are doing all over the world. it’s not the money. it’s the power.
mcwop
who ever heard of politicians lying? who ever heard of banks doing their own assessment?
Where did all the money go? I can recall having asked a similar question a few years ago when all the excitment was revolving around US banks needing to be paid back. Or, in the case of US banks the question was also who got all the money that the bail out was supposed to cover? Some of the discussion seems to imply that common wroking stiffs got all that cash. Really? You mean a few million Greek laborers are sitting on a shit load of valuables that they bought with all those bank loans? I don’t think so.
As I said, its the same issue here in the good old US. I can recall row upon row of new homes popping up along the hills running north-south along US 5 driving from San Diego to LA and thinking, who the devil is buying all those houses? Well a boat load of funds were paid out to RE developers to put up all those homes. A smaller boat load went to RE sales organizations that bounced properties back and forth between confederates all funded via easy mortgage loans with little proper due diligence. Those agencies and their associated mortgage brokers made a great many people exceptionally wealthy during the decade from the late ’90s to about 2007 when the entire market blew up from collected methane generated from the crap being sold back and forth.
So now itsw the fool who signed the mortgage loan to buy the house that was worth a fraction of what they paid who is the cause of it all. Look around and see if you can identify the hidden wealth of any of those poor slobs who were the patsies in the game. Money went some place, but it certainly didn’t go to the average Greek, nor his American counter part.
coberly,
And the banks arn’t getting anything out of this. they will take a haircut of huge proportions. I no longer know what your talking about in reference to Greece. This is not your family farm….
Islam will change
Here’s a link to Mish with some pictures and a good description (with linnks) of what’s going on. Riots across Greece and the burning a 10s of buildings including a historical Theater in Athens. Greece police running low on tear gas in the running battles with molotov-cocktail throwing rioters.
http://globaleconomicanalysis.blogspot.com/2012/02/total-chaos-riots-rage-athens-resembles.html
Islam will change
Yes, banks should do their own asseements, but my point is that Linda’s comment is non sequitor to the issue of greek Debt crisis and its effect on banks. In fact the relationship gets bizarre when you factor in the ECB using banks as a monetization proxy.
yeah
i know some folks who had to buy a house at about that time. top of the market. of course when they had to sell it two years later (employment related move) they couldn’t get half that for it.
And Goldman Sachs . . . .
Tim:
Yes they get paid back and also Goldman Sachs will be paid also . . .