Sunday, July 26, 2015

Did the Banksters Do Greece In?

We all know that in the US, land of capitalism, the banskters peadled fraudulent investments that caused the system to panic in 2008. They got bailed out by the taxpayers, nobody worth a headline went to jail for the fraud, and a few years later everybody on the Street sees happy days again. What we do not know is to what extent Greece, much less comitted to the capitalist line, was also sold a bill of goods by Goldman Sachs.

Greece's financial problems began when it was attempting to join the eurozone. Under the Masstricht agreement, EU governments had to meet certain public finance goals. Greece could not met those without fudging and when in 2009 a new government under Georges Papandreou suddenly found out that its deficit was "suddenly" bigger than expected, its debt became unmanageable. There are questions about how the deficit suddenly got larger revolving around Andreas Georgiou the president of Hellenic Statistical Authority (ELSTAT). A former colleague testified to parliament under oath that Georgiou was a pawn of Eurostat, overseeing the Masstricht criteria. He issued statistics under his own authority that made Greece's deficit appear bigger than it should by doing things like including public utilities in the deficits. The larger than expected deficit size drove Greek bond spreads through the roof, making the first and second bailouts by the EU and IMF necessary. ELSTAT testimony is that if the statistics produced were accurate and not cooked, the first and second bailouts for Greece would not have been necessary. The really sad part is that of €110bn loaned in the first bailout, only 10% ever reached the Greek economy. Most of it went to corrupt Greek banks that had lent too much to begin with.

The hook was in and set. Papandreou asked for a referendum on "austerity" and was promptly removed. His successor Lucas Papademos, a eurocrat, fared no better. A second bailout of €136bn was pushed through parliament amid riots and burning buildings. The demanded austerity program with its painful cuts in social spending and pensions, tax increases and public assets sales guaranteed a plunge in Greece's troubled economy that is driven primarily by domestic consumption. Rebelling against the destruction of their economy by 'internal deflation' imposed from without, Greeks elected a socialist coalition, Syriza, that promised to end the so-called austerity regime. In the referendum held this year Greeks voted for their freedom, but were betrayed once again by their supposedly leftist coalition government made up of economic elites. Thirty-nine Syriza MPs defected to vote against the latest euro bailout demands, but that was not enough to out-vote the right that cannot imagine a country outside the eurozone. The Prime Minister characterized his collapse in Brussels as "not having the authority to take Greece out of the eurozone".  That was a disingenuous summation of the crisis. Greeks did not want to leave, true, but they would have been forced out by Germany, the major state creditor, if they had not submitted.

The predatory lender had entered earlier in 2001 when Greece was looking for ways to reduce or disguise its mounting fiscal troubles. Goldman Sach's Lloyd Blankfein sold Greek officials a complicated "currency swap" in the amount of 2.8bn€ in which Greece's foreign currency debt was exchanged for domestic currency obligations at a favorable exchange rate. The result was that Greece's national debt was reduced by about 2%. For that piece of financial wizardry Goldman received a €600m fee or about 12% of Goldman's trading revenue in 2001. It was an attractive deal for Greek officials facing near insurmountable debt and Masstricht restrictions because it allowed the government to hide some of its obligations off national accounts. JP Morgan did a similar deal for Italy in the 1990s. But the Greek swap went bad as bond yields plunged after 9/11, doubling its off-the-book liability under the swap from €2.8bn to €5.1bn. That amount of debt was locked in when the swap was restructured in 2005 by Mario Draghi then managing director of Goldman's international division; he is now head of the ECB, one of the troika of Greek creditors forcing the Greek people into submission.

The banksters were not done ringing out the Greek economy for all it was worth. In 2009 just a few months before the Greek predicament was made public news, Goldman offered another financial gimmick that would have pushed Greece's health care system debt far into the future, but this time Greek politicians avoided the moral hazard. Wall Street's method learned from the Rothschilds is tried and true, but perhaps not used against an entire European country before. Mitt Romney used it at Bain Capital for corporate takeovers: load up companies with leveraged debt, strip valuable company assets, and then throw the debt-laden carcass back onto the public market. It was the banksters who leveraged Greece beyond redemption for greed and ideology with the cooperation of corrupt Greek elites. When the country came crawling on its knees for relief from unsustainable loans, they demanded Greeks dismantle their socialist state by selling them the hard goods at discount prices. So now Hannah, the Greeks must join the Irish and the Portuguese as the plutocracy's debt slaves for years to come. That's why their knees are dirty.