Greece Conspiracy Theory: Just who are these dark forces attacking Greece? – THE hefty price Greece is having to pay to shift its government bonds is part of a broader political plot, if you believe that country’s prime minister, George Papandreou. Or so he seemed to be hinting in several public and media appearances at the World Economic Forum in Davos, saying at one point:
“This is an attack on the eurozone by certain other interests, political or financial, and often countries are being used as the weak link, if you like, of the eurozone. We are being targeted, particularly with an ulterior motive or agenda, and of course there is speculation in the world markets.”
Intrigued, I called a couple of well-informed contacts: one based in Athens, and one a former senior Greek financial official. Who, I asked, did Mr Papandreou have in mind? Surely, I said, this cannot be the usual anti-American or anti-British conspiracy theory, because both America and Britain are rather pleased at the strength of the euro at the moment, which is helping their exports? The answer is both more and less simple, it was suggested to me.
At the simplest level, I was told, a popular catchphrase of the moment among middle class Greeks is “the foreigners want to destroy us”, said (or texted from one phone to another) with a very Greek mixture of self-mockery and half-sincerity. For some, identifying further who these mysterious “foreigners” is not the point. It is enough to feel that outsiders are on the attack.
More specifically, I am told, many outlets in the Greek press for the past week have constructed a narrative about the rising yield spreads between Greek government bonds and the German 10 year bonds used as a benchmark in the euro zone. This narrative goes like this: Greece is a small country, which is currently badly in need of foreign capital. Big international banks and financial institutions know this, and so they have conspired among themselves to hold lending back from Greece, so that the spreads grow still wider (ie, the Greek government has to offer a bigger and bigger premium over the interest rates offered by German bonds to attract lenders). This is because the banks are not making much money elsewhere, so they have decided to gang up and make fat profits by lending to Greece at extortionate rates.
Then you can feed into that the usual stuff on the left about wicked American credit rating agencies deliberately trying to mark Greece down to keep Greece weak, which has been out and about in some of the papers and online forums.
None of this means that there is not also a lot of debate inside Greece about how the country’s woes are home grown. This is something that is widely discussed, though it is often buttressed with grumbling that of course everyone else has made terrible mistakes, cooked the books and so on, and only Greece gets the blame.
There is some especially sharp commentary out there just now about farmers protesting around the country, blocking roads until the government gives them large amounts of cash. This extortion by tractor-blockade has worked many times in the past. But this time, the farmers are fragmented, I am told, and there is no money to give them. It will be an early test of the political courage of the Greek government. If Mr Papandreou gives in to the farmers, the EU should probably be sceptical about his promises to cut his deficits by 10% in three years.
Source: economist
Germany, Greece, and the conspiracy of the technocrats
Der Spiegel has a long and meticulously reported piece on the state of affairs as it exists right now between Germany and Greece, naturally concentrating on attitudes within Germany. Meanwhile, Yanis Varoufakis has a much more Greek take on the same subject at CNN. And by far the most striking thing, here, is how similar the two pieces are.
The German article is headlined “European Politicians in Denial as Greece Unravels”, while the Greek one plumps for “Why it’s too late to save Greece’s sovereignty”. They’re both saying the same thing: Germany has been treating Greece’s insolvency as though it were some kind of liquidity crisis, which can be solved by lending Greece more money. But of course that’s the worst possible thing you can do with an insolvent debtor: it only makes things worse rather than better.
Here’s Varoufakis:
German leaders, unwilling to confront their bankers and the fault lines developing throughout the eurozone, pretended to believe that the problem was Greece and that Greece could be “cured” by means of loans and austerity. At the same time, Greek leaders, unwilling to confront their electorate, pretended to believe that they could deliver the targets demanded by Germany.
This can be seen as a conspiracy of the technocrats: both sides deliberately agreeing to the impossible so that Europe would be dragged into ever-greater fiscal union. After all, the more money that Germany lends to Greece, the more control it’s going to demand, and the greater the gap between Greece’s promises and its reality, the more control it’s going to feel the need to concede.
But the problem is that the technocrats aren’t managing to bring the two countries’ respective populations along for the ride. The Spiegel article is full of various German politicians saying in no uncertain terms that more money is simply not forthcoming. And the Spiegel article has some very strong demonstrations of why Greece is going to need to devalue if it’s going to have any hope of growing:
In Mediterranean tourism, Greece has to compete with non-euro countries like Croatia, Tunisia, Morocco, Bulgaria and Turkey, which can offer their services at significantly lower prices. The per-hour wage in the hospitality industry was recently measured at €11.39 in Greece, as compared with only €8.49 in Portugal, €4 in Turkey and as little as €1.55 in Bulgaria.
Devaluation alone isn’t enough, of course; it has to be accompanied by a large number of defaults and insolvencies. As the Spiegel article notes, thousands of companies and banks could be forced to declare bankruptcy. But maybe that’s exactly what Greece needs. Bankruptcy is a cleansing process which gives the opportunity to start over.
The Eurocrats are petrified of a Greek insolvency because they know it risks spilling over into Portgual and the rest of the continent. Sovereign defaults tend to be contagious — look at Latin America in the 1980s. But since a default in Greece is inevitable at this point, best it get done sooner rather than later. The German press has worked this out; it remains to be seen how long Europe’s technocrats can remain in denial.
Source: reuters