Goodbye, Greece

Email Print
FacebookTwitterShare

Goodbye Greece

by Eric Margolis

Recently by Eric Margolis: Into Africa — Uncle Sam Goes Colonial

     

A lot of angry Greeks must be recalling 1922 when a military coup overthrew the incompetent royalist government that had just lost a catastrophic war with Turkey and seen over a million Greeks flee Asia Minor.

The military men arrest the cabinet, tried them and then had most of them shot. Last week rumors of a military coup swirled around Athens.

But the tragi-comedy in Greece, as it gets no closer to rescue from financial disaster.

So why should 330 million Europeans face a financial and likely political meltdown for the sake of 11 million profligate Greeks?

The best thing for the Greeks and for Europe is for Greece to be asked to quietly leave the Euro club. That's the simple, brutal solution to the current financial crisis that is threatening to tear apart the European Union and provoke a global financial crisis.

As the old New York expression goes, "first loss, best loss." Meaning, the longer one delays taking a loss, the worse it gets.

Greece, let's recall, wriggled into the 17-member Euro zone by faking its accounts and falsifying economic and tax figures. The EU closed its eyes to these frauds because of a desire to unite all of Europe.

So, it seems, did Italy, which currently owes money lenders $2 trillion and must borrow $300 billion this year alone just to service its gargantuan debts.

Panic over Italy's awesome debts has now begun, as Prime Minister Silvio Berlusconi — who has done a pretty good job of managing unmanageable Italy — clings to power by his well-manicured finger nails. Unlike the EU's mostly dreary leaders, at least "il Cavaliere" has style and panache.

Three other nations, Romania, Bulgaria and Cyprus, were also admitted to the EU for similar bad reasons. Greek Cyprus is in the Euro zone; Romania and Bulgaria are not, though euros are widely used by both nations.

Greece's financial and political crisis has infected Europe and threatens to ignite a banking crisis as destructive and dangerous as the 2008 collapse of Wall Street's Lehman Brothers.

It's very sad to see this disaster. For me, Greeks are delightful people: fun-loving, zesty, smart, hard-working. The problem is that many of the most capable, industrious alpha Greeks long ago decamped to the US, Canada, Australia and the Mideast to escape their corrupt governments and unfriendly business environment. Greeks own many of America's restaurants and the world's ships.

Left behind in Greece were too many lazy public sector workers and do-nothing bureaucrats who owed their sinecures to political patronage. Dynastic political clans rotated in power, weaving Byzantine intrigues as the economy went to the dogs.

Greece's socialists and conservatives both stuffed government with supporters to buy their votes. Since few Greeks paid any taxes, Greece's corrupt political class had to borrow from abroad to keep the lights on in Athens.

Europe's witless lemming bankers poured into higher-yielding Greek debt, heedless of the dangers, believing the old truism, "governments don't go bankrupt." But they do.

Austerity or no austerity, there is no way Greece can ever make good on its debts unless Europe uses financial smoke and mirrors to sustain its massive borrowings. Few Europeans, however, are eager to support Greece's "dolce vita" when they themselves face growing austerity. Besides, Greece will never be able to pay off its debts from tourism and exporting olives.

Kicking Greece out of the Euro zone will obviously create a huge explosion. Many Greek banks, which are also active in the Balkans and Cyprus, will go under. There will be runs on the banks by panicked Greek depositors. Greek trade will be disrupted. Russian banks will be shaken.

Europe's reckless bankers, particularly the French, will suffer major losses on Greek public and private debt. They deserve it. The banking fools who piled into Greek debt should be fired.

Greece must swallow bitter medicine. Doing so is absolutely vital if the poison of too much debt is to be purged from Europe's sickly body.

Debt addiction must be broken, both in Europe and the United States. Time for cold turkey.

Germany, once the scourge of Europe but now hailed as its potential savior, will have to join France in shoring up banks that are holding pots of Greek debt.

Some big banks should be nationalized, if necessary. If too big to fail, they are a national security risk and must be either taken over or broken up.

Now is a good time to take action. The Greek debacle should be used by governments to break the power of the bankers by imposing taxes on financial transactions, heavily taxing banker's unseemly bonuses, and sharply limiting bank's ability to lend more than they hold in assets.

Just this past week, the shocking collapse of Wall Street trading firm MF Global showed that even after the 2008 crash, US federal regulators have utterly failed to assure the financial system's safety.

We learn that MF Global had leveraged its capital 35 or even 42 to 1, the same perilous ratio that brought down Wall Street's titans in 2008. That means MFGlobal lent out or invested $35-42 for every dollar it held. That's crazy Las Vegas behavior and a formula for disaster.

In the United States and many other nations, the cost of borrowing money is tax deductible. This unwarranted subsidy to borrowers encourages the dominance of finance over manufacturing, and encourages reckless risk-taking. It has allowed big finance to buy politicians in the US, Britain and Europe.

Back to the Greeks. They will be fine on their own once the poison of debt leaves their system. Greece, always a poor nation, tried to live big like North Europeans — on credit. Greeks should go back to their former slower, more modest Mediterranean ways.

Bring back the dear old drachma, make Greeks work again at home, and relearn to live within their means.

We'll see. Meanwhile, those wild and crazy Italians are starting to eclipse the disaster-prone Greeks. And don't forget about bankrupt America, now running on cash life support from China and Japan.

Eric Margolis [send him mail] is the author of War at the Top of the World and the new book, American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World. See his website.

The Best of Eric Margolis

Email Print
FacebookTwitterShare