greece: 20 popular fallacies concerning the debt crisis

8/6/2019 Greece: 20 popular fallacies concerning the debt crisis

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ROSA LUXEMBURG FOUNDATION

Sell your islands,

you bankruptGreeks

20 POPULARFALLACIES

CONCERNING

THE DEBT CRISIS

Headline in German newspaper,BILD, 27.10.2010


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photo:

MARIoSLoLoS/dpA


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What is the crisis? False descriptions of the situation 31. Greecehastoomanydebts 3

2. ThefnancialmarketsarescaredthatGreecewillgobankrupt 4

How did the crisis come about?

Inaccurate research into the causes 5

3. TheGreeksarelazy 5

4. TheGreeksareconstantlyonholiday 65. WearepayingluxurypensionstotheGreeks9 6

6. TheGreekshavebeeneatheringtheirownnestwell 7

7. TheGreekshavebeenlivingabovetheirmeans 8

8. TheGreekstateisover-inated 9

9. Greeceisnotcapableocompeting 9

10. TheGreeksarecorrupt 10

The way forward? False solutions 12

11.TheGreeksshouldstartsavingbeorewehelpthemagain 12

12. SellyourislandsyoubankruptGreeks!29 13

13. Thecreditorsshouldootthebill! 13

14. GreeceshouldgetoutotheEurozone 15

15.Greecehastowinbackthetrustothefnancialmarkets 15

The role of the Germans: False friends 17

16. WewanttoberiendswiththeGreeks35 17

17. Youshouldhelpyourriendsbutnotbailthemout 17

18. NoGermantaxeurosorGreece!37 18

19. WearethepaymastersoEurope40 19

One last comment 2020.GreececheateditswayintotheEurozone

Wearenowpayingthepriceorourindulgence 42 20

TABLE OF CONTENTS


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Its that time again! Greece needs more loans and the governmentsin Europe are arguing about whether its really necessary and who

should oot the bill. There is widespread opinion in Germany that

Greece itsel is to blame or the problems it now fnds itsel in. It

frst o all cheated its way into the Eurozone, then the government

spent too much and the governed worked too little, many believe.

Latently nationalistic patters o interpretation o this kind have been

nourished by German politicians and the media, who have no endo proposals or how to solve the crisis. For example, the Greeks

should save more, work more and sell their public property and i

all o these measures do not help, then Greece will just have to leave

the Eurozone or declare itsel bankrupt. The stupid thing is, neither

are the causes o the crisis that have been named actually correct,

nor will the proposed ways out o the crisis achieve their goal.


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1. GREECE HAS TOO MANY DEBTS

The acts:Becauseothefnancialcrisis,Greecesnationaldebtgrew

between2007andtheendo2010rom115%to143%oeconomic

perormance.Thisso-calleddebtratiowillprobablyclimbabovethe

150%markin2011.Bywayocomparison:Germanysdebtratiois

about85%.The way things are portrayed:Thehighdebtratioalonedoesnotex-

plainGreecesproblems.Thedebtratiodoesnotreectthecorrect

valueeitherintheoryorinpractice.1Italyhasadebtratioo120%,

Japanhasevenreached200%oitseconomicperormance.Neither

otheseisseentobebroke,whileGreeceis.Why?Becausethe

fnancialmarketsarespeculatingonGreecebecomingbankrupt.This

hasdriventheinterestrateornewdebtstosuchhighlevels,thatAth-enscannotborrowanynewmoney2.Bycomparison:Athensmustpay

25%interestontwo-yearstateloans,Italyonly3%andJapanamere

0.2%(asperendoMay2011).

Theproblemthereorelieswiththeinterestratethathasbeenorced

upwardsbyfnancemarketspeculations.TheMacroeconomicPolicy

Institute(IMK)hascalculatedthat,itheaveragerateointerestor

Greekstateloanswouldallto3%,thenthecountrysdebtratiowouldallto110%oeconomicperormancebytheyear2015.3However,

itheinterestrateremainsashighasitis,Athenswillnotbeableto

borrowanymoneyonthemarkets.Whetherornotitisthenbroke

dependsonthewillingnessotheotherEuro-statestohelpitoutby

providingloans.Thereore,thequestionobankruptcyisaquestion

opoliticaldecisionsbystates.

WHAT IS THE CRISIS?

FALSE DESCRIPTIONS OF THE SITUATION

1 BHF-Bank economic service, 4.6.2011 2 One simplified example to demonstrate how this works: Greece

borrows a loan of 1 million euros at a fixed rate of interest of 5 % p.a. (=50,000 euros). The loan is then traded

on the stock exchange and crashes. Its price falls from 1 million euros to 500,000 euros. The interest rate of

5 % (=50.000 euros) however remains unchanged. Ergo, the loan now has a return on investment for the lender

of 10 % (50,000 euros from 500,000 euros). If Athens now wants to take out a new loan, the interest rate that

it has to pay is based on the return on investment of the old loan. If it wants to borrow new money, this means

that Greece must offer the lenders an interest rate of 10 %. 3 IMK: Debt cuts bring more disadvantages than

advantages, May 2010.


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2. THE FINANCIAL MARKETS ARE SCARED

THAT GREECE WILL GO BANKRUPT

The acts:Greekloanscrashedonthefnancialmarkets.Inversely,thereturnsoninvestmentortheseloans(seeootnote2)increased.

The way things are portrayed:Thefnancialmarketsarescaredo

nothing.Theyarenotahumanbeingwitheelingsandears.Andthey

arealsonotanobjectiveentitythatanalysesthefnancialsituationo

acountryinaactualmanner.Thefnancialmarketisnothingmore

thantheentiretyotheinvestorswhotrytoearnasmuchmoneyas

possiblewithfnancialinvestments.AnyonewhoisreallyscaredthatGreecewillgobankruptisnotinvestinginGreekgovernmentsecuri-

ties.EveryoneelsehopesthatHellaswillbesavedandtheywillbeable

torakeinhugeinterestprofts. 4

4 Berliner Zeitung newspaper 27.4.2010


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3. THE GREEKS ARE LAZY

The acts:TheGreeksworkagreatdeal.Theactualweeklyworking

hoursminuslunchbreaksbeorethecrisiswere44.3hoursaccord-

ingtoEurostat.InGermany,thisfgurewas41hoursandtheEUaver-

agewas41.7hours.5TheFrenchbankNatixisarrivedattotalaverage

workinghoursperannuminGermanyo1,390hours,whiletheGreeksworkanaverageo2,119hoursperannum. 6

The way things are portrayed:Germanyalsohashighdebtsbutwe

canpaythemo,becausewegetupprettyearlyandworkallday.7

ApartromtheactthattheGreeksworkalotandapartromtheact

that leisure time isnot necessarilysomethingbad andwork isnot

necessarilysomethinggooditisundamentallywrongtoseekthe

causesoacrisisinacountrybycitingthelackohardworkamongitspopulation.TheGreeksdonothavetheoptionojustworkinglonger

hourstoendthecrisis.Theoppositeistruebecauseothecrisis,

manyGreekshavebeenorcedtonotworkatall.Theofcialunem-

ploymentratewas16.5%inApril2011,andathirdoyoungpeople

werewithoutapaidjobattheendo2010.Thenumberocivilserv-

antshasbeenreducedby83,000inthelastmonths.Andsoitisclear,

itisnotlazinessthatcreatescrises,butcrisesdestroyjobs.Thesitu-ationwasverydierentinGermany,wheretheupswingreducedthe

unemploymentrateto6.0%inApril2011.

HOW DID THE CRISIS COME ABOUT?

INACCURATE RESEARCH INTO THE CAUSES

5 Handelsblatt newspaper, 2.5.2005 6 Natixis, Flash Economie, 30.5.2011 7 BILD newspaper 5.3.2010


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4. THE GREEKS ARE CONSTANTLY ON HOLIDAY

The facts:AccordingtotheEUagencyEuroound,Greekemployees

havearightto23daysholidayleaveonaverageperyear.TheGermansareintheluckypositionobeingabletoenjoy30daysholidayleavea

fgurethatisrightatthetopinEurope.AndtheGermansarealsoright

uptherewhenitcomestothenumberopublicholidaystheyhave.8

The way things are portrayed:Wecannothaveonecurrency,when

somehaveagreatdealoholidayleaveandothersverylittle,said

Federal ChancellorAngelaMerkel in themiddle oMay2011.This

isanotherversionothelazinessaccusation.Itisanotherattempttoblamethecrisisontheindividualsupposedlyalseconductothe

Greeks. Conversely the Chancellor praises her own people, stating

that,theactthatweareinagoodeconomicpositionisbecause

wearesohard-working.

5. WE ARE PAYING LUXURY PENSIONSTO THE GREEKS9

The acts:AccordingtotheOECD,meninGermanyretireonaverage

at61.8yearsoage,whileinGreeceitis61.9.Andwecannotinany

sensetalkaboutluxurypensions:theaveragepensioninGreeceis

about55%otheEurozoneaverage,whichamountedto617eurosin2007.Two-thirdsoGreekpensionershadtosurviveonlessthan600

eurospermonth.

The way things are portrayed:Itisimportantthat,incountrieslike

Greece,SpainandPortugal,peopleshouldnotbeabletoretireearlier

thaninGermany,ChancellorMerkelsaidinthemiddleoMay2011.

AndyettheBILDnewspaperandtheChancellormustbeawareothe

realsituationacingGreekpensioners.However,theyobviouslydonotcareaboutacts.Accordingtotheirwayothinking,everyyearore-

tirementandeveryeuroorpensionsisaluxuryinacountrythatisin

themiddleoacrisis.

8 Spiegel-Online, 18.5.2011 9 BILD newspaper, 27.4.2010


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6. THE GREEKS HAVE BEEN FEATHERING

THEIR OWN NEST WELL

The acts:ThewagelevelinGreeceisonly73%otheEurozoneaver-age.AccordingtoinormationprovidedbytheGermanInstituteor

Labour,whichiscloselyassociatedwiththetradeunions,aquartero

allGreekemployeesearnlessthan750eurospermonth. 10Teachers,

orexample,ater15yearsinservice,earnabout40%lessthaninGer-

many11andthatwasbeorethecrisis.AccordingtoEurostat,beore

thecrisisafthoallGreekswerethreatenedbypovertyand25%o

Greekslivedinapartmentsthatweretoosmallorthenumberopeo-plelivinginthem(inGermany:7%).

The way things are portrayed:Here,whatwearelookingatisacrisis

explanationthataddstheaccusationogluttonytotheoneolazi-

ness.Aswasthecasewithallegationsolazinessandluxurypen-

sions,anattemptisbeingmadetoapplyseeminglyplausiblecom-

monsensetotheeconomyasawhole.Theimplicationis,wejusthave

toworkhardandsavehardandeverythingwillbefne.Bothsmallandlargecrisescanbeexplainedinthisway.Weshouldhavejust

askedanyhousewiewhohastobudgetherhousehold,Merkelad-

vised.Shewouldhavegivenussomewordsowisdom:Onecannot

liveaboveonesmeansorever.Thatiswhatliesattheheartothein-

ternationalcrisis.12Andyetthedierencebetweenplatitudesandthe

realityisclearenough.Workinghardwillnotbringaboutaboom,

rathertheconverseistrueaboombringsaboutnewjobs.Frugalitycanleadtoruin(seeGreece)andnewdebts,bycomparison,canhelp

onetogetbyindifculttimes(asinGermanyduringthemostrecent

crisis).

10 Frankfurter Rundschau newspaper, 25.7.2010 11 Ifo service 5/2007 12 Focus-online, 1.12.2008


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7. THE GREEKS HAVE BEEN LIVING

ABOVE THEIR MEANS

The acts:Foryears,thegovernmentinAthenshasbeenspendingmorethanithasbeenbringingin.Between2000and2007,itsbudget

defcitlaybetweenourandsevenpercentoeconomicperormance.

The way things are portrayed:Almosteverygovernmentlivesabove

itsmeans,thatis,spendsmorethanitbringsin.Assuch,thebudget

defcitotheGermangovernmentbetween2000and2007wasbe-

tween1.6%and4.0%oeconomicperormance.Theproblemwith

Greecewasnotsomuchthenewdebt,buttheactthatthefnancialmarketsstartedtospeculateagainstAthensatsomepoint,pushing

theinterestratesornewloanstoanunaordablelevelintheprocess

(seeabove).Thiscanalsohappentoacountrywithoutalargedefcit,

whichisshownintheexampleoIreland,whichdidnothavedefcits

butmostlysurplusesinitsbudgetsothepastdecadeandyetitstill

ellvictimtothefnancialmarketsandhadtoberescuedbytheEUand

theIMFtothetuneo85billioneuros.Germanyalsohashighdebts,butweareabletopaythemobe-

causewealwayssavepartoourincomeorarainyday,theBILD

newspaperwrote.13TheBILDismistakeniitwantstoapplythisargu-

menttothelevelothestate.TheGermangovernmenthasalsorun

upanetdebtsituationandhasnotsavedinthepast.Iwelookat

theeconomyasawhole,however,thereissometruthinit:TheGer-

mannationaldebtoaround2,000billioneurosisbalancedbytotalassetsoaround7,400billioneuros.14However,thesearenotour

assets,butaremainlyconcentratedinthehandsoaewrichpeople.

Thiswouldonlybeosomeusetothestate,iithadaccesstothese

undsthatis,iittaxedthem.However,thisisnotgoingtohappen,

aspropertytaxwasabolishedin1997.

13 BILD newspaper, 5.3.2010 14 DIW weekly report, 50/2010


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8. THE GREEK STATE IS OVER-INFLATED

The acts: Greekpublic spending in relation to the gross domestic

product,theso-calledpublicspending-to-GDPratio,was48%in2008,whilethisfgurewasonly44%inGermany.

The way things are portrayed:Beorethecrisis,thesituationwasvery

dierent.TheGreekpublicspending-to-GDPratiosankbetween2000

and2006rom47%to43%andremainedduringthisperiodbelow

thelowGermanrate15.Thisdidnotchangeuntiltheeconomyslumped

duringthefnancialcrisis.Andso,itwastherecessionthatwasto

blame or the over-inatednature oGreekpublic spending, andnotHellenicextravagance.Andbesidesthis,Swedenhashadapublic

spending-to-GDPratioobetween51%and55%ortenyearsnow

andisnotbankrupt.

9. GREECE IS NOT CAPABLE OF COMPETING

The acts:Thismaybetrueiwelookatexports,whereGreecehas

hadahighdefcitoryears,reaching14%oeconomicperormancein

2009.ThismeansthatGreeceimportsmorethanitexports.Themain

reasongivenorthiswashighwageincreases,whichiswhytheGreek

wagelevelshouldallnow,inordertorenderthecountrycompetitive

again.The way things are portrayed: Being capable o competing has

nothingtodowithcapability.Thistermmerelydescribesaratio.As

aact,theunitlabourcostsinGreecedidincreasebetween2000and

2010byalmost40%16.Thiswasonlyaproblem,however,because

theunitlabourcostsinothercountries increasedtoa lesserextent

andthebusinessesinthesecountriesthereorehadacostadvantage

ontheworldmarket.TheEuropeanexpertatwagesavingswasGer-many,wheretheunitlabourcostsonlyroseby5%thankstolower

increasesachievedincollectivebargaining.Theresultwashighexport

surplusesorGermanyandimportsurplusesorcountrieslikeGreece,

15 Michael Schlecht: The Euro is burning. Position paper 21.5.2010 16 Commerzbank Research Note: Euro

periphery facing a wage revolution? 1.4.2011


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Portugal,IrelandorSpain.TheGermansuccesswasthereoremerely

theinverseimageotheailureintheEuroperiphery,becauseGer-

manywouldnothavegainedsurplusesiithadnotbeenorthedef-

citsinGreece,SpainandPortugal.Andso,Germanysexportoensive

allowedittofllitscoersattheexpenseoitsneighbours.Germanyhashealthycompanieswhoseproductsareindemandaroundthe

globe,theBILDnewspapertriumphed17.Themouthpieceotheman

onthestreetshouldnotorget,despiteitselation,thatGermanysex-

portsuccesseswerefnancedbythepovertyotheworkers.Aswages

sankoronlyincreasedslightly,privateconsumptionwithinGermany

hashardlymovedaninchinthelasttenyears 18.Andonemorething:

TheWorldEconomicForumdefnedbeingcapabletocompeteasacombination o institutions,policiesand actors that determine the

productivityleveloacountryTheproductivitylevelalsodetermines

thereturnsoninvestment19.Thatiswhatallstatesmeasurethem-

selvesby:Wherecanthebestreturnsoninvestmentbegained?The

questionis,however,whetherthisisanappropriateunitomeasure-

mentorenablingpeopleworldwideagoodlie.

10. THE GREEKS ARE CORRUPT

The acts:Itistruethattaxraudandtaxavoidancearemorepreva-

lentinGreecethaninothercountriesandthatcorruptionisevery-

where20

.Theshadoweconomyisestimatedtobeabout25%otheeconomy(bycomparison:inGermanythisfgureisapprox.15%21)and

totaltaxraudamountsto20billioneurosperyear. 22

The way things are portrayed:Taxraudandcorruptionreallyarea

greatproblemorGreece.Threethingsmustbesaidinthisrespect:

tax raud is akind o redistributionowealth rom thestate to the

privatesector.Thereore,themoneyisnotgoneassuch.Andso,

thisargumentdoesnothelpustoexplaintheGreekcrisis.Secondly,theormerPrimeMinisterKostasKaramanliswasresponsibleorthe

Greekmess.HewasacloseallyoChancellorMerkelintheEU.With

17 BILD newspaper, 5.3.2011 18 See in more detail in: Michael Schlecht: The Euro is burning. Position paper

21.5.2010 19 WEF Competitiveness Report 2010 20 Spiegel-online, 10.3.2010 21 IAW press release,

26.1.2010 22 The Standard, 11.2.2010


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thehelpothewillingGreek,Merkelmanagedonvariousoccasionsto

penetratetherontothesouthernnationsinimportantEUdecisions.

Karamanliswasalwaystheretomakedeals.Inreturn,theGreekdidnot

havetoworryaboutanyover-criticalquestionsconcerninghissloppy

fnancialpolicies.ThisquotecomesromtheormerEditor-in-ChieoGermaneconomicmagazine,theHandelsblatt.23Thirdly,largeGer-

mancompaniesalsoproftedromthebackhandercultureintheGreek

economy.Since2008,severallegaldisputeshavedocumentedthat

theGermancompaniesSiemens,Ferrostaal-MANandDeutscheBahn

AGboughtGreekpoliticiansingreatstyleandfnancedpoliticaldeci-

sionsintheiravour.Inthisway,theSiemensGroupaloneinvested

almost15millioneurosperyearinGreeceoveraperiodotenyearsromthemiddleothe1990sinordertowinoverandinuencepoliti-

ciansromthetwoimportantparties,NeaDimokratiaandPASOK. 24

23 Michael Schlecht: The Euro is burning. Position paper 21.5.2010 24 Greece, the IMF and EU dictate and

German responsibility, position paper issued by the scientific advisory board of Attac Germany.


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11. THE GREEKS SHOULD START SAVING

BEFORE WE HELP THEM AGAIN

The acts:In2010,Greecesbudgetdefcitwasabout10.5%oeco-

nomic perormance.Athens promised tobring thisdefcit down to

7.5%in2011.Thiswillunlikelysucceed,andtheconsequenceisthat

theinterestrateorloansonthecapitalmarketwillnotsink,Greecewillremaincutoromthecapitalmarketandunabletoborrownew

undsasplannedin2012.Thatiswhynewstatesupportisbeingtaken

intoconsiderationtohelpAthensavoidbeingunabletopay.

The way things are portrayed:ItisnotrighttodeducethatGreece

doesnotsave,justbecauseothehighdefcitin2011.Greeceisnot

onlysaving,butisdoingsoatanextremelevel.Becauseotheausterity

measures,theGreekshavelostalmost20%otheirincomeonaveragesincethebeginningo201025.Nootherindustrialnationhasreduced

itsstructuraldefcitbysomuchwithinoneyearinthelast25years,

ratingagencyFitchhasevenadmitted26.AndtheBerenbergBanksees

Athensprogrammeoausteritymeasuresasprobablythehardestfs-

caladjustmentevertohavebeenmadebyaWesterncountry.27

Theactthatthedefcitwilllikelybehigherthanplannedin2011does

nothavetodowithextravaganceinAthens.Spendingisnottoohighincomeistoolow.This,inturn,hastodowiththeharshausterity

measures.Asthestateissaving,andreducingwagesandpensions,

economicperormanceissuering.Privateconsumption, or exam-

ple,was18%lowerinMarch2011thanoneyearbeoreand,inthe

sameperiod,65,000companieswentbankrupt.Areductioningross

nationalproductoalmost4%isexpectedortheyearasawhole.The

resultothisisthatlesstaxisbeingpaid.BetweenJanuaryandApril2011,revenueromtaxeswas7%belowthepreviousyearsfgureor

thesameperiod.Allinall,theGreektaxauthoritieshavetakenin1.2

billioneuroslessthanestimated.Andso,itisnotexcessivespending

THE WAY FORWARD? FALSE SOLUTIONS

25 FAZ newspaper, 25.5.2011 26 Financial Times Germany, 26.5.2011 27 Berenberg Bank, Macro Views,

20.5.2011


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thatistheprobleminAthens,buttheausteritymeasuresthemselves.

WedoubtthattheGreekeconomycanwithstandanaggressiveand

prolongedfscaladjustment.28

12. SELL YOUR ISLANDS

YOU BANKRUPT GREEKS!29

The acts:TheGreekstateownspropertywithanestimatedvalueo

270to300billioneuros.Thesearemainlyrealestateproperties,also

ontheislands.The way things are portrayed:ThegovernmentinAthensisnotjust

sittingonitsortune.Ithasalreadystartedoabroadprogrammeo

privatisation,withtelecommunicationscompanies,electricitysuppli-

ers,portsanda largequantityorealestatepropertiesonoer.By

doingthis,Athensaimstobringin50billioneurosbytheyear2015.

However,therearemanysnagsinthisprogramme.AsGreeceisbe-

ingorcedtosell,itwillonlyreceivebadpricesoritsproperty.Thebuyersinternationalcorporationswilltrytoexploittheemergency

situationinGreece.Secondly,ithestatesellsproftablecompanies,

thentheincomeromthesewillbegone.Theresult:Theexperience

gainedbytheInternationalMonetaryFund(IMF)incountlessstabilisa-

tionprogrammeshasshownthat(privatisation)isanextremelyrisky

strategyIttakesaverylongtimetomakesurethatsuchprocedures

arecarriedoutinanorderlyashion,andtimeissomethingthatGreecedoesnothaveatpresent.Privatisationsarethereorenotverywellsuit-

edasemergencymeasures.30

28 Societ Generale, The Economic News, 5.4.2011 29 BILD newspaper, 27.10.2010 30 VP Bank, Investment

News, 1.6.2011


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13. THE CREDITORS SHOULD FOOT THE BILL!

The acts:TheGreekstatehasaround350billioneurosindebt.The

creditorsare:Greekbanks(23%),otherGreekcreditors(20%),gov-ernmentsintheEurozone(12%),theEuropeanCentralBank(18%),

theInternationalMonetaryFund(4%),otheroreigncreditors/banks

(23%).31Themoneylenderscouldwaivesomeotheloansissuedin

ordertosaveGreece.

The way things are portrayed:Thatsoundsair,becauseithishap-

pened the fnancial investors would then play a role in reducing

Greecesdebt.Atthesametime,itinvolvesseriousrisks.Firstoall,itwouldleadtosignifcantlossesorthebanks.Idebtswerecutby50

percentinGreece,thiswouldmeanaburdeno25billioneurosorthe

Germanbanksalone(IMK:debtcutsbringmoredisadvantagesthan

advantages,May2010).Secondly,thiswouldbetheruinothemain

creditors,theGreekbanks.Thirdly,itheEurozoneallowsacountry

togobankruptinitsmidst,otherstateswouldalsolosetheircredit

standing.TheworryaboutGreececouldowovertootherperipherystatesandleadtoasell-outotheirbonds(DZBank,Interestmarkets,

9.5.2011).TheproblemcouldthenspreadtostateslikeSpain,andits

economyismorethantwicethesizeotheeconomiesoGreece,Por-

tugalandIrelandputtogether32.Thiswouldcertainlybetheendothe

Eurozone,whichisthebackboneotheGermaneconomy.Aswecan

see,aslongasEuropeisdependentonthegoodwillofnancialinves-

tors,itwillremaindifculttomaketheseinvestorspaytogetGreeceoutoitsdebtsituation.Onemorecomment:TheGreeknationaldebt

isnotamajorproblemortheEurozone.Atatotalo350billioneuros,

itisamere3.7%otheEurozoneseconomicstrength.

31 VP Bank, Investment News, 1.6.2011 32 This would mean further risks for the banks. According to the

Bank for International Settlements, Greece, Portugal, Ireland and Spain owed the European banks 1,340 billion

euros at the end of 2010. A quarter of these were German banks (http://bis.org/publ/qtrpdf/r_qa1106.

pdf#page=100)


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14. GREECE SHOULD GET OUT OF THE EUROZONE

The acts:TheEurozonecouldattempttogetridotheGreekproblem

byexcluding/dischargingGreeceromtheEuroregionandsoprotecttheproblemromspreadingtoothercountries.Greece,ontheother

hand,couldre-introducetheDrachmaanddevalueitscurrency.This

wouldmakeGreekexportscheaperandthecountrycouldtrytoexport

itseloutothecrisis.

The way things are portrayed:Thiswouldhavetwoseriousdisadvan-

tages.Firstly,iAthensre-introducestheDrachma,thiswoulddevalue

drasticallyagainsttheEuro.However,thegovernment(aswellastheGreekbanks,companiesandprivatehouseholds)wouldcontinueto

havetheirdebtineuros.Asaresult,thedebtswouldincreaserapidly

invalueandthedebtsituationwouldexplode.Thiswouldmeanthef-

nancialruinoGreeceandthebankingsystemwouldalmostcertainly

collapse.33Inthiscase,Greecesoreigncreditorsaboveall,German

andFrenchbankswouldhavetowriteothedebtstheyhaveissued.

Secondly,excludingGreecewouldmeangivinguptheimplicitguaran-teeocontinuanceotheEurozoneandwouldopenuptheoodgates

orspeculationagainsttheEuro.TheplanocreatingintheEuro

aworldcurrencythatcancompetewiththeUSDollarwouldthenhave

ailed.34

33 DZ Bank, Interest markets, 9.5.2011 34 Berliner Zeitung 27.4.2010. Concerning the advantages in the

status of a leading world currency, see AK 561, 20.5.2011. http://www.akweb.de/ak_s/ak561/23.htm


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15. GREECE HAS TO WIN BACK THE TRUST

OF THE FINANCIAL MARKETS

The acts:ToregainaccesstoloansandbecomeindependentoEUaid,Athensmustreceivemoneyromthefnancialmarketsataord-

ableinterestrates.Todoso,theinvestorsmustagainbelievethattheir

moneyissaeandproftableinGreece,thatis,thattheycanearngood

moneythere.

The way things are portrayed:Whathasbeenoutlinedaboveispretty

muchthecaseandclearlydemonstratesthepowerbalancethree

yearsaterthefnancialcrisis.Today,allindustrialnationsareattempt-ing to regain the trust o the fnancial markets by implementing

austeritymeasures,wagereductions,taxincreasesandanincrease

incompetitiveness.Thisshowsthatthepowerothemarketsisin-

tact.While,atthebeginningothefnancialcrisis,itwassaidthatthe

fnancialmarketswouldhavetoberestrainedorplacedinchains,

nowthedemandsmadebythefnancialinvestorswithrespecttothe

proftabilityandstabilityostatesisonceagainthemeasuringstickwhichthecountriesthemselvesgoby.Themarketsruleandpolitics

bendstomeettheirdemands.


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16. WE WANT TO BE FRIENDS WITH THE GREEKS35

Friendshipisaeelingbetweenpeople,notadefningactorinthere-

lationshipbetweenpoliticalapparatuses.Ocourse,oneotenspeaks

fgurativelyoberiendedstates.However,thisreerslesstobonds

oriendshipandhasmoretodowiththesharedinterestspursuedby

somestates.TheinterestthatGreeceandGermanyshareinthiscasecanbeoundprettyast:itisthejointcurrency,theEuro.However,

whileAthenshastopreventitseconomyromcollapsing,theGerman

governmentistryingtogetoutotheGreekproblemasinexpensively

aspossible.Whenitcomestomoney,riendshipgoesoutthewindow.

17. YOU SHOULD HELP YOUR FRIENDS BUT NOT BAIL THEM OUT

The acts:15May2011,Sundayevening,talkshowonGermantelevi-

sionwithAnneWill,thesubject:BillionsorthepoorEurowretches

isthegovernmentriskingourmoney?.Theprogrammestartsoby

questioningpeopleonthestreet.Theollowingquestionsareasked:Wouldyouhelpyourneighboursorriendsitheywereinafnancial

mess?Mostothosequestionedanswered:Yes.Theanswertothe

nextquestionWouldyoualsooerthemcollateraloraloan?how-

everismostlyNo.Thistakestheviewerstotheeveningsmainques-

tion:Shouldpoliticiansbeallowedtodosomethingwewouldnever

doinourprivate lie, thatis, provide large-scalecollateralor loans

takenoutbyothers?From2013,Germanywillprovidealmost168bil-lioneurosinguaranteesandalmost22billionincashinjectionsaspart

othelong-termEuropeanStabilityMechanism(ESM);thesumsareto

bepaidingraduallybetween2013and2017.

THE ROLE OF THE GERMANS: FALSE FRIENDS

35 BILD newspaper, 5.3.2010


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18

The way things are portrayed:WeGermansshouldthereorenot

giveguaranteesortheGreeks.Andyetweareconstantlygiving

guarantees,withoutanyoneasking us iwewant to. For example,

orthedomesticcrediteconomy.Thiswasshownbythelastfnan-

cialcrisis:whenthecreditratingotheGermanbankswasindanger,thepublicauthoritiesjumpedinwithaidandguarantees.Whilethe

GermanshareinthefnancialaidtoGreecehasbeenapprox.24bil-

lioneurostodate,theaidgiventotheGermanbankswassignifcantly

higher.AccordingtotheGermanBundesbank,thesupportgivento

thefnancialsectoralonein2010increasedthenationaldebtby241

billioneuros.36

18. NO GERMAN TAX EUROS FOR GREECE!37

The acts:ThefrstaidpackageorGreeceromtheyear2010con-

tainedaGermanshareoaround22billioneuros.

The way things are portrayed:Dobrindtisright.Itisnotthemuch-quotedtaxpayerwhoishelpingGreece.TheGermangovernment

doesnottakethemoneyorAthensromthenationalbudgetorrom

taxincome,butborrowsthismoneyatinterestrateso2%to3%and

lendsiturthertocountriesinastateocrisisincludingpenaltyinter-

est.Athensmustpay4.2%orthisaid,whileIrelandpays5.8%and

Portugalbetween5.5%and6%.Thisisagoodbusinessproposition

ortheGermantaxpayer.Thedierenceininterestmeansthatanestimated500millioneuroswillowintothecountry 38underthe

proviso,however,thatthecrisisstatescanpaybacktheirdebts.As

such,theBILDnewspaperisrightwhenitheadlineswithYouGreeks

aregettingnothingromus!39.Itstheotherwayrounditisactually

Greecewhowillootthebillintheend.

36 Bundesbank press release, 13.4.2011 37 Alexander Dobrindt, CSU, in BILD newspaper, 5.3.2010 38 Finan-

cial Times Germany, 20.5.2011 39 BILD newspaper, 5.3.2010


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19

19. WE ARE THE PAYMASTERS OF EUROPE40

The acts:Seeitems17and18

The way things are portrayed: As theGerman governmentgrantsGreeceaidintheormoloans,thismoneyhasnotbeengivenaway.

Itwillcomebackagainplusinterest.However,thedebtcrisisacing

someperiphery states hasmore advantages orGermany, because

Germangovernmentbondsareseenassaeamonginvestors.The

result is thatall investors areeagertobuyupGermangovernment

bonds.WhichiswhytheGermangovernmenthasnoproblemfnding

fnancialbackers,iitwantstoborrowmoney.TheresultothisisthattheinteresttheGermangovernmenthastopaytoitscreditorsisvery

low.Inearlierphaseswheretherewasaneconomicupswing,theGer-

mangovernmenthadtopayitscreditorssignifcantlyhigherinterest.

Now,however,theEurocrisisismakingGermangovernmentbonds

attractive,whichreducestherateointerestandsavestheGerman

MinisteroFinancemoney.Theestimatedannualsavingsromthisare

3.5billioneuros.41

TheaidorstateslikeGreece,IrelandorPortugal,bytheway,isnotadonationandnotanactoriendship.Inreality,

themoneyisnotowinginordertohelptheGreeks,butinorderto

preventothercountriesromdamage.TheEuroGroupormulatedthis

explicitlyintheresolutionotheESM,theEurospermanentprotec-

tor,inMarch2011:ThememberstatesthathavetheEuroastheir

currencyshallestablishastabilitymechanism,whichwillbeactivated

whenthisisunavoidabletosecurethestabilityotheEurozoneasawhole.Thismeansthattheloansgivenasaidtocountriesinastateo

crisisarenottheretohelptheoverindebtedcountry,buttoprotectthe

restotheEurozoneromtheconsequencesothisoverindebtedness.

Itistheretoprotectthecreditorsromthedebtors.

40 BILD newspaper, 25.2.2011 41 Financial Times Germany, 20.5.2011


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20

ONE LAST COMMENT

20. GREECE CHEATED ITS WAY INTO

THE EUROZONE WE ARE NOW PAYING THE PRICE

FOR OUR INDULGENCE42

The acts:TheGreekdefcithasactuallybeencontinuouslyabovethe

EUupperlimitothreepercentogrossdomesticproductsince1997

evenduringtheyears1997to1999,whichweredecisiveorentrytotheEurozone.

The way things are portrayed:ThecheatingotheGreekswasal-

readyknownaboutandofcialin2004.However,thecountrywasnot

excludedromthecurrencyunionnorwereanytreatyviolationpro-

ceedingsorsanctionsundertaken,suchascutsinEUaid.Whynot?

Thisissomethingwecanonlypostulateon.Greecewasgovernedby

KostasKaramanlisrom2004onwards,andheisacloseallyoGer-manChancellorAngelaMerkel(seeitem10TheGreeksarecorrupt).

Whatismore,itwasthegoalothemainpowerswithintheEurozone

suchasGermanyandFrance,inprinciple,toacceptasmanycoun-

triesaspossible,inordertolendthecurrencyunionmoreeconomic

cloutaterall,theEuroisacompetitiveprojectagainstthedollar,

behindwhichtherearetheUSAandaquarterotheworldeconomy.

Inaddition,withGreecesentry,theEurozonespreadgeopoliticallyto-wardstheimportantMiddleEastregion.ThismaybewhytheIMFand

theEUexcludedGreecesweaponsbudgettoagreatextentromthe

austeritymeasuresin2010.Despitetheactthatthis(asapercentage

otheentirebudget)istwo-and-a-haltimeshigherthantheGerman

andtwiceashighastheEUaverage.FrenchandGermanweapons

manuacturersinparticularaswellasthegovernmentsinParisandin

Bonn,orlaterBerlin,havebeensupportingasystematicarmsbuild-up

inTurkeyandGreecesincethe1980s.43

42 Brse online, 7.1.2010 43 Greece, the IMF and EU dictate and German responsibility, position paper issued

by the scientific advisory board of Attac Germany


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Author

Stephan Kaufmann

IllustrAtIon of front pAge

Lutz Kbelbck

drawn up as a result of the project: Lets talk about alternatives ,

in cooperation with the press epartment of the Rosa-Luxemburg-Founation

ContACt

Rosa-Luxemburg-Stiftung

dr. Sabine Nuss, dr. Lutz Brangsch

Franz-Mehring-latz 1, 10243 Berlin

hone 030 44310-448, www.rosalux.e


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greece: 20 popular fallacies concerning the debt crisis

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