No Reprieve for Greece from Debtor’s Prison

February 26, 2012 – Greece remains in debtor’s prison.  That horrible fate was confirmed this past week with the ‘group-sentencing’ handed down by Brussels’ eurocrats, Merkel, Sarkozy, the ECB and IMF, and most shameful of all, the Greek politicians who accepted the brazen ultimatum delivered to them.

One can only wonder what these politicians were thinking, and whose interests they were really serving.  The €130 billion that is supposed to ‘help’ Greece barely does anything at all to revive the economic prospects for that beleaguered country.  Other than some money that will trickle-down into economic activity by ensuring the ongoing payment of the €8,594 per month salary (plus additional perquisites) going to the members of the Greek parliament as well as some other odds-and-ends, the rest simply passes through Greek books into the hands of the reckless lenders who foolishly made too many loans in the first place.  Once again, the bad loans made by irresponsible, reckless lenders are socialized.

If Greek politicians were really acting in the best interests of the Greek people, they would have taken the same path chosen by Iceland’s leaders – default.

A financial crisis engulfed both Iceland and Greece about the same time, but their progress since then has been completely different.  While Greece wallows in a depression that worsens each year and carries an unmanageable debt burden too large to service even if its economy was growing, the BBC reports: “Iceland is safe to invest in again, according to Fitch, which has upgraded its credit rating three years after its economy spectacularly collapsed.”

There are of course notable differences between these two countries.  Private companies and banks incurred much of the Icelandic debt, while the more troublesome burden in Greece is its sovereign debt.  The most notable difference though is that Greece is part of the euro-zone, and therefore uses the euro.  Thus, Iceland was in a better position to control its own destiny.

Iceland never joined the EU, nor ceded control of its currency or its economy to Brussels, Frankfurt and Washington, DC, the homes of the meddlesome autocrats that seek to impose their will on Greece.  Nor did Iceland cede control of its government to its creditors or abandon democracy, which apparently is the outcome the German finance minister would like to impose on Greece, like already has happened in Italy. The government of unelected ‘technocrat’, Mario Monti, “doesn’t include a single elected politician in its ranks.” So we should not be surprised by the desire to wrangle control of Greece away from the Greek people.  If it already happened in Italy, why can’t it happen in Greece too?

We saw, for example, the indignant reactions of EU politicians when former Prime Minister Papandreou decided to hold a referendum to let the Greek people decide their future, as the Icelandic people did.  President Sarkozy said that he was “dismayed” by Papandreou’s decision to hold a referendum, while Luxembourg Prime Minister Juncker said that a referendum by the Greek people was something that he “could have done without”.

It was inevitable that the proposed referendum would never happen because the Greeks were not then and are not now in control of their country’s destiny. So the outcome now unfolding was pre-ordained.  Here is what I wrote a year ago:

Personally, I am not optimistic that governments will do the right thing.  The reason is captured in a quote in The Telegraph by Germany’s chancellor, Angela Merkel.  I am not picking on her, but am highlighting her quote because I think it accurately captures what all politicians are thinking today.  Commenting that the eurozone was “facing an exceptionally serious situation”, she went on to say “the primacy of politics over markets must be enforced.”

What must be enforced of course is the rule of law, but that time-honoured principle is rarely if ever mentioned in the rancorous debates both inside and outside of Greece.  When politics are put ahead of markets, the vested interests that politicians serve trample time and again over the people’s best interests.

There is no hope for Greece to repay its debts by meeting the draconian burden imposed on it. But the banks want their money back, even if it means keeping Greece in debtor’s prison.