Cayman Financial Review
By: L. Burke Files & Mike J. MASOUD
April 22, 2015
By: L. Burke Files & Mike J. MASOUD
April 22, 2015
Let’s start with being provocative: The utterly corrupt path leading to the Greek debt default theater is filled with faux EU pressures, chicanery and bribes, overt and implied, by all 11 sides.
So what are the corrupt paving stones that make up the path to debt perdition?
1981
It all started with Greece’s membership in the European Community. The EU membership entitled Greece to European Regional Integration funds, the Delors Package I. It also brought new sources to borrow from abroad. In 1981 Greek public debt was €8.5 billion (22.8 percent of Greece’s GDP), by 1991 it was €48 billion (71 percent of GDP). This is a full 10 years before Greece was made a full member of the EU. Did Greece have the institutional capacity to absorb these funds without corruption? Did anyone think to ask?
January 2001
Greece became the 12th member of the eurozone. While many fretted about such an economically weak country joining the euro, Wim Duisenberg, then president of the European Central Bank, assured all that Greece, with the EU’s help, would continue with improvements to its economy that would make euro membership appropriate.
At the time, Greece touted its fiscal reforms to cut the government budget deficit, privatizations and labor market reforms. Today those are the same areas where the troika has demanded action and the Greek government resisted.
2004
Greece admits it may have fudged its bona fides a bit to gain access to the EU club. It seems that since 1999 Greece has not met the deficit target of 3 percent of GDP that applies to all prospective and current members.
As commentators have pointed out, this was in part a consequence of a toothless Eurostat, the EU agency that monitors economic statistics, which was wholly reliant on the data provided by the national governments.
As Matina Stevis pointed out in The Guardian in 2011, “In a time when the EU issues regulations on the permissible size and shape of fruit, there are no excuses for not having in place a strict framework for the generation of statistical information.”
2004 to 2009
Greece is a big spender. Athens hosted the Olympics at extravagant expense. The estimated cost of the Olympic Games is a stunning $14 - 15 billion. No game in the history of the Olympics has lost more than a tenth of that. Associated Press reported in 2012 that eight years after the Olympic Games many of the facilities were left vacant and rotting.
Many Greeks, even the head of the International Olympic Committee, say hosting the 2004 Olympics contributed to the country’s debt crisis. The Olympic Games was such a bank buster that it was the tipping point starting Greece’s downward slide into debt perdition.
So what are the corrupt paving stones that make up the path to debt perdition?
1981
It all started with Greece’s membership in the European Community. The EU membership entitled Greece to European Regional Integration funds, the Delors Package I. It also brought new sources to borrow from abroad. In 1981 Greek public debt was €8.5 billion (22.8 percent of Greece’s GDP), by 1991 it was €48 billion (71 percent of GDP). This is a full 10 years before Greece was made a full member of the EU. Did Greece have the institutional capacity to absorb these funds without corruption? Did anyone think to ask?
January 2001
Greece became the 12th member of the eurozone. While many fretted about such an economically weak country joining the euro, Wim Duisenberg, then president of the European Central Bank, assured all that Greece, with the EU’s help, would continue with improvements to its economy that would make euro membership appropriate.
At the time, Greece touted its fiscal reforms to cut the government budget deficit, privatizations and labor market reforms. Today those are the same areas where the troika has demanded action and the Greek government resisted.
2004
Greece admits it may have fudged its bona fides a bit to gain access to the EU club. It seems that since 1999 Greece has not met the deficit target of 3 percent of GDP that applies to all prospective and current members.
As commentators have pointed out, this was in part a consequence of a toothless Eurostat, the EU agency that monitors economic statistics, which was wholly reliant on the data provided by the national governments.
As Matina Stevis pointed out in The Guardian in 2011, “In a time when the EU issues regulations on the permissible size and shape of fruit, there are no excuses for not having in place a strict framework for the generation of statistical information.”
2004 to 2009
Greece is a big spender. Athens hosted the Olympics at extravagant expense. The estimated cost of the Olympic Games is a stunning $14 - 15 billion. No game in the history of the Olympics has lost more than a tenth of that. Associated Press reported in 2012 that eight years after the Olympic Games many of the facilities were left vacant and rotting.
Many Greeks, even the head of the International Olympic Committee, say hosting the 2004 Olympics contributed to the country’s debt crisis. The Olympic Games was such a bank buster that it was the tipping point starting Greece’s downward slide into debt perdition.
During this time, the Greek government was the third largest arms importer after China and India. As part of an earlier rescue program, Greece agreed to cut its defense spending from over 7 percent of GDP to 4 percent of GDP, which is still twice the euro-zone average. In the three years leading up to the bailout, 2007 through 2009, Greece averaged over $10 billion per year in military spending. Who were the winners? The French and German arms manufacturers. In fact, Greece was Germany’s largest arms buyer for this entire time period.
Elected in October of 2009, Georgios Papandreou’s government within days discovered that the prior administration had been “playing with the books” and the Greek deficit as a percentage of GDP was revised and doubled overnight to 12.7 percent of GDP – more than 300 percent over target. At the end of this five-year spending party, Greece became the first nation to have its sovereign debt rating cut to below investment grade.
2010
This was the year of bailout for the county. Papandreou’s administration cut the budget by 10 percent, froze wages and increased taxes.
Elected in October of 2009, Georgios Papandreou’s government within days discovered that the prior administration had been “playing with the books” and the Greek deficit as a percentage of GDP was revised and doubled overnight to 12.7 percent of GDP – more than 300 percent over target. At the end of this five-year spending party, Greece became the first nation to have its sovereign debt rating cut to below investment grade.
2010
This was the year of bailout for the county. Papandreou’s administration cut the budget by 10 percent, froze wages and increased taxes.
No comments:
Post a Comment