Greece has not been bailed out; the eurozone has.
This is an agonizing point analysts are continuing to drum home to a world which eagerly follows the thespian events in the country’s debt saga.
Last week, Greece was readying itself to endorse a debt swap with private bondholders to slice €100 billion off the country’s debt after the eurozone struck a deal earlier in the week to provide Athens with loans worth €130 billion ($170 billion) to 2014. But this austerity action has been promoted as a “bailout of Greece” by finance ministers and technocrats when in actual fact it isn’t. In literal terms, Greece has not been fiscally rescued to ensure the country’s financial stability, as has been suggested by financial experts and inferred by mainstream media.
The move has masked a European Union financial coup d’état; not a bailout of Greece, but a bailout for investors in Greek bonds, mostly American and German banks, which in turn would buy time to stabilize the 17-nation euro zone currency bloc.
The frenzied spate of EU negotiations over Greece had proved that the bloc was eagerly trying to swerve away from default; it no longer became a matter of saving Greece, but trying to contain the damage if the crisis turned unsalvageable. Many experts had pointed towards the first part of the EU’s coup d’état in recent months when the bloc replaced the Greek leader with a technocrat answerable to the EU Commission, EU Central Bank (ECB) and IMF decision making on the country’s economy. This also sequentially happened in Spain and Italy, with the newly-installed technocrats supporting radical structural reforms and deficit reduction goals. The latest government measures in Greece included a 22 percent cut in the minimum wage, while pensions of more than €1,300 a month are to be slashed by 12 percent, further adding to the economic hardship of ordinary Greeks.
But what is now worrying about Greece is not only the loss of sovereignty, but also the fear that the EU now wants to permanently bypass the elected government with more unelected technocrats. It’s a matter of the EU putting Greece on a leash. It may be one of the smallest economies of the region (just 2.4 percent of Europe’s GDP), whose primary export is olives, but on the bond market Greece represents part of an interlinking network of economies that stay afloat if they continue to exude confidence and attract investment. The EU can’t afford to break a limb, no matter how weak it may be. And Greece has no option but to follow and adhere to the bloc that has stepped in to get it out of its mess and save the euro from being devalued.
But it is not entirely about the euro however, as Australia-based analyst Dan Denning explains:
“The Euro would be better off without Greece and Greece would be better off without the Euro. The Germans are even planning for a Euro that doesn’t include Greece. With its own currency, Greece could default, devalue, inflate and start over.”
Indeed, Argentina has done just that in the past 10 years and recovered; but Greece can’t – the euro is stuck to it.
Of course in a perfect world, the jarring cocktail of growing governmental power in the eurozone and a corrupt financial system based on limitless debt would be the main issue here and officials would work to eradicate it. But what Europe is doing is actually preserving this system; one example being, governments hiring trans-national financial elites to spend taxpayer money: government money goes out and goes back in to the government again!
And bailouts that accumulate government debt are another example, because over the years, accumulation of European debt had drawn parallels with growing government power and global political influence.
The eurozone has twisted many arms to ensure a Greek bailout, with the ECB persuading creditors to accept a 70 percent haircut on their current debt “without actually calling it a default,” notes Denning. And delving deeper into the whole shenanigan over who decides what actually constitutes a credit default, will present you with a network of global banking representatives keen to look after “number one” as they have the most to lose if Greek bonds default.
“If Greece defaults, it sets a precedent for how other countries might deal with unsustainable debt levels. This imperils the collateral of Europe’s entire banking system,” Denning explains.
And there’s that link again. The knock-on effect on the value of government bonds in a region with a banking system full of government bonds. Pull the thread from all these stitches and one by one, those who once stood to gain from a corrupt debt culture – let alone the average taxpayer who was always at a loss in comparison - will be grappling for the fiscal stability they had once had.
(Eman El-Shenawi, a writer at Al Arabiya English, can be reached at email@example.com)