5 Mar 2010
A 24-hour general strike paralyzed the Greek capital of Athens this week, shutting down schools, hospitals and transportation. According to The Real News Network (TRNN), the protests serve as confirmation that Greece will be one of the first battlegrounds in the public debt crisis.
The Greek economy is in turmoil with its government owing 53 billion Euros to creditors.
Greek Prime Minister, Georgios Papandreou, announced that he would cut public spending, as demanded by the European Union to deal with the country's debt. This includes pay freezes for public workers, amongst other IMF-style austerity measures. And, this round of cuts in public expenditure is just the beginning, says the Greek government.
Papandreou has called on all Greeks to make sacrifices for the country to pay off the national debt.
Nikos Nikisianos of the Greek Social Forum doesn't agree that the Greek public should carry the responsibility for the debt. He contends that the private sector owes a huge amount of money to the state in the form of social insurances, which they have not paid and should now be called to account for. The private sector in Greece is notorious for reneging on its social insurance obligations and owes the government huge amounts of money. In Nikisianos' view, the problem of Greece's debt is being lumped on the working class, while the profits of big business continue to grow.
How did the Greek economic crisis arise?
Chris Spannos editor for Z-Net says, in 2001, Goldman Sachs traded some debt with Greece in a mutually beneficial arrangement. At the time, what Goldman Sachs did allowed Greece to hide its public deficit and national debt, which in turn enabled the country to join the European Union. Goldman Sachs made a huge amount of money in this deal. The exact amount is still unknown and is being investigated by the US Federal Reserve Agency.
In an earlier TRNN report, F. William Engdal argues that since 2001, Greece has been spending way over the 3% deficit GDP limits imposed by the Maastricht Treaty.
He contends that Greek finance ministers and politicians were courted by the likes of Goldman Sachs and JP Morgan Chase. As early as 2001/2, the Greek government was offered a chance to put its liabilities "off the books." Instead of showing a deficit to GDP ranging from 6-8%, as was the case, they were only showing around 3%.
But in November 2009, it was revealed that through the use of complex derivative instruments, which Goldman Sachs, especially, sold to the Greek government, the actual debt to GDP was 12.7%.
At that point, Moody's Standard and Poor, the credit rating agency, which Engdal says was asleep at the switch when the sub-prime crisis erupted two-and-a-half years ago, downgraded the debt of the Greek government and put it on a downward credit watch. This, he contends, was a godsend for hedge funds and other highly speculative groups around the world to short the Euro.
Rampant financial speculation is making it extremely difficult for Greece to meet its debt obligations. Traders are using the financial instrument known as the credit default swop to bet against Greece's ability to pay its debt. The bets themselves make it even more difficult for Greece to borrow the money needed to pay for its debt obligations.
According to Spannos, Goldman Sachs is still behaving in a predatory and cannibalistic manner.
German Chancellor Angela Merkel commented on the role of bankers saying, "The debt that had to be accumulated, during the financial crisis, is now becoming the object of speculation by precisely those institutions that we saved a year-and-a-half ago. That's very difficult to explain to people in a democracy who should trust us."
Despite Merkels show of empathy, Germany has led the EU in opposing a bailout for Greece. Analysts speculate that this is because Germany as an export economy that benefits from a falling Euro.
Editor's Note: You might also be interested in reading, How the Monsters at Goldman Sachs Caused a Greek Tragedy and The Fall of Greece: Yes, It Really is a Capitalist Plot.