Greece 2010: The Year of the Bondholder (2010)

The European sovereign debt ‘crisis’ narrative has now been running for months. The mainstream media and a self-interestedly pessimistic bond market have nudged each other along, both pushing a storyline of selective continental decadence, as if whole populations had been having one long party. AS YEARS OF PROFLIGACY COME HOME TO ROOST was a typically moralistic headline. Or there was one of those fresh-faced head boys of the BBC talking of the Spanish government ‘facing up to reality’ by making cuts in public sector wages and foreign aid. Like the poet TS Eliot’s smug pessimism as expressed in the famous line, “human kind cannot bear very much reality” it invites the question, whose fucking reality? Even in privileged Europe, many,

any people are continually bearing a reality that is not of their making, and not much fun either.

Equally smug was the ‘that’s how things are’ story, cyclical: “during periods of financial euphoria and strongly rising share prices, people cut corners and bend the rules; during the austere times which follow, the rule books are rewritten and everyone agrees things will be different next time.”[1] The ‘austere times’ it should be remembered, preceded the sovereign debt drama. This was when bankers were forced to face up to ‘reality’, having previously ditched it in favour of extolling the pleasure principle: don’t wait, do all the things you’ve always wanted to do, and we’ll help you do it: take that holiday of a lifetime now! Despite all kinds of government and institutional talk however, they’ve been largely excused from such a ‘facing up’. Instead, the deceptively homely ‘living-beyond our means’ story which had been touched on, and then passed over in the matter of personal indebtedness, became more comfortably, a matter of government debt late in 2009. What did continue from one ‘crisis’ to another were the frighteners. GLOBAL MARKETS ON A “CLIFF EDGE” has been a regular. It enabled in turn the egomaniac of the German Green party, Joska Fischer, to insist on the need for social-democratic austerity, by which he meant for one thing, increasing the pension age, on the grounds that otherwise there would be an upsurge of ultra-right wing parties. In this he mimicked British Trade Union leaders of the mid-1970s who disarmed resistance to the capitalist offensive of the time in similar fashion.

In the ‘real’ world, the upshot of the banking crisis, caused by the sheer scale of rentier financial claims, the wholly unrealistic assumptions of continuous future revenue streams, has had disastrous consequences for people encouraged to have unrealistic expectations about both house ownership, and house prices. In the wider world it brought on economic recession, and financial institutions taking a rather closer look at some of their loans. Or rather, as is usually the case, doing so in a highly selective manner: the concentration on sovereign debt was given focus by the decision taken in Germany in June 2009 to amend the Constitution to anchor a timetable for a balanced budget: The political Constitution! ! As the largest national economy in the Eurozone, the natural consequence of this would be to force ‘austerity’ on Europe, given that until this moment, government deficit financing has been a normal macroeconomic tool to maintain levels of economic activity and employment.

It has contributed – with the usual’ leaner and meaner’ rhetoric – to a Europe of competitive austerity(ies). This also required the selective tightening of credit created by the banking crisis, and which towards the end of 2009 homed in on and gave a language to a ‘sovereign debt crisis’ which originally focussed on Greece and still continues to do so. The dating of its appearance as a public narrative, the conjunction of a Dubai debt ‘crisis’ in November 2009, unforeseen by the credit ratings agencies and the revelation very soon after by an incoming Greek government that its national debt as a proportion of GDP was between 2 and 4 times as large as the previous government had announced. During 2010, it emerged that it was even greater, standing at 15.4% of GDP.

From this moment onwards another language of the banking crisis reappears, that of ‘contagion’ with Greece as the original sick man. Now and then the ‘domino’ metaphor of the Cold War would pop up, but contagion as a language of disease has been felt to have greater rhetorical force. Descriptions of whole nation-state societies and their ‘health’ have been seen exclusively through the prism of public finances. The solution, a purging of the patient. The rhetorical force is not of revolution, but rather, a mix of archaic religion with archaic medicine.

This essay aims to examine what has happened in Greece – the original ‘sick man’ — with the intention of making a very modest contribution to how the austerity being imposed on it be opposed, both in the absence of a pan-European effective opposition, and as part of making such an opposition. This involves trying to hold together Greek specifics, and the contexts in which they exist. There are similar characteristics, but Greece is not at all the same as Ireland. Both however are subject to the same dynamic which informs competitive austerity, that is, the punishment of sections of European populations by a self-righteous class that is not being punished itself; which has seized an opportunity for ‘restructuring’ to the benefit of European capital. Being competitive with East Asia is a contextual threat, but the taste for punishment per se is rife. Managerial bullying to increase intensity of labour of those still in work is common, and sometimes just for its own sake as in the case of France Télécom. As are the constant, politically managed threats to migrant workers, and all people on welfare, while pensions are now considered fair game. There is a glee to the attack as with the French Minister in advance of the increasing the retirement age law: “We need to get rid of bad habits,” he said. We? And who are they then? What stands out is that the argument for having to work till you’re exhausted is not presented in economic terms but in those of social psychology. This too has become the dominant form of explanation of Greece’s crisis, a tabloid version, Greeks are lazy; and from intellectuals as ingrained clientilism, and an ‘ambiguity’ towards modernity. The forces likely to take advantage of this in Greece are, unfortunately, nationalist. What such forces – the Orthodox church to the fore – are seizing on, cannot be ignored if an internationalist anti-capitalist response is to have any chance of success.





The sins of the father is the personalized version of the Greek ‘modernist’ account and its present consequences. It is Andreas Papendreou, the father of the current Prime Minister who is the real villain of this narrative. He was, it’s fair to say, a charismatic windbag who, in a previous political age, could speak interminably of ‘the people’ to thousands in city squares. It’s true that before the election of his PASOK government in 1981, national debt was – in 1980 -around 30% of GDP. But some context is required here. 1980 was also the year Greece joined the EU and the 1981 election ended 50 years of ‘right wing’ governments by monarchs and dictatorships with occasional semi-democratic party governments. There was a mood of great optimism and, a feeling amongst leftist families that they were entitled after years of discrimination dating back to the Civil War of the late 1940s. Social reforms were introduced that broke some of the power of the Orthodox church; the spoken language became the official language; smart alliances were made in the Arab world; free health clinics were set up in all small towns; and money, much of it from EU funds despite ‘Andreas’s rhetorical opposition to it, was channelled to farmers. In the mid 1980s however things changed. As the global economic situation became tougher, critics of Papendreou with no self-interested agenda of their own were smeared; Turkish ‘scares’ became the order of the day; and corruption – centred on the government, ‘Andreas’ himself, the Bank of Crete and its owner, a man from nowhere called Koskotas, – were open secrets.

It is easy to understand the bitter disillusion of a leftist intellectual like Nikos Mouzelis at what happened at this time, and it is he, now an establishment professor at the LSE who has theorized the modern/anti-modern dichotomy. It’s true that as in Ireland and the former Prime Minister Charles Haughey, that there was an uneasy popular admiration for the sheer chutzpah of the whole thing, the Irish ‘cute hoor’ syndrome. Nevertheless ‘Andreas’ was voted out of office when the traditional Communist Party (KKE) allied with the conservative ND specifically on the matter of corruption, and for a couple of years an ND government under Mitsotakes attempted to push through ‘Greek neoliberalism’. And failed. On ‘Andreas’s return to power, he vied with the Orthodox Church, the political right, and the Communist Party in aggressive nationalism in support for Milosevic’s Serbia, and on the question of the naming of Macedonia.

The ‘modernist’ critique would, with good reason, see this kind of nationalism [2], and its association with the perceived anti-Western sentiment of the Orthodox Church which has recently attacked the loss of sovereignty that the EU/IMF bail-out involves, and now, in the form of the Bishop of Piraeus, talked of it as an international Jewish conspiracy, as regressive and pernicious. The ‘modernist’ critique when it joins the social-psychological with the economic is centred on the state, party ‘ownership’ of the state, and its consequent expense and dysfunctionality. There is a joke in the Mani area of Greece in which a father with three sons says one will be a conservative, one a socialist, and one a communist…just in case. One always needs a connection, and this reflects a strange but widespread attitude to the state in the not-young population; looking to it to solve all problems, and at the same time not trusting it. It is dysfunctional. The obsession with pieces of paper, and the number official stamps they require consumes hours, days of citizens lives. Well-balanced people freak-out in tax offices, or, after a chase from one office to another, end up having to go to Athens for yet one more piece of paper.

But this is not the accusation levelled at Andreas Papendreou which is rather that he instituted the ‘arms race’ between his PASOK and the ‘conservative’ New Democracy party to give jobs to their own supporters, manipulating Civil War schisms. In the United States it is normal for governing parties to reward their own. In Greece the accusation is that the total numbers of public sector workers has increased so much as a result of party competition, because at the same time as jobs are given, it is virtually impossible to sack anyone. The running joke is that a public sector office job is a pension from Day One. Taken together with the dysfunctional state’s failure to collect all the tax it should, because of a mistrust of the same state by its citizens, the modernist critique implies that all Greeks are complicit in endemic corruption, on the assumption that within the extended (soy), if not the immediate (ekoyenya) family, there will be at least some members with public sector jobs. It was the line taken by the 1967-74 dictatorship in spite of its close links to a class of property developers: the Greeks need to be disciplined. Indeed the one remaining member of the junta, the 97 year old Stylianos Pattakos , wheeled himself out in April 2010 to say that the crisis proved the Junta had been right: Greeks need discipline from above.

Let there be no tears for PASOK and its socialist rhetoric. The nouveaux-riche class it produced takes some beating when it comes to conspicuous vulgarity in the mansions it built, or the arrogance that goes with it. The phrase private wealth-public poverty applied to Mrs Thatcher, applies even more to them. Around the mansions would be uncollected rubbish unless a private person was employed to move it to an illegal dump. A disregard for environmental policy, while forest land was illegally carved up for development on behalf of the professional and political class, lead to a series of devastating fires. A professional class of lawyers, doctors and journalists, and a political class not exclusive to one party or another, for the New Democracy governments of 2004-9 matched anything PASOK had done, and then went a step further in how much money it funnelled to its own supporters. The scandal of the monks of Vatopiadi, and state lands, may have had an impact on the autumn 2009 election, but knowing there was no more state largesse to give, it was one New Democracy clearly wanted to lose.



There is then substance to the ‘modernist critique’ made by Mouzelis and recently, in more polemical fashion, by Michael Lewis in Vanity Fair (October 1st 2010)[3] and Takis S Pappas in Open Democracy [4]. But as it relates to the present situation, it leaves out various contextual ‘realities’. The historical for one. Back in the 1970s a then young Nikos Mouzelis wrote a long article for New Left Review on the particular characteristics of Greece as a capitalist country: the overbearing role of the state from the moment of Independence; Greek capital’s history of investing outside of the country; and the country’s topography meaning that the “Fordization” of agriculture was impossible. Yes, it can be asked, but surely this power of the state should have been undone in the years following the 1974 fall of the most recent dictatorship, and isn’t it because of political party clientilism? In part, yes, and, looked at through another lens a critique of politics via political parties absolutely, but its continuing power also relates to the obvious lack of domestic private investment. Traffic congestion and parking nightmares in Athens are legendary, yet no cars or trucks are made in Greece, not even under licence. EU money was funnelled to rural schemes, and much of this disappeared in projects controlled by politically connected persons, but there was no Europe-wide attempt for example to develop world markets for olive oil, or value-added production using citrus fruits. The Common Agriculture Policy of the EU has been almost exclusively to the benefit of large-scale farming and agri-business of Northern Europe, as have a range of export guarantees. It involves sums far greater than any local scams.

Nevertheless the disappearance of such EU funds as did take place may, in addition to its own ideological commitment to a balanced budget, have made the German government make such a moralistic big deal out of ‘bailing-out’ Greece, dragging out the ‘rescue deal from February to May 2010. Certainly there was a focus not just on Greek ‘easy-living’ but on corruption. It’s still going on. This is a very selective take on what is corrupt. The highest profile case in Greece until the Vatopaiodi monks’ scam, has involved both political parties and the German company, Siemens. It has been marked by postponement, German-Greek extradition haggling. Greek nationalists of the ‘left’ and the ‘right’ can also point to fudged findings of guilt and large fines in the cases of Daimler-Benz for bribery, and more recently of Deutsche Bank for tax evasion schemes in the USA, and ask, is corruption exclusively a Greek public sector affair. Similarly when Michael Lewis invokes Wall St bankers as representatives of objectivity when it comes to financial numbers evaluation, a sardonic laugh is the only possible response.

The one thing on which Greek nationalists of the ‘right’, and European austerity fundamentalists can find agreement, are those contributors to public ‘profligacy’ on which to remain silent: the vainglorious Olympic Games of 2004; and the exceptionally high level of armaments spending. The Olympics, leaving behind the usual unused sports facilities, cost $25bn and is estimated to have been the costliest Games ever. The country with a population of approximately 10 million comes fifth on a list of the world’s biggest arms purchases, buying 4% of all the arms produced in the world; itis the highest GDP proportionate spender in the EU (2.8% of GDP) and 2nd only to the USA in NATO. In March 2010 it was still being pushed by France and Germany to buy its weapons with the implied threat that not doing so would reduce chances of a bail-out. France was pushing to sell 15 frigates, 15 helicopters and 40 top-of-the-range Rafale fighter planes; while Germany was pressing Greece to pay for a diesel electric submarine from Thyssen Krupp.




The contextual ‘reality’ of how the ‘Greek crisis’ developed in real time, and some characteristics of finance capital shown in this time, give traction to nationalists of all parties. To repeat, the Greek debt as a public and market narrative is dated back to November 2009 and the conjunction of a possible though over-dramatized Dubai debt default, and the new government declaring the deficit being nearly double the amount declared by the previous New Democracy government. Yet already, a year earlier, in October 2008, a Daily Telegraph headline read INVESTORS SHUN GREEK DEBT AS SHIPPING CRISIS DEEPENS. For the first time, it said, Greek national debt broke its tight linkage with Italian bonds. It went on to relate this to the slowdown in global freight market in which Greek shipping families hold a major role, while discretely avoiding mention of its legendary tax avoidance. In fact the Dubai ‘crisis’ was quickly sorted politically in the Gulf states world, and the unreliability of Greek official financial statistics was surely known to any ‘sophisticated investor’ and therefore should have been factored into investment decisions.

In the public narrative as it reached the bail-out drama of 2010, the role of Goldman Sachs in helping the Greek government hide the extent of its debt from 2001 onwards, made a brief appearance in February 2010(FN GOLDMAN SACHS FACES INQUIRY OVER GREEK CRISIS, [5]and then disappeared again. Even this was not new, back in 1998 Miranda Xafa, ex-IMF, ex-Mitsotakes adviser and then a Saloman Brothers analyst argued that if you added up all the government deficits over the previous 15 years, they amounted to only half the Greek debt. This massaging must have been even better known to the ‘sophisticated investor’/bondholder in 2003 when its 1st July edition, Risk magazine, Nick Dunbar showed that with help from Goldman Sachs, Greece had been using giant swap deals to ensure its national debt ratios met EU targets, and that Italy had been using such techniques since 1996 since both are faced with debt/GDP ratios of over 100%. He named names – Christopher Sardelkis of the Greek public debt division and the head of Goldman’s European fixed-income currencies and commodities unit, Antigone Loudiades; how it was done , using cross-currency swaps that were ‘off-market’; the transaction cost of 500 million Euros to the bank; how European companies had done the same after the introduction of IFRS hedge accounting; told how European statisticians gave way to Eurozone debt managers on the non-transparency of these deals as they affected national debt; and that Goldman immediately hedges its Greek exposure by placing its risk with a “well-known investor in sovereign debt,” Deutsche Pfandbriefe Bank, now part of Germany’s Hypo Real Estate.

This took place under the PASOK government of Andreas Papaendreou’s successor, Simitis, and such techniques continued under the next New Democracy government with other investment bankers. In 2007, it emerged that JP Morgan had been hired by the Finance Ministry to package loans linked to yet more military procurement in the form of ‘structured notes’. These notes did the rounds and ended up in the hands of Greek public sector pension funds with 50bn Euros between them, who paid way-over the odds for them. This time Mr Dunbar blamed poor supervision by the pension fund.

Poor supervision – along with what Michael Lewis calls the tsunami of cheap credit available across the world between 2003-2007, and the supposed excess of public over private sector wages – is a dominant theme in his Vanity Fair article. His evidence comes from George Papaconstantinou, the present Finance Minister who with others of the immediate governing group are nicknamed the Americans, and who gave Lewis a nightmarish picture of off-book pension spending, and echoing Miranda Safa complained that “There was no independent statistical service.” That governments made up their own figures.

All of this raises the question, why the emergence of a drastically (3-5 times) higher debt figure in October/November 2009 should have so spooked ‘sophisticated investors’. In fact nothing happened immediately. The long-term equivalence of state bond spread with Italy had already been broken a year previously, and Standard&Poor’s Greece analyst, Marko Mrsnik, told the Kathimerini newspaper that he would maintain the country’s A- rating. What was changing faster, was the CDS (Credit Default Swaps) market, a market to ensure against defaults which itself became a speculative market. In the course of 2009 the volume in sovereign credit default swaps had doubled, and was beginning to shift from Russia, Brazil and Ukraine, towards Europe, though it was Italy which first took its attention. The relation between the judgements of the bond market itself; the ratings agencies; and the CDS market; and a mass media with neoliberalism as its default position, is impossible for this writer to assess. The ratings agencies got away with a Congressional inquiry into the 2007-9 crash for which it had received some blame specially from European politicians, but one thing which emerged was that no re-rating of municipal USA bonds took place for years on end, for fear of being criticized for having created a problem by doing so. On sovereign debt however it soon changed its stance, and its student essay marks of A Minuses and B Pluses — adding an ‘objective’ gloss to the archaisms of contagion — went into dramatized, media-friendly downward spiral with warnings briefly ahead of a downgrade to come.

In the event, both the agencies and the CDS market jostled each other in the same direction. The movements of the CDS market was increasingly autonomous from the asset itself, the Greek debt . There was something distinctly herd-like in this market which reached roughly $80bn by itself. Comrades of Insurgent Notes cite Gregory Zuckerman in the Wall St Journal of the 5th February pointing out that it’s always been possible to bet against(short) government bonds, a CDS can be an easier way for them to quickly enter a wager. The upshot an increase on the yields, in effect interest rate, on Greek government bonds, measured by its increasing divergence from German ones. In addition to the maturing of bonds with the principle having to be paid off, the Greek drama was in motion from the beginning of 2010.

At the same time, other national economic indicators were not those of Europe’s sick man. The OECD report on the country produced in July 2009 talks of how “Greece resisted the global economic crisis better than many other countries in the OECD area.” It noted how the banking sector had “benefitted from marginal exposure to the toxic assets which were at the root of the international storm.” Outside of government debt and that of Greek ship-owners, debt-GDP ratios – that is for households, corporate and banks – are much lower than say in the UK or USA. It is simply not true that –as reported in the Guardian (April 6th) as part of the ‘sick man’ story, that the sector was in danger from ‘millions of Greeks with mortgages’. There are not millions of Greeks with mortgages. Nor did the sector’s overseas lending put it at risk. National Bank of Greece’s profits come in large part from Turkey. The deposits in the 4 largest banks totalled 164bn Euros. Growth rates too remained strong until the end of 2008 in large part the OECD noted with a straight face, because of large wage increases which supported consumption. In this, the organization revealed the parallel universes of bourgeois economics. Growth? A good thing as a measure of national economic health in one: increased wages –and in this case powered by New Democracy largesse to the public sector, a bad thing from another universe of competitiveness and profitability.






The bail-out drama soon became one of the Euro as a currency, European institutional capability/incapability, and German domestic politics. Getting a handle on this is not easy given the agendas of those commenting on events and on the very ‘facts’ themselves. British commentators for example, across-the-board are hostile to the very existence of the Euro. What matters in how the drama unfolded however, are the terms on which the ‘bail-out’ was made. And it does matter, the Greek non-party anti-capitalist movement’s failure to articulate a clear position on this, was a failure to come out of its own comfort zone. A public debate on the option of defaulting on the sovereign debt did not take place, and the lack of such a debate made George Papendreou and his ‘Americans’ , strike a far worse deal than might have been the case. Large-scale debtors have power. In the ‘sick man’ narrative, much was made of the national debt held by Greece’s banks, and never mind the scale of their deposits, but the obvious truth was that by far the most was held in France, Germany and other European countries. An extrapolation from IMF figures in April, indicated German financial institutions holding $37 billions worth at the very moment Greek state bonds had been reduced to junk status, one institution being Hypo Real Estate.

The harshness of the terms of the deal, coming on top of measures the Greek government had already introduced in February, and whether they were necessarily so has been debated, as so often, after the event. A former IMF Director for Europe was quoted as saying they would have been easier if it had been applied to at the end of 2009. Another IMF ‘source’ said this would have happened if the EU/European Central Bank had not stuck their oar in. Another report early in April had the value of the Euro falling on account of Greece wanting to avoid IMF involvement at a time when it was the Eurozone members lead by Germany demanding IMF participation. Either way, as the ratings agencies downgraded the debt to junk status, the yield on ten year bonds kept on rising, the whole business of a bail-out was dragged out with the media playing its role in saying things had been agreed when they hadn’t been agreed, thus creating more market mistrust in Europe’s ‘political will’.

The procrastination over many weeks to the point of money on the table, ambiguity and delays which are said to have made the terms more onerous, has been blamed most of all on the German government. After several weeks of it, the head of the IMF, Dominique Strauss-Khan was reported to have had to have a private meeting with German legislators. That it was legislators rather than bankers tells a double story.

*Two weeks after the Greek bailout in May, financial markets “shuddered” after Germany’s political decision to ban so called ‘naked’ short-selling which. They said this was affecting sovereign debt costs in an unjustified manner. The ban is said to have caused market panic, and was ridiculed by most neoliberal wiseguys. A secondary impact was-perversely, a fall in bond price yields. Some months later in plain language, the German Chancellor Angela Merkel asserted the primacy of the political against the financial world. This time it went with the suggestion/threat that bondholders themselves must take some responsibility in the case of debtor repayment difficulties, or, as the phrase-makers had it, be ready to ‘take a haircut’. This too had perverse immediate results. Investors, thinking that a 100% debt was no longer a 100% debt, demanded yet higher yields on Greek and other ‘PIGS’ (Portugal, Ireland , Greece and Spain) bonds. Papendreou’s implicit criticism of Merkel’s suggestion on account of this perverse effect, got this response from German Finance Minister Schauble. “Greece has had a lot of German solidarity. But solidarity is not a one-way street. That shouldn’t be forgotten in Greece.” Coming around the same time as the Austrian finance minister’s threat to block its share of the next transfer of the agreed bail-out funds to Greece on the grounds that “We are getting indications that the Greeks can’t stick to their plain in a sufficient manner”. Domestically, this was more ammunition for the worst kind of Greek nationalism. At the level of political economy, the declarations from the German government reflected an extraordinary irony, that it was politicians who were the defenders of the ‘independence of money’ against the bankers: the balanced budget against ‘easy money. And psychically, revenge against all that Anglo-Saxon preaching against the sclerotic German ‘social-market’ model.

*That it was German legislators who had to be convinced stemmed also from the climate they themselves had created, as to the unworthiness of Greeks for rescue. Taken up by the tabloid press it was unrelenting, and as so often, had an objective basis that these same legislators and media had themselves promoted, that is the standstill, and often regression in German workers pay and conditions over the previous years. This, it hardly needs saying is how nationalism works.


Underneath the matter of ‘political will’, or rather the way in which money was being politically determined, was the calculation as to what rate Greece would have to pay for the bail-out money –above what German state bonds would cost, but below what the market would demand – and the degree and targets of the pain required. What the media narrative of this political price negotiation leaves out, is the unprecedentedly low rate of interest at which money was available to financial institutions in the Western capitalist world. The German government of Angela Merkel may have objected to the USA’s latest round of Quantitive Easing, and to believe in the balanced budget, but not to the general Rate of Interest. From this point of view, despite the media-bond market barrage of ‘just wait for Spain, that’ll make what’s come before peanuts’, European sovereign debt bonds have been a good deal for the rentier in a period of a politically maintained excess of un-devalorised capital. Thus in the July-September 2010 period there were news reports saying that () “Just two months ago, Europe’s sovereign debt problem seemed grave enough to imperil the global economic recovery. Now, at least, [6]some investors bare treating it as the crisis that wasn’t. “ This followed an auction of Spanish 15-year bonds that went off without a hitch, with Jacob Funk Kirkegaard, fellow of the Peterson Institute for International Economics in Washington, saying, “Europe has had a pretty good crisis.” A month later, another financial wiseguy[7] was quoted: “ you think it is very long odda that a major European country is going to default, then you are getting terrific yields in an era of very low interest rates.” Early in September the IMF declared that the risk of default by heavily indebted countries like Greece, Ireland, and Portugal had been significantly over estimated. In late October[8]  there is a recognition that in a period of excess capital, “As the search fro yield…becomes indiscriminate, there has been a growing case for vacuuming up the euro-zone’s debt-battered periphery of Greece, Ireland, Portugal and Spain,” and pointed to the 6%points Greece is paying over what US and Germany are paying on 10 year bond yields.

Of course there are agendas in what people and institutions say. In the case of the IMF, its mission –when regaining a role in times of ‘crisis’ –is always to put the interests of the creditor first. To make sure they get their money back with the appropriate interest. This they did in Latin America and East Asia. And this, Willem Buiten argued was what was being set up for Greece with the finally agreed bail-out, a lost decade in the interests of all those foreign, mostly other European creditors. The question he raised at the time being what happens while existent creditors are paid off in full? Who will buy new bonds?



When it comes to moaning and bitching, there’s nothing to match the representative voices of capital, they want their cake each and every way. While ‘the market’ demands the redistribution of wealth in the name of public sector cuts in which the cost of reproduction of labour is born by labour, and its scope shrunk, it simultaneously complains of the impact of recession on itself. And wants what to deal with this? More personal debt? State aid strictly aimed at holding up house prices? At the level of professional opinionists and some political parties there are differences as to the speed/intensity of ‘austerity’. Neoliberals and neo-Keynesians argue the toss. What is however inescapably obvious to all sides is that austerity policies have become ‘competitive austerities’, and that in terms of cutting the budget deficit, the policies are self-defeating. The shrinking of ‘economic activity’ they cause will reduce tax revenue. Back in May, at the time of the bail-out, the Financial Times’s guru, Martin Wolff, displaced the contradictions of capital on to what he called erroneous ‘conventional wisdom’, that “giving the markets what we think they may want in future – even though they show little sign of insisting on it now – should be the ruling idea of policy.” Who is this ‘we’? There are obviously some conflicting capitalist demands and claims, but in the case of sovereign debt, the contradiction on tax revenue comes from its general contradictory needs. Wolff thought the final bail-out deal was less unrealistic than previously as to the scale of recession, but that it would be hard to believe that “Greece can avoid a debt restructuring.”   That was when the deal was struck, and gives force to the weakness of Papendreou’s ‘Americans’ in their negotiations, or a misplaced faith in their own notion of modernity. It is an untenable deal.


January 2011



[1] The Financial Times, September 2000

[2] You were swinging on trees when we had the lories of classical Athens as one PASOK minister liked to say.

[3] October 1st 2010

[4] 29th Novemeber 2010

[5] New York Times 26th February 2010

[6] New York Times 18th July 2010

[7] Zach Pandl economist at Nomura Bank, New York Times 26th August 2010

[8] New York Times 21st October 2010