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I cannot begin to express how much I'm enjoying watching the elections play out in Greece this year. I want to spend all day with a big old tub of popcorn, refreshing the Greek news tabs in my browser over and over again. This is the best show I've watched in years.

For those of you who don't follow overseas news:

Conservatives all over the world bleat about how awful and out of control Greek spending is, but truth be told, their government spending as a ratio of GDP is perfectly in line with the rest of the world's. The Greek economy is finally completely melting down because of corruption. Ever since Greece dropped the drachma and took up the euro, Deutsche Bank (and others, but mostly Deutsche Bank) has been running a sweet scam with elected Greek officials of both of the (previously) top two parties: Greek politicians borrow money from DB on behalf of the country, money that's supposed to pay for things that make the economy more productive like schools and roads and airports and docks and courts -- and while they do let some of that borrowed money go to those things, they steal a lot of it.

Nobody knows yet how much. Greek reporters over the years kept documenting huge swaths of big graft, giant overseas bank accounts and whole private islands and priceless archaeological treasures spirited away into private collections, all paid for with money corruptly lent by German banks. But a recent anti-corruption audit of what wasn't even thought to be one of the more corrupt agencies has turned up estimates that are making even Greek journalists' eyes pop, 30%, maybe as much as 50%, stolen. And the thing about that is that if you steal half the productive capital in a country, it doesn't reduce economic output by 50%. It reduces it by a lot more than that, because people who see with their own eyes that nobody is getting rich by working, that the only way to get rich is to be a politician or a politician's friend and steal, only a few noble fools actually still do any hard work. After a couple of decades of that, even after the lenders have (in desperation to get something back) offered to write off 71% of the face value of the loans, Greece can't even pay back the remaining 29%.

And so the usual international agencies, backed hard by the German and (outgoing) French governments, got the two corrupt parties to agree to a bipartisan deal: (a) None of the people who stole that money are to be inconvenienced in any way, because they're "job creators." (b) Their corrupt bankster partners must get back as much as possible, by disassembling every remaining productive asset in Greece and shipping it to Germany, and by closing down every public service from the hospitals to the schools to the police, so that the tax money that would normally pay for those things can go to the German banksters. And finally (c) since nobody even denies, any more, that this will destroy the Greek economy, the Greeks will pay those debts for all eternity. Presumably even if they do work hard enough to pay off those loans, decades from now, all that will happen is that new corruptocrats, new kleptocrats, will be installed by the banksters to take out new loans and steal those.

tl;dr version: French, German, and Greek bipartisan elites have voted unanimously to turn Greece into the Haiti of Europe.

Now, here's where it gets interesting:

Greece has a massively-multiparty democracy system. For the benefit of my American readers, let me somewhat dismissively and only slightly unfairly give the four big winners in the current round of elections new names that will make sense to Americans: the fascists, the Republicans, the Democrats, and the socialists (that would be Golden Dawn, New Democracy, PASOK, and and Syriza). This posed an interesting challenge to the Greek voters, in that only the facists and the socialists were anti-kleptocracy, anti-austerity, and anti-bailout. In the end, a lot of Democratic (PASOK) voters defected to the socialists (Syriza) and just enough Republican (New Democracy) voters defected to the fascists (Golden Dawn) that the two anti-austerity parties won a collective majority. So what's the problem? They hate each other even more than they hate the austerity and the bailouts; there is no plausible way that they can form a joint government, not even a temporary one. So the President of Greece has been locked all week in non-stop talks with the leaders of the four big parties, and a bunch of smaller parties, trying to find some compromise that will form a majority government. And they just can't do it.

The two pro-austerity, pro-bailout kleptocratic centrist parties are willing to form a coalition (since their commitment to looting the public treasury far exceeds their commitment to their own political principles), but can't do it without persuading one of the two main anti-austerity parties to go along. And it's just not working, they're having none of it. The two anti-austerity parties tried, earlier in the week, to form an anti-austerity coalition, and couldn't come up with any plausible way to get over their mutual loathing for each other, no way to form a government that's (say) 3/5ths socialist and 2/5ths fascist. So, constitutionally, they're going to have to hold new elections and hope that enough voters change their votes to give some plausible coalition a majority. This may or may not work, either.

But either way, the anti-austerity, anti-bailout, anti-kleptocrat voters win because they've already succeeded in the only thing they needed, in the short run: if a governing coalition isn't in place by Tuesday, if there isn't a government in place that still agrees to the bailout and austerity terms imposed on them by the German and (outgoing) French governments by the end of the day on Tuesday? The Greek government just flat-out defaults on its loans to Deutsche Bank, and Deutsche Bank is in even more trouble than the Greeks are. As the old saying goes, if you owe your bank a hundred dollars, and you can't pay, you're in a lot of trouble. But if you owe your bank a hundred million dollars, and you can't pay, your bank is in a lot of trouble.

Pass the popcorn!


( 19 comments — Leave a comment )
May. 13th, 2012 04:25 pm (UTC)
While I applaud the efforts of the Greek people to vote in an anti-austerity government and keep their economy running, I have to wonder: what will the failure of Deutche Bank do to the rest of the Eurozone economy and the world economy?

It seems that if Greece defaults, as they're almost certain to do, the whole eurozone economy, and possibly the entire world, enters yet another economic freefall, and everybody loses.
May. 13th, 2012 04:39 pm (UTC)
It's important to note that it wasn't just fraud on the governmental/bureaucracy side - there was massive non-payment of taxes, to the point where paying your taxes was almost considered odd.

You can't spent a decent percentage of your GDP on services if you aren't taking it off people in the first place!
May. 13th, 2012 04:45 pm (UTC)
Why would people pay their taxes if half the money they pay is just going to get stolen? Better to join the thieves.
May. 13th, 2012 05:30 pm (UTC)
I don't have time to make a real comment, so I'm just pointing you to this article that I hope you (and other readers) will find interesting, if you haven't already seen it: Beware of Greeks Bearing Bonds

It's at least a year and a half old, but it tells a great deal about the problems that are plaguing Greece today, that are precipitating the issues that Brad is only touching on.
May. 13th, 2012 05:33 pm (UTC)
Yeah, I read that when it first appeared. My favourite bit is this:
As he finishes his story the finance minister stresses that this isn’t a simple matter of the government lying about its expenditures. “This wasn’t all due to misreporting,” he says. “In 2009, tax collection disintegrated, because it was an election year.”


He smiles.

“The first thing a government does in an election year is to pull the tax collectors off the streets.”
May. 13th, 2012 05:34 pm (UTC)
I figured you'd've prolly seen it. Hell, I probably got it from you. I hope others are as fascinated by it as I was.
May. 13th, 2012 05:36 pm (UTC)
I did read it and boggle. It basically made it clear that Greece is _not_ a modern democracy in the same way that most of Western Europe is.
May. 14th, 2012 09:10 am (UTC)
My housemate just mentioned (ie unverified) that there were more Porsche Cayennes sold in Greece than there are people in the top tax bracket.
May. 13th, 2012 07:35 pm (UTC)
I'm assuming you've already seen/heard this, but This American Life did a show on the Greek financial omfgwtf mess that's worth hearing if you're unfamiliar.
May. 13th, 2012 08:04 pm (UTC)
Planet Money's been covering the hell out of it, too. I adore Planet Money.
May. 14th, 2012 02:30 am (UTC)
I'm curious, within this context, what do you make of the vote in Germany today which went against the Christians Democrats (Merkel's party)?
May. 14th, 2012 03:10 am (UTC)
You're quick, I only saw that myself an hour or so ago. I put in the same context as Hollande's defeat of Sarkozy: Europeans are turning against the austerians, even in Germany. Merkel, and the shareholders of the major European banks, have to be looking over their shoulders. Their nightmare is that fiscal austerity will be repudiated, that the indignados and the Occupiers and so forth will win, and the economy will crash. But their worst nightmare would be if the voters repudiate austerity and the economy actually recovers, because then their entire political philosophy will be repudiated for decades.
May. 14th, 2012 05:56 am (UTC)
Didn't a couple of countries default straightaway, and are doing fine? Iceland and Argentina?
May. 14th, 2012 03:19 pm (UTC)
Not really...
...Iceland did okay but that's because their basic economy, when you take away the crazy bank stuff they were doing for a while, is very export oriented and the profits from it are quite good compared to the size of the county (320K people, 120K in the capital and 81K in the next four most populous towns). So even if their currency's devalued severely, they still get along okay. They were shrewd to realize this. These _are_ the descendants of rebels whose first act on landing was to swear "we will never have a king".

Argentina on the other hand is only "fine" in the sense that yes, they defaulted and foreign armies did not come in and occupy their main industrial area like the French with the Ruhr valley. Seriously, because their wealth/population ratio is not nearly as favourable as Iceland, their suffering has been _immense_. Most of their middle class has been reduced to peonage and social mobility upwards is pretty much at an end. Their supposedly "populist" political leaders have done very little to address this. The devaluation they endured in 2001 basically gutted the country. They had public services comparable to Canada or the USA's poorer parts and one of the most educated populations in South America. Now, if you get sick and you're not rich, you suffer and die. Your water is somewhat to substantially poisonous. The police are at best worthless leeches at worst armed brigands. Most people are in the position of "will work for food" and consequently real wages are in the basement and have stayed there.

Nothing has really improved much in a decade since either. I've met a couple of people with Argentinian relatives in my travels and asked them "I heard in 2001 the country was wrecked by the currency devaluation, and for most people, things are still pretty bad is this so?" and they said "yes".
If you see any figures to the contrary remember according to the figures, the US economy the last two years has been out of recession.

Greece isn't identical but it looks to me like it'll end up substantially like Argentina. While they do have more wealth (particularly in shipping) per capita than Argentina, it sounds like their rich folk were always running the show with an even tighter grip than the Argentinian notables.
May. 14th, 2012 04:21 pm (UTC)
You know what? I started to reply to this, and it got long enough to deserve a follow-up post of its own. Give me a couple of minutes or so.
May. 14th, 2012 04:01 am (UTC)
I am not surprised to find Deutsche Bank behind most of this? Turns out they're quite the mafioso when nobody is looking?
May. 16th, 2012 05:25 pm (UTC)
I wonder how likely is that a Greek default would result in other governments trying to overthrow the government, as in, uh, Haiti.
May. 16th, 2012 10:37 pm (UTC)
What nobody seems to be mentioning is that this election was doomed. There are *five* anti-austerity parties, not just two, and they have 151 seats out of 300 between them. (Greece still has Communists, and both of the pro-austerity parties had an internal schism where MPs refused to vote for austerity and were expelled.)

This means that there were three ways this could go: the anti-austerians could cave, and betray the program on which they were elected; the austerity parties could lose massive amounts of MPs suddenly going over against austerity; or the anti-austerity parties could form a coalition which every single one of them would put up with.

Now in addition to the problems between the parties at the best of times, there is a tactical question: how hardball are you to Merkel?
Jun. 9th, 2012 06:59 pm (UTC)
Debt and Usury, The Greek Example
User peristaltor referenced to your post from Debt and Usury, The Greek Example saying: [...] elites might have exercised this self-interested attitude. We hear from about this corruption [...]
( 19 comments — Leave a comment )