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«Sell your islands, you bankrupt Greeks»

20 POPULAR FALLACIES CONCERNING THE DEBT CRISIS

Headline in German newspaper, BILD, 27.10.2010

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What is the crisis? False descriptions of the situation 31. «Greecehastoomuchdebts» 32. «ThefinancialmarketsarescaredthatGreecewillgobankrupt» 4

How did the crisis come about? Inaccurate research into the causes 53. «TheGreeksarelazy» 54. «TheGreeksareconstantlyonholiday» 65. «WearepayingluxurypensionstotheGreeks»9 66. «TheGreekshavebeenfeatheringtheirownnestwell» 77. «TheGreekshavebeenlivingabovetheirmeans» 88. «TheGreekstateisover-inflated» 99. «Greeceisnotcompetitive» 910. «TheGreeksarecorrupt» 10

The way forward? False solutions 1211. «TheGreeksshouldstartsavingbeforewehelpthemagain» 1212. «SellyourislandsyoubankruptGreeks!»29 1313. «Thecreditorsshouldfootthebill!» 1414. «GreeceshouldgetoutoftheEurozone» 1515. «Greecehastowinbackthetrustofthefinancialmarkets» 16

The role of the Germans: False friends 1716. «WewanttobefriendswiththeGreeks»35 1717. «Youshouldhelpyourfriends–butnotbailthemout» 1718. «NoGermantaxeurosforGreece!»37 1819. «WearethepaymastersofEurope»40 19

One last comment 2020. «GreececheateditswayintotheEurozone–

‹Wearenowpayingthepriceforourindulgence›»42 20

TABLE OF CONTENTS

It’s that time again! Greece needs more loans and the governments in Europe are arguing about whether it’s really necessary and who should foot the bill. There is widespread opinion in Germany that Greece itself is to blame for the problems it now finds itself in. It first of all cheated its way into the Eurozone, then the government spent too much and the governed worked too little, many believe. Latently nationalistic patters of interpretation of this kind have been nourished by German politicians and the media, who have no end of proposals for how to «solve» the crisis. For example, the Greeks should save more, work more and sell their public property – and if all of these measures do not help, then Greece will just have to leave the Eurozone or declare itself bankrupt. The stupid thing is, neither are the causes of the crisis that have been named actually correct, nor will the proposed ways out of the crisis achieve their goal.

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1. «GREECE HAS TOO MUCH DEBTS»

The facts:Becauseofthefinancialcrisis,Greece’snationaldebtgrewbetween2007andtheendof2010from115%to143%ofeconomicperformance(GrossDomesticProduct,GDP).Thisso-calleddebtratiowillprobablyclimbabovethe150%markin2011.Bywayofcompari-son:Germany’sdebtratioisabout85%.Context:ThehighdebtratioalonedoesnotexplainGreece’sproblems.«Thereisnoadequatedebtratio,neitherintheorynorinpractice.»1It-alyhasadebtratioof120%,Japanhasevenreached200%ofitsGDP.Neitheroftheseisseentobe«broke»,whileGreeceis.Why?BecausethefinancialmarketsarespeculatingonGreecebecomingbankrupt.Thishasdriventheinterestratefornewdebtstosuchhighlevels,thatAthenscannotborrowanynewmoney2.Bycomparison:Athensmustpay25%interestontwoyeargovernmentbonds,Italyonly3%andJapanamere0.2%(asperendofMay2011).Theproblemthereforelieswiththeinterestratethathasbeenforcedupwardsbyfinancemarketspeculations.TheMacroeconomicPolicyInstitute (IMK)hascalculatedthat, if theaveragerateof interest forGreekstateloanswouldfallto3%,thenthecountry’sdebtratiowouldfallto110%ofGDPbytheyear2015.3However,iftheinterestratere-mainsashighasitis,Athenswillnotbeabletoborrowanymoneyonthemarkets.Whetherornotitisthen«broke»dependsonthewilling-nessoftheotherEuro-statestohelpitoutbyprovidingloans.There-fore,thequestionof«bankruptcy»isaquestionofpoliticaldecisionsbygovernments.

WHAT IS THE CRISIS?

FALSE DESCRIPTIONS OF THE SITUATION

1  BHF-Bank economic service, 4.6.2011 2  One simplified example to demonstrate how this works: Greece borrows a loan of 1 million euros at a fixed rate of interest of 5 % p.a. (=50,000 euros). The bond is then traded on the stock exchange and crashes. Its price falls from 1 million euros to 500,000 euros. The interest rate of 5 % (=50.000 euros) however remains unchanged. Ergo, the bond now has a yield for investment for the lender of 10 % (50,000 euros from 500,000 euros). If Athens now wants to take out a new loan, the interest rate that it has to pay is based on the yield for investment of the old loan. If it wants to borrow new money, this means that Greece must offer the lenders an interest rate of 10 %. 3  IMK: Debt cuts bring more disadvantages than advantages, May 2010.

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2. «THE FINANCIAL MARKETS ARE SCARED

THAT GREECE WILL GO BANKRUPT»

The facts:Greekloanscrashedonthefinancialmarkets.Inversely,theyieldfortheseloans(seefootnote2)increased.Context:Thefinancialmarketsare«scared»ofnothing.Theyarenotahumanbeingwithfeelingsandfears.Andtheyarealsonotanobjec-tiveentitythatanalysesthefinancialsituationofacountryinafactualmanner.Thefinancialmarketisnothingmorethantheentiretyoftheinvestorswhotrytoearnasmuchmoneyaspossiblewithfinancialin-vestments.«AnyonewhoisreallyscaredthatGreecewillgobankruptisnotinvestinginGreekgovernmentsecurities.EveryoneelsehopesthatHellaswillbesavedandtheywillbeabletorakeinhugeinterestprofits.»4

4  Berliner Zeitung newspaper 27.4.2010

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3. «THE GREEKS ARE LAZY»

The facts:TheGreeksworkagreatdeal.Theactualweeklyworkinghours–minuslunchbreaks–beforethecrisiswere44.3hoursaccord-ingtoEurostat.InGermany,thisfigurewas41hoursandtheEUaver-agewas41.7hours.5TheFrenchbankNatixisarrivedattotalaverageworkinghoursperannuminGermanyof1,390hours,whiletheGreeksworkanaverageof2,119hoursperannum.6

Context:«Germanyalsohashighdebts–butwecanpaythemoff,becausewegetupprettyearlyandworkallday.»7Apartfromthefactthat theGreeksworka lotandapart fromthe fact that leisure timeisnotnecessarilysomethingbadandworkisnotnecessarilysome-thinggood–itisfundamentallywrongtoseekthecausesofacrisisinacountrybycitingthelackofhardworkamongitspopulation.TheGreeksdonothavetheoptionofjustworkinglongerhourstoendthecrisis.Theoppositeistrue–becauseofthecrisis,manyGreekshavebeen forced tonotworkatall. Theofficialunemployment ratewas16.5%inApril2011,andathirdofyoungpeoplewerewithoutapaidjobattheendof2010.Thenumberofcivilservantshasbeenreducedby83,000inthelastmonths.Andsoitisclear,itisnot«laziness»thatcreates crises,but crisesdestroy jobs. Thismechanismworked theotherwayaroundinGermany:Theupswingreducedtheunemploy-mentrateto6,0%inApril2011.

HOW DID THE CRISIS COME ABOUT?

INACCURATE RESEARCH INTO THE CAUSES

5  Handelsblatt newspaper, 2.5.2005 6  Natixis, Flash Economie, 30.5.2011 7  BILD newspaper 5.3.2010

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4. «THE GREEKS ARE CONSTANTLY ON HOLIDAY»

The facts:AccordingtotheEUagencyEurofound,Greekemployeeshavearightto23daysholidayleaveonaverageperyear.TheGermansareintheluckypositionofbeingabletoenjoy30daysholidayleave–afigurethatisrightatthetopinEurope.AndtheGermans«arestillrightupthereevenifyouincludethenumberofpublicholidaystheyhave.»8Context:«Wecannothaveonecurrency,whensomehaveagreatdealofholidayleaveandothersverylittle»,saidGermanChancellorAngelaMerkelinthemiddleofMay2011.Thisisanotherversionofthe«lazi-ness»accusation.Itisanotherattempttoblamethecrisisontheindi-vidualsupposedlyfalseconductoftheGreeks.ConverselytheChan-cellorpraisesherownpeople,statingthat,thefactthat«we»areinagoodeconomicpositionisbecause«we»aresohard-working.

5. «WE ARE PAYING LUXURY PENSIONS

TO THE GREEKS»9

The facts:AccordingtotheOECD,meninGermanyretireonaverageat61.5yearsofage,whileinGreeceitis61.9.Andwecannotinanysensetalkabout«luxurypensions»:theaveragepensioninGreeceisabout55%oftheEurozoneaverage,thatamountedto617eurosin2007.Two-thirdsofGreekpensionershadtosurviveonlessthan600eurospermonth.Context:«Itisimportantthat,incountrieslikeGreece,SpainandPor-tugal, people shouldnotbeable to retire earlier than inGermany»,ChancellorMerkelsaidinthemiddleofMay2011.AndyettheBILDnewspaper and the Chancellor must be aware of the real situationfacingGreekpensioners.However,theyobviouslydonotcareaboutfacts.Accordingtotheirwayofthinking,everyyearofretirementandeveryeuroforpensionsisapureluxuryinacountrythatisinthemid-dleofacrisis.

8  Spiegel-Online, 18.5.2011 9  BILD newspaper, 27.4.2010

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6. «THE GREEKS HAVE BEEN FEATHERING

THEIR OWN NEST WELL»

The facts:ThewagelevelinGreeceisonly73%oftheEurozoneaver-age.«AccordingtoinformationprovidedbytheGermanInstituteforLabour,whichiscloselyassociatedwiththetradeunions,aquarterofallGreekemployeesearnlessthan750eurospermonth.»10Teachers,forexample,after15yearsinservice,earnabout40%lessthaninGer-many11–andthatwasbeforethecrisis.AccordingtoEurostat,beforethecrisisafifthofallGreekswerethreatenedbypovertyand25%ofGreekslivedinapartmentsthatweretoosmallforthenumberofpeo-plelivinginthem(inGermany:7%).Context:Here,whatweare lookingat isacrisis«explanation» thataddstheaccusationof«gluttony»totheoneoflaziness.Aswasthecasewithallegationsof«laziness»and«luxurypensions»,anattemptis being made to apply seemingly plausible common sense to theeconomyasawhole.Theimplicationis,wejusthavetoworkhardandsavehardandeverythingwillbefine.Bothsmallandlargecrisescanbeexplainedinthisway.«‹Weshouldhavejustaskedanyhousewifewhohastobudgetherhousehold›,Merkeladvised.‹Shewouldhavegivenussomewordsofwisdom:Onecannotliveaboveone’smeansforever.›Thatiswhatliesattheheartoftheinternationalcrisis.»12Andyetthedifferencebetweenplatitudesandtherealityisclearenough.«Workinghard»willnotbringaboutaboom,rather theconverse istrue–aboombringsaboutnewjobs.«Frugality»canleadtoruin(seeGreece)andnewdebts,bycomparison,canhelponetogetbyindif-ficulttimes(asinGermanyduringthemostrecentcrisis).

10  Frankfurter Rundschau newspaper, 25.7.2010 11  Ifo service 5/2007 12  Focus-online, 1.12.2008

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7. «THE GREEKS HAVE BEEN LIVING

ABOVE THEIR MEANS»

The facts: For years, thegovernment inAthenshasbeenspendingmorethanithasbeenbringingin.Between2000and2007,itsbudgetdeficitlaybetweenfourandsevenpercentofGDP.Context:Almosteverygovernment«livesabove itsmeans», that is,spendsmorethanitbringsin.Assuch,thebudgetdeficitoftheGer-man government between 2000 and 2007 was between 1.6% and4.0%ofeconomicperformance.TheproblemwithGreecewasnotsomuchthenewdebt,butthefactthatthefinancialmarketsstartedtospeculateagainstAthensatsomepoint,pushingtheinterestratesfornewloanstoanunaffordablelevelintheprocess(seeabove).Thiscanalsohappentoacountrywithoutalargedeficit,whichisshownintheexampleofIreland,whichdidnothavedeficitsbutmostlysurplusesinitsbudgetsofthepastdecade–andyetitstillfellvictimtothefinancialmarketsandhadtoberescuedbytheEUandtheIMFtothetuneof85billioneuros.«Germanyalsohashighdebts,butweareabletopaythemoff…be-causewealwayssavepartofourincomeforarainyday»,theBILDnewspaperwrote.13TheBILDismistakenifitwantstoapplythisargu-menttothelevelofthestate.TheGermangovernmenthasalsorunupanetdebtsituationandhasnot«saved»inthepast.Ifwelookattheeconomyasawhole,however,thereissometruthinit:TheGer-mannationaldebtofaround2,000billioneurosisbalancedbytotalassetsofaround7,400billioneuros.14However,thesearenot«our»assets,butaremainlyconcentratedinthehandsofafewrichpeople.Thiswouldonlybeofsomeusetothestate,ifithadaccesstothesefunds–thatis,ifittaxedthem.However,thisisnotgoingtohappen,aspropertytaxwasabolishedin1997.

13  BILD newspaper, 5.3.2010 14  DIW weekly report, 50/2010

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8. «THE GREEK STATE IS OVER-INFLATED»

The facts: Greek public spending in relation to the gross domesticproduct,theso-calledpublicspending-to-GDPratio,was48%in2008,whilethisfigurewasonly44%inGermany.Context:Beforethecrisis,thesituationwasverydifferent.TheGreekpublicspending-to-GDPratiosankbetween2000and2006from47%to43%andremainedduringthisperiodbelowthelowGermanrate15.Thisdidnotchangeuntil theeconomyslumpedduringthefinancialcrisis.Andso, itwastherecessionthatwastoblameforthe«over-inflated»natureofGreekpublicspending,andnotHellenicextrava-gance.Andbesidesthis,Swedenhashadapublicspending-to-GDPratioofbetween51%and55%fortenyearsnowandisnotbankrupt.

9. «GREECE IS NOT COMPETITIVE»

The facts:ActuallyGreece’sexportsroseby200%between1990and2008.Sothecountrywassuccessfulontheworldmarket.Ontheoth-erhand,Greecehadahightradedeficit foryears, reaching14%ofGDPin2009.ThismeansthatGreece importsmorethan itexports.Themainreasongivenforthiswashighwageincreases,whichiswhytheGreekwagelevelshouldfallnow,inordertorenderthecountrycompetitiveagain.Context:Beingcompetitiveisnotafeatureofanationaleconomy–it’snothingthatit«is».Thistermmerelydescribesaratio.TheunitlabourcostsinGreeceindeeddidincreasebetween2000and2010byalmost40%16. This was only a problem, however, because the unit labourcostsinothercountriesincreasedtoalesserextentandthebusiness-esinthesecountriesthereforehadacostadvantageontheworldmar-ket.TheEuropeanexpertatwagesavingswasGermany,wheretheunitlabourcostsonlyroseby5%thankstolowerincreasesachievedincollectivebargaining.TheresultwashighexportsurplusesforGer-manyandimportsurplusesforcountrieslikeGreece,Portugal,Ireland

15  Michael Schlecht: The Euro is burning. Position paper 21.5.2010 16  Commerzbank Research Note: Euro periphery facing a wage revolution? 1.4.2011

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orSpain.TheGermansuccesswasthereforemerelytheinverseimageofthefailureintheEuroperiphery,becauseGermanywouldnothavegainedsurpluses if ithadnotbeen for thedeficits inGreece,SpainandPortugal.Andso,Germany’sexportoffensiveallowedittofillitscoffersattheexpenseofitsneighbours.Germanyhas«healthycom-panieswhoseproductsare indemandaround theglobe», theBILDnewspapertriumphed17.Themouthpieceofthe«manonthestreet»shouldnotforget,despiteitselation,thatGermany’sexportsuccesseswerefinancedbythesacrificesoftheworkers.Aswagessankoronlyincreased slightly, private consumption within Germany has hardlymovedaninchinthelasttenyears18.Andonemorething:TheWorldEconomicForumdefinedcompetitiveness«asacombinationofinsti-tutions,policiesandfactorsthatdeterminetheproductivitylevelofacountry…Theproductivitylevelalsodeterminesthereturnsoninvest-ment»19.That iswhatall statesmeasure themselvesby:Wherecanthebestreturnsoninvestmentbegained?Thequestionis,however,whetherthisisanappropriateunitofmeasurementforenablingpeo-pleworldwideagoodlife.

10. «THE GREEKS ARE CORRUPT»

The facts:Itistruethattaxfraudandtaxavoidancearemorepreva-lent inGreecethan inothercountriesandthat«corruption isevery-where»20.Theshadoweconomyisestimatedtobeabout25%oftheeconomy(bycomparison:inGermanythisfigureisapprox.15%21)andtotaltaxfraudamountsto20billioneurosperyear.22Context: Tax fraud and corruption really are a great problem forGreece.Threethingsmustbesaidinthisrespect:taxfraudisakindofredistributionofwealthfromthestatetotheprivatesector.Therefore,themoneyisnot«gone»assuch.Andso,thisargumentdoesnothelpustoexplaintheGreekcrisis.Secondly,«theformerPrimeMinisterKostasKaramanliswasresponsiblefortheGreekmess.HewasacloseallyofChancellorMerkelintheEU.WiththehelpofthewillingGreek,

17  BILD newspaper, 5.3.2011 18  See in more detail in: Michael Schlecht: The Euro is burning. Position paper 21.5.2010 19  WEF Competitiveness Report 2010 20  Spiegel-online, 10.3.2010 21  IAW press release, 26.1.2010 22  The Standard, 11.2.2010

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Merkelmanagedonvariousoccasions topenetrate the frontof thesouthernnations in importantEUdecisions.Karamanliswasalwaystheretomakedeals.Inreturn,theGreekdidnothavetoworryaboutany over-critical questions concerning his sloppy financial policies.›This quote comes from the former Editor-in-Chief of German eco-nomicmagazine, theHandelsblatt.»23 Thirdly, largeGermancompa-niesalsoprofitedfromthebackhandercultureintheGreekeconomy.«Since2008,severallegaldisputeshavedocumentedthattheGermancompaniesSiemens,Ferrostaal-MANandDeutscheBahnAGboughtGreekpoliticiansingreatstyleand‹financed›politicaldecisionsintheirfavour.Inthisway,theSiemensGroupalone‹invested›almost15mil-lioneurosperyearinGreeceoveraperiodoftenyearsfromthemiddleofthe1990sinordertowinoverandinfluencepoliticiansfromthetwoimportantparties,NeaDimokratiaandPASOK.»24Andfourthly:Meas-uredbythecorruption-indexofTransparencyInternationalGreeceisindeedmuchmorecorruptthatGermany.Butatthesametime,thereismuchlesscorruptioninGreecethanincountrieslikeIndonesiaorChina,whichareeconomicallyverysuccessful.

23  Michael Schlecht: The Euro is burning. Position paper 21.5.2010 24  Greece, the IMF and EU dictate and German responsibility, position paper issued by the scientific advisory board of Attac Germany.

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11. «THE GREEKS SHOULD START SAVING

BEFORE WE HELP THEM AGAIN»

The facts:In2010,Greece’sbudgetdeficitwasabout10.5%ofeco-nomic performance. Athens promised to bring this deficit down to7.5%in2011.Thiswillunlikelysucceed,andtheconsequenceisthattheinterestrateforloansonthecapitalmarketwillnotsink,Greecewillremaincutofffromthecapitalmarketandunabletoborrownewfundsasplannedin2012.ThatiswhynewstatesupportisbeingtakenintoconsiderationtohelpAthensavoidbeingilliquid.Context:ItisnotrighttodeducethatGreecedoesnotsave,justbe-causeofthehighdeficitin2011.Greeceisnotonlysaving,butisdoingsoatanextremelevel.Becauseoftheausteritymeasures,theGreekshavelostalmost20%oftheirincomeonaveragesincethebeginningof201025.«Nootherindustrialnationhasreduceditsstructuraldeficitbysomuchwithinoneyearinthelast25years»,ratingagencyFitchhasevenadmitted26.AndtheBerenbergBankseesAthens’programmeofausteritymeasuresas«probablythehardestfiscaladjustmentevertohavebeenmadebyaWesterncountry».27

Thefactthatthedeficitwilllikelybehigherthanplannedin2011doesnothavetodowithextravaganceinAthens.Spendingisnottoohigh–income is too low. This, in turn, has todowith theharsh austeritymeasures.Asthestateissaving,andreducingwagesandpensions,economicperformance is suffering.Privateconsumption, for exam-ple,was18%lowerinMarch2011thanoneyearbeforeand,inthesameperiod,65,000companieswentbankrupt.Areductioningrossnationalproductofalmost4%isexpectedfortheyearasawhole.Theresultofthisisthatlesstaxisbeingpaid.BetweenJanuaryandApril2011,revenuefromtaxeswas7%belowthepreviousyear’sfigureforthesameperiod.Allinall,theGreektaxauthoritieshavetakenin1.2billioneuroslessthanexpected.Andso,itisnotexcessivespending

THE WAY FORWARD? FALSE SOLUTIONS

25  FAZ newspaper, 25.5.2011 26  Financial Times Germany, 26.5.2011 27  Berenberg Bank, Macro Views, 20.5.2011

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thatistheprobleminAthens,buttheausteritymeasuresthemselves.«WedoubtthattheGreekeconomycanwithstandanaggressiveandprolongedfiscaladjustment.»28

12. «SELL YOUR ISLANDS

YOU BANKRUPT GREEKS!»29

The facts:TheGreekstateownspropertywithanestimatedvalueof270to300billioneuros.Thesearemainlyrealestateproperties,alsoontheislands.Context:ThegovernmentinAthensisnotjustsittingonitsfortune.Ithasalreadystartedoffabroadprogrammeofprivatisation,withtel-ecommunicationscompanies,electricitysuppliers,portsanda largequantityofrealestatepropertiesonoffer.Bydoingthis,Athensaimstobringin50billioneurosbytheyear2015.However,therearemanysnagsinthisprogramme.AsGreeceisbeingforcedtosell,itwillonlyreceivebadpricesforitsproperty.Thebuyers–internationalcorpora-tions–willtrytoexploittheemergencysituationinGreece.Secondly,ifthestatesellsprofitablecompanies,thentheincomefromthesewillbegone.Theresult:«TheexperiencegainedbytheInternationalMon-etary Fund (IMF) in countless stabilisation programmes has shownthat(privatisation)isanextremelyriskystrategy…Ittakesaverylongtimetomakesurethatsuchproceduresarecarriedoutinanorderlyfashion,andtimeissomethingthatGreecedoesnothaveatpresent.Privatisationsarethereforenotverywellsuitedasemergencymeas-ures.»30

28  Societé Generale, The Economic News, 5.4.2011 29  BILD newspaper, 27.10.2010 30  VP Bank, Investment News, 1.6.2011

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13. «THE CREDITORS SHOULD FOOT THE BILL!»

The facts:TheGreekstatehasaround350billioneurosindebt.Thecreditorsare:Greekbanks(23%),otherGreekcreditors(20%),gov-ernmentsintheEurozone(12%),theEuropeanCentralBank(18%),the InternationalMonetaryFund(4%),other foreigncreditors/banks(23%).31ThemoneylenderscouldwaivesomeoftheloansissuedinordertosaveGreece.Context:Thatsoundsfair,becauseifthishappenedthefinancialinves-torswouldthenplayaroleinreducingGreece’sdebt.Atthesametime,itinvolvesseriousrisks.Firstofall,itwouldleadtosignificantlossesforthebanks.«Ifdebtswerecutby50percentinGreece,thiswouldmeanaburdenof25billioneurosfortheGermanbanksalone»(IMK:debtcutsbringmoredisadvantagesthanadvantages,May2010).Sec-ondly,thiswouldbetheruinofthemaincreditors,theGreekbanks.Thirdly,iftheEurozoneallowsacountrytogobankruptinitsmidst,otherstateswouldalso losetheircreditstanding.«TheworryaboutGreececouldflowover tootherperipherystatesand lead toasell-outoftheirbonds»(DZBank,Interestmarkets,9.5.2011).TheproblemcouldthenspreadtostateslikeSpain,anditseconomyismorethantwicethesizeoftheeconomiesofGreece,PortugalandIrelandputto-gether32.ThiswouldcertainlybetheendoftheEurozone,whichisthebackboneoftheGermaneconomy.Aswecansee,aslongasEuropeisdependentonthegoodwilloffinancialinvestors,itwillremaindiffi-culttomaketheseinvestorspaytogetGreeceoutofitsdebtsituation.Onemorecomment:TheGreeknationaldebtisnotamajorproblemfortheEurozone.Atatotalof350billioneuros,itisamere3.7%oftheEurozone’sGDP.

31  VP Bank, Investment News, 1.6.2011 32  This would mean further risks for the banks. According to the Bank for International Settlements, Greece, Portugal, Ireland and Spain owed the European banks 1,340 billion euros at the end of 2010. A quarter of these were German banks (http://bis.org/publ/qtrpdf/r_qa1106.pdf#page=100)

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14. «GREECE SHOULD GET OUT OF THE EUROZONE»

The facts:TheEurozonecouldattempttogetridoftheGreekproblembyexcluding/dischargingGreecefromtheEuroregionandsoprotecttheproblemfromspreadingtoothercountries.Greece,ontheotherhand,couldre-introducetheDrachmaanddevalueitscurrency.ThiswouldmakeGreekexportscheaperandthecountrycouldtrytoexportitselfoutofthecrisis.Context:Thiswouldhave twoseriousdisadvantages.Firstly, ifAth-ensre-introducestheDrachma,thiswoulddevaluedrasticallyagainsttheEuro.However,thegovernment(aswellastheGreekbanks,com-paniesandprivatehouseholds)wouldcontinuetohavetheirdebtineuros.Asaresult,thedebtswouldincreaserapidlyinvalueandthedebtsituationwouldexplode.Thiswouldmeanthefinancial ruinofGreeceand«thebankingsystemwouldalmostcertainlycollapse».33Inthiscase,Greece’sforeigncreditors–aboveall,GermanandFrenchbanks–wouldhavetowriteoffthedebtstheyhaveissued.Second-ly,excludingGreecewouldmeangivinguptheimplicitguaranteeofcontinuanceof theEurozoneandwouldopenup thefloodgates forspeculation against the Euro. «The plan of creating – in the Euro –aworldcurrencythatcancompetewiththeUSDollarwouldthenhavefailed.»34

33  DZ Bank, Interest markets, 9.5.2011 34  Berliner Zeitung 27.4.2010. Concerning the advantages in the status of a leading world currency, see AK 561, 20.5.2011. http://www.akweb.de/ak_s/ak561/23.htm

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15. «GREECE HAS TO WIN BACK THE TRUST

OF THE FINANCIAL MARKETS»

The facts:ToregainaccesstoloansandbecomeindependentofEUaid,Athensmustreceivemoneyfromthefinancialmarketsatafford-ableinterestrates.Todoso,theinvestorsmustagainbelievethattheirmoneyissafeandprofitableinGreece,thatis,thattheycanearngoodmoneythere.Context:Whathasbeenoutlinedaboveisprettymuchthecase–andclearlydemonstratesthepowerbalancethreeyearsafterthefinancialcrisis.Today,allindustrialnationsareattemptingtoregainthe«trustofthefinancialmarkets»byimplementingausteritymeasures,wagereductions,taxincreasesandanincreasein«competitiveness».Thisshowsthatthepowerofthemarketsisintact.While,atthebeginningof thefinancial crisis, itwas said that the «financialmarketswouldhavetoberestrained»or«placedinchains»,nowthedemandsmadebythefinancialinvestorswithrespecttotheprofitabilityandstabilityofstatesisonceagainthemeasuringstickwhichthecountriesthem-selvesgoby.Themarkets ruleandpoliticsbends tomeet theirde-mands.

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16. «WE WANT TO BE FRIENDS WITH THE GREEKS»35

Friendshipisafeelingbetweenpeople,notadefiningfactorinthere-lationshipbetweenpoliticalapparatuses.Ofcourse,oneoftenspeaksfigurativelyof«befriended»states.However,thisreferslesstobondsoffriendshipandhasmoretodowiththesharedinterestspursuedbysomestates.TheinterestthatGreeceandGermanyshareinthiscasecanbefoundprettyfast: it isthe jointcurrency,theEuro.However,whileAthenshastopreventitseconomyfromcollapsing,theGermangovernmentistryingtogetoutoftheGreekproblemasinexpensivelyaspossible.Whenitcomestomoney,friendshipgoesoutthewindow.

17. «YOU SHOULD HELP YOUR FRIENDS –

BUT NOT BAIL THEM OUT»

The facts:15May2011,Sundayevening,talkshowonGermantelevi-sionwithAnneWill,thesubject:«BillionsforthepoorEurowretches–isthegovernmentriskingourmoney?».Theprogrammestartsofbyquestioningpeopleonthestreet.Thefollowingquestionsareasked:«Wouldyouhelpyourneighboursorfriendsiftheywereinafinancialmess?»Mostofthosequestionedanswered:«Yes».Theanswertothenextquestion«Wouldyoualsoofferthemcollateralforaloan?»how-everismostly«No».Thistakestheviewerstotheevening’smainques-tion:«Shouldpoliticiansbeallowedtodosomethingwewouldneverdo inourprivate life, that is,provide large-scalecollateral for loanstakenoutbyothers?»From2013,Germanywillprovidealmost168bil-lioneurosinguaranteesandalmost22billionincashinjectionsaspartofthelong-termEuropeanStabilityMechanism(ESM);thesumsaretobepaidingraduallybetween2013and2017.

THE ROLE OF THE GERMANS: FALSE FRIENDS

35  BILD newspaper, 5.3.2010

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Context: «We» Germans should therefore not give guarantees fortheGreeks.Andyet«we»areconstantlygivingguarantees,withoutanyoneaskingusifwewantto.Forexample,forthedomesticfinan-cialinstitutions.Thiswasshownbythelastfinancialcrisis:whenthecreditratingoftheGermanbankswasindanger,thepublicauthori-ties jumped inwithaidandguarantees.While theGermanshare inthefinancialaidtoGreecehasbeenapprox.22.4billioneurostodate,theaidgiventotheGermanbankswassignificantlyhigher.AccordingtotheGermanBundesbank,thesupportgiventothefinancialsectoralonein2010increasedthenationaldebtby241billioneuros.36

18. «NO GERMAN TAX EUROS FOR GREECE!»37

The facts:ThefirstaidpackageforGreecefromtheyear2010con-tainedaGermanshareofaround22billioneuros.Context:Dobrindtisright.Itisnotthemuch-quotedtaxpayerwhois«helping»Greece.TheGermangovernmentdoesnottakethemoneyforAthensfromthenationalbudgetorfromtaxincome,butborrowsthismoneyatinterestratesof1%to3%andlendsitfurthertocoun-triesinastateofcrisis–includingpenaltyinterest.Athensmustpay4.2% for this «aid»,while Irelandpays5.8%andPortugalbetween5.5% and 6%. This is a good business proposition for the German«taxpayer».Thedifferenceininterestmeansthatanestimated500mil-lioneuroswillflowintothecountry38–undertheproviso,however,thatthecrisisstatescanpaybacktheirdebts.Assuch,theBILDnews-paperisrightwhenitheadlineswith«YouGreeksaregettingnothingfromus!»39.It’stheotherwayround–itisactuallyGreecewhowillfootthebillintheend.

36  Bundesbank press release, 13.4.2011 37  Alexander Dobrindt, CSU, in BILD newspaper, 5.3.2010 38  Finan-cial Times Germany, 20.5.2011 39  BILD newspaper, 5.3.2010

19

19. «WE ARE THE PAYMASTERS OF EUROPE»40

The facts:Seeitems17and18Context:As theGermangovernmentgrantsGreeceaid in the formof loans, thismoneyhasnotbeen«givenaway». Itwill comebackagain plus interest. However, the debt crisis facing some peripherystateshasmoreadvantages forGermany,becauseGermangovern-mentbondsare seenas «safehavens»among investors.The resultisthatall investorsareeagertobuyupGermangovernmentbonds.WhichiswhytheGermangovernmenthasnoproblemfindingfinan-cialbackers,ifitwantstoborrowmoney.TheresultofthisisthattheinteresttheGermangovernmenthastopaytoitscreditorsisverylow.Inearlierphaseswheretherewasaneconomicupswing,theGermangovernmenthadtopayitscreditorssignificantlyhigherinterest.Now,however,theEurocrisisismakingGermangovernmentbondsattrac-tive,which reduces the rateof interestandsaves theGermanMin-isterofFinancemoney.Theestimatedannual savings from thisare3.5billioneuros.41The«aid»forstateslikeGreece,IrelandorPortugal,bytheway,isnotadonationandnotanactoffriendship.Inreality,themoneyisnotflowinginordertohelptheGreeks,butinordertopreventothercountriesfromdamage.TheEuroGroupformulatedthisexplicitlyintheresolutionoftheESM,theEuro’spermanentprotec-tor, inMarch2011:«ThememberstatesthathavetheEuroastheircurrencyshallestablishastabilitymechanism,whichwillbeactivatedwhenthisisunavoidabletosecurethestabilityoftheEurozoneasawhole.»Thismeansthattheloansgivenasaidtocountriesinastateofcrisisarenottheretohelptheoverindebtedcountry,buttoprotecttherestoftheEurozonefromtheconsequencesofthisoverindebtedness.Itistheretoprotectthecreditorsfromthedebtors.

40  BILD newspaper, 25.2.2011 41  Financial Times Germany, 20.5.2011

20

ONE LAST COMMENT

20. «GREECE CHEATED ITS WAY INTO

THE EUROZONE – ‹WE ARE NOW PAYING THE PRICE

FOR OUR INDULGENCE›»42

The facts:TheGreekdeficithasactuallybeencontinuouslyabovetheEUupperlimitofthreepercentofgrossdomesticproductsince1997–evenduringtheyears1997to1999,whichweredecisiveforentrytotheEurozone.Context:The«cheating»oftheGreekswasalreadyknownaboutandofficialin2004.However,thecountrywasnotexcludedfromthecur-rencyunionnorwereanytreatyviolationproceedingsorsanctionsun-dertaken,suchascutsinEUaid.Whynot?Thisissomethingwecanonlypostulateon.GreecewasgovernedbyKostasKaramanlis from2004onwards, andhe is a close ally ofGermanChancellorAngelaMerkel(seeitem10«TheGreeksarecorrupt»).Whatismore,itwasthegoalofthemainpowerswithintheEurozonesuchasGermanyandFrance,inprinciple,toacceptasmanycountriesaspossible,inordertolendthecurrencyunionmoreeconomicclout–afterall,theEuroisacompetitiveprojectagainstthedollar,behindwhichtherearetheUSAandaquarterof theworldeconomy. Inaddition,withGreece’sen-try,theEurozonespreadgeopoliticallytowardstheimportantMiddleEastregion.ThismaybewhytheIMFandtheEUexcludedGreece’smilitarybudgettoagreatextentfromtheausteritymeasuresin2010.Despitethefactthatthis«(asapercentageoftheentirebudget)istwo-and-a-halftimeshigherthantheGermanandtwiceashighastheEUaverage.FrenchandGermanweaponsmanufacturersinparticularaswellasthegovernmentsinParisandinBonn,orlaterBerlin,havebeensupportingasystematicarmsbuild-upinTurkeyandGreecesincethe1980s.»43

42 Börse online, 7.1.2010 43 Greece, the IMF and EU dictate and German responsibility, position paper issued by the scientific advisory board of Attac Germany

Author Stephan Kaufmann

IllustrAtIon of front pAge Lutz Kübelbäck

drawn up as a result of the project: «Let’s talk about alternatives …», in cooperation with the press department of the Rosa-Luxemburg-Foundation

ContACt Rosa-Luxemburg-Stiftung dr. Sabine Nuss, dr. Lutz Brangsch Franz-Mehring-platz 1, 10243 Berlin phone 030 44310-448, www.rosalux.de