Greece’s Phony and Unpayable Debt: Write It Down!

Ironically, top Greek debt “vulture” Paul Kazarian says that Greece, after years of “extending and pretending” its unpayable debt, owes, not EU320 billion, but EU32 billion. But the IMF and ECB demand Greece pay EU20 billion this year. Keep in mind in considering such figures, that the U.S. economy is roughly 100 times the size of Greece’s: That would be $2 trillion debt payment by the U.S. in 2015.

Where did that huge pile of debt claims come from?

First, the subprime lending. Greece was ushered into the Eurozone in 2002, by Goldman Sachs’ “magic derivatives.” It began using a euro currency greatly overvalued relative to its economy, in effect making Greek products much more expensive than those of the countries it traded with. The Greek trade deficits which immediately resulted, averaged EU30 billion/year from 2002 to 2008. Much of this deficit was with the United States and Germany, notably U.S. and German military equipment. One particularly unnecessary deal was in 2006 for six German submarines, valued at EU12 billion, of which only one has ever been delivered! Of this roughly EU200 billion trade deficit over 2002-08, military purchases alone were EU80-90 billion, according Stockholm International Peace Research Institute rough data.

Such trade deficits are largely financed by, ultimately, government borrowing. From 2002-08, while Greece’s trade deficits totaled EU200 billion, its nominal debt grew from EU160 billion to EU260 billion, and its central bank became indebted to the European Central Bank by EU50 billion.

Second, Greece has paid about EU60 billion in interest to international creditors since it joined the Eurozone.

Third, came the global financial crash, culminating in late 2008, which imposed large costs on the Greek government, like all others; every trans-Atlantic nation’s government went into deep budget deficits. For Greece, the national debt leapt again from EU260 billion in 2008, to EU330 billion in 2010.

Fourth, were the big 2010 and 2012 bailouts—part of Europe-wide massive bailouts of bad debts held by the big Wall Street and London-centered banks. In 2009, Greece’s debt was EU260 billion. It then “got” two huge bailouts in 2010 and 2012, totaling about EU245 billion ($295 billion) between them, mainly from the EFSF, but also from the IMF and European Central Bank. Former Greek Economics Minister Louka Katseli has provided documentation that the Greek government actually spent or invested just 3% of that EU245 billion in Greece. Fully 97% went directly to Deutsche Bank, HSBC, JPMorgan Chase, and their fellow sharks, with small chunks to hedge funds swimming alongside.

Fifth came “bail-in.” In the 2012 bailout, Greek banks — and Greek banks only — had to write off a chunk of their “Greek debt.” Several swooned as a result, and the Greek government now had to recapitalize them, putting in EU19 billion and then EU17 billion in 2012-13. That EU35 billion had to be borrowed by the government, and was added to the fraud of “Greek debt.” Bail-in action against the Greek banks, supposed to reduce outstanding Greek government debt, immediately increased it instead.

After five years of austerity’s punishments, Greece’s unemployment rate is 25%, its GDP shrunk by a terrible 20%. And its EU260 billion debt of 2009 has become EU320 billion—after EU245 billion was passed through to the banks!