Posted by: Dr Pano Kroko Churchill | June 28, 2011

Playing with fire in Greece

There’s no doubt that a Greek default would be incredibly painful. But only for the Greek people and only for a very short while. And while it becomes clear that contagion is what keeps finance ministers awake at night, this fear is misguided and even misleading.

All reasonable and sturdy minded economists and practitioners of high finance concur that a well planned and immediate restructuring of the Greek debt is the only way for Greece to get on the mend and to step on the road to recovery and economic growth.

Anything else is sheer madness. Kicking the can down the street or letting the snowball gorge itself while speeding up downhill towards the village — to consume the little nation is simple stupidity. And so is the idea that a new round of austerity packages will benefit Greece.  That political daftness is clearly against simple economic theory and reasonable business practice. And the will of Greek politicians to vote on extending the snowball effect and to be willingly complicit to this disastrous debacle that themselves have caused is simple treason. None of them has ever been in business to know what’s what. And nobody has stood trial for causing this economic disaster that led to the country’s wholesale surrender as if it has lost a war. An economic war, they caused and they lost. Nobody. Why?

Still one can hear the harpies of fear croaking their solemn song all around. And the current crop of Greek politicians aren’t made of the stern stuff that Ulysses was made off and was able to resist the siren song of surrender and defeat… So they fall for the sad song. Cause these men are already enslaved to the idea of personal profit, usury and defeat — such a small leap and bound to a forfeiture and dishonourable surrender. In short this useless lot of party apparatchiks voted to condemn Greece to failure. Maybe, because they only care for number one and simply have their own survival to contend with and their party’s remnants of power in their heart but they certainly don’t have the interest of their country.

Yet you simple citizen and honest leader, cover your ears with wax, and read on, since the sirens are legion and their song sweet, and you can see from this post the way forth. Because over the last few days, all the harpies sing: Bankers/wankers, politicians and journalists have competed for the most dramatic-sounding default and bankruptcy song for Greece. They sing a heavy song. A song that says a Greek bankruptcy could “overshadow the effects of the Lehman Brothers bankruptcy to world commerce,”  so sang the European Central Bank executive board member Jürgen Stark.
Gary Jenkins, head of fixed-income research at Evolution Securities, went one note higher and sang that “Greece could become the next Lehman’s as investors move from one target to the next, just like they did in the banking crises of 2008”.  And the head of the Eurogroup, Jean-Claude Juncker, chorused, that offering Athens debt relief is akin to “playing with fire”.

But, beyond the symphonic orchestra of fear, uncertainty, and doubt, and headline-grabbing rhetoric, the sweet song of surrender and the failed comparisons to Lehman simply don’t let up.

As a matter of fact they all sing falsetto and make no sense at all. Because first these songs are full of empty words since the majority of those peddling this shite Lehman myth have a significant vested interest in avoiding a Greek default or restructuring. Sadly it was the European Central Bank from Frankfurt, that first floated the Lehman analogy in a well rehearsed PR gambit.

Why? Sheer self-interest. By propping up Greek banks and the Greek state, the ECB has taken on €190bn worth of Greek assets, which would face radical write-downs should Greece go down the road of default. And we know that the denizens of Frankfurt’s ECB care little for Greece — but crying fire in a packed theatre isn’t smart either. As a matter of fact it is downright criminal.

And many other commercial banks across Europe have joined the chorus of scare-mongers chanting “liquidity will dry up”, “contagion will spread”, “savings will be wiped out”, for much the same reason as the ECB sings along.

Generally the banks’ passion for more bailouts is not altruistic, but stems from the desire to ensure that profits remain private, while losses continue to be socialized. And plenty of profits exist already from this Greek tragedy. Cause a tragedy is when the lenders claim patriotic feelings for the Euro and they get to be believed. A Euro that they have assaulted with both words and deeds already. And a Greek nation that has paid for interest payments alone a total of 690 Billion Euros on an original debt of 51 Billion Euros. No wonder debt matured to such usurious heights. ANd the bankers know the power of compound interest — whereas politicians never do nor care since their short termism is clear. They will deny this of course, but actions speak louder than words any day of the week in finance as well as in honest Life.

And the narrative in the public imagination that Greece could be the “next Lehman Brothers” is way off the mark and overblown, because of a crucial difference between apples and monkeys. Because Lehman [monkeys] was destined to become an intentional example by the Federal Reserve. A prime example of the bonfire of vanities to consume, warn and reform all other banker/wankers of Wall Street from their errant ways. Such is the habit of the US government and it’s a good system to punish a heavy hitter violating the laws — in order to create an example and sent a message to all other monkeys out there. And that is why Greece [Apples] is quite unlike Lehman, in that nobody wants to set an example of a sovereign default cause it is just not Wall Street operators but citizens of Europe who get punished for the deeds of the few bastard politicians who admittedly stole the nation’s wealth. Still the German Swabian housewife wants the lesson to be learned by all the EU governments, Peoples and the financial markets who at any rate have had over a year to prepare themselves psychologically and physically for a potential Greek default. And to that she is right. And the learnings are legion, with plenty of warnings even leading up to last year’s ”first breaking point”.

And the banks know this and benefited because the very same ones who chose to stay the course and keep the Greek bonds and kept lending to Greece at usurious rates — did so at their own risk. Loan sharks know that the risk capital is just that and when you’ve taken your profits, the kneecapping can stop. But in the banking sector it is an intentional choice to maintain the Greek debt exposure because it is the most profitable game around. Where else can you get an ECB guaranteed return of 17% per annum for large amounts of money invested in sovereign debt?

And if you don’t like doubling your money every three to four years, you can leave the party. Because Greek debt is like a smorgasbord at the party with an open bar. Eat your fill, drink your lot till your head buzz and screw in the bathrooms till you can’t get it up no more. A real Greek orgy of profiteering. That’s why the banks have stayed with Greece. Because they can always exit if they don’t like it. But like the pusher knows, the addict never ever quits. He just keels over and dies… and the pusher can then roll him over — steal his watch, his wad — and then call it quits.

And so it goes with the banks — cause they can exit with great happy returns on their profits too — but they will not do it. Greed and avarice prevents them from doing so. And instead they will keep supplying the drugs till the addict rolls over dead. Because this type of finance is a drug and the pushers could respectably exit even as late as the end of February of this year. Hell, all investors could have walked away from Greek bonds with only a 10-20% loss even in March. The Greek bonds continued to trade at above 80% of their nominal value till early March. This is a good deal considering the economic mess Greece is in now and the same was then for the savvy investors. Everybody knew and yet played along in the party. And even now it’s not late for investors to walk away with a small loss. Because even now they can walk away with a 30-40% haircut… And that 40% of the capital isn’t bad because it has been profits and gravy till now all the way. Not bad for bankers who need suspenders to go with that belt.

Greece now acts like Charlie Sheen. Self wounding and self abusing it needs help. It needs an intervention by friends and family and a spell in the Betty Ford clinic. Or maybe it needs a spell of a fortnight in the Sanctuary to kick the habit. Before it consumes itself. The first few days are hard. The rest is easy… But if you become a refusnik of the treatment, Greece will end up like Amy Winehouse crying No, No, No I will not go to rehab… No…  A sad song rendition of it’s own.

Choices….

And to go further up on the daft Lehman comparison, one needs to see that Lehman Bros was just a business. A simple financial business albeit quite a large one. And it’s debt was 720 billion or thereabouts.

But it was not a nation. Add to it the fact that Lehman was a very opaque institution — akin to a Wall Street black box — riddled with complex inconsistencies that combined with its misleading accounting practices, there was no clear picture of who was truly exposed to it’s bankruptcy. Everyone, as it turned out, was exposed, to some of the more than 4,000 different partnerships that Lehman Bros fraudulently run up to the fiscal disaster and many others were involved in it. But still it was just a simple business with many investors, overvaluations of worthless assets and scary complex accounting. Big deal in a rather small way. Not worth saving was what the Federal Reserve board of governors said…

But Greece is a European country and if it gets squeezed then the people bleed. Really bleed as evidenced every day and night in Athens parliament square. In the Constitution square where pitched battles are raging against the police for a few steps of common ground.

Still the siren song helps to put the fear of the Gods of the markets, in the hearts of the Greek politicians and errant policy makers who are asked to vote and pass in parliament the foreign dictated terms of an onerous surrender. A surrender more humiliating than a Versailles Treaty and a national selloff of Greek sovereignty. Greece didn’t lose a war but it is asked to accept a disastrous package and terms worse than those forced upon Germany when she lost the first world war. And Greece accepts these onerous terms of surrender of it’s sovereignty without even the benefit of a promise for a Marshal plan. Yet the current Vichy type Greek government is accepting that and going full tilt towards the self destruct mechanism this new tranche of debt agreements means for Greece.

And to keep the fear afloat, with the Greek parliament debating and voting today on a wide ranging law raft of IMF implementation packages — for the continued service of the massive public sector and the ballooning sovereign debt — that includes severe austerity measures, spending cuts, tax rises and privatisations, the harpies keep up their woeful song. For example, EU’s top economic official, Olli Rehn, dismissed reports that Brussels was working on fallback options to keep Greece afloat if the plan was rejected. He says lying in earnest: “The only way to avoid immediate default is for parliament to endorse the revised economic programme … They must be approved if the next tranche of financial assistance is to be released. To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default”. Olli Rehn said. But he was lying because they were working on a plan B all along and they simply wanted to get Greece to default at their own best timing. When they have bled the ”patient” dry and their profit taking has been maximized while their banking exposure has been minimized.

 The alternative was underscored yet negated sharply, by Bank of England Governor Mervyn King, who told British parliamentarians that policymakers were working on ways to limit the damage from a potential default on Greece’s 340 billion euro debt pile. “What we’re doing is to say there is sufficient concern in the market about the possibility of default for us to think about contingency plans and the consequences of this event,” he said.  Mervyn King, urged greater transparency about sovereign exposures to prevent a sudden, broad-based loss of confidence in European banks in the event of a Greek default, which could trigger a new credit crunch.
But whom to believe?  They both can’t be right…
I throw my lot with Mervyn King because as governor of the Bank of England he has minimal or zero exposure to Greece ad is a man known to be telling the truth. Also his economic assessment passes easily the bullshit test.

But Greece is a country and Sovereign debt is the very last asset class that can be placed on default. Basic economic theory dictates this because when the sovereign default happens, there is no other higher order of asset to fall back on and thus wash off the sins of the past, present and future. It’s end game and when it spreads, it causes a wildfire around the world. See 1929 massive and global crash as a prelude to what would be a massive sovereign default…

But that should not happen in 2011 because we are all prepared. The possible effect of Greek default contagion has been staked out properly and fire lanes have been opened to prevent a wildfire. And the Greek parliamentarians today if they vote for a treasonous memorandum for a continued bailout package that would lead to default anyway, they are first class sinners, if not traitors to the cause of their country. Because instead, they can choose to follow the example of countries like Brazil and Argentina, who restructured their debt and started growing their economies and now enjoy economic miracles of growth and prosperity with nary a month of disruption. Contrast that to the countries who followed the IMF recipe for austerity and they are all mired in long term depression and despair like Guatemala and San Salvador — some of the worst places on earth today.

So Greece and it’s parliamentarians have a clear choice. Let the snowball roll down hill out of control and growing as it goes along, until it destroys the small village — or bust it up open now and save the village altogether.  Fair?

Answer is simple, but simple is not the way of dishonest politicians who are responsible for the mess in the first instance. And where is Truman, Marshal and Eisenhower to enforce a Marshal plan to help Greece rebuild, instead of a humiliating Treaty of Versailles to enslave Greece?

Because only a Marshall plan can help Greece stand up as a key nation of the free world.

Because we need a Marshall Plan right about now to save Greece. Not a Treaty of Versailles signed n a hurry in a despicable railroad car. And railroading the Greek people can only end badly for Europe… But Europe sadly, has no such leaders right now. It only has midgets and minnows in the key positions of the Union, intentionally as it seems, to not overshadow the national insecure leaders.

And although Greece fudged its budget numbers in order to join the euro, and continued to massage them to fit within the Eurozone, and official looting of the country and systemic corruption is out of control — still the foreign banks’ exposures to and the FDI holdings of Greek debt are reasonably low and very well understood. In fact the very few banks who are exposed to Greek sovereign debt are well documented and their risks are well understood by comparison to Lehman exposure.  Yet to some, this is little comfort. And those financiers who are exposed to Greek debt restructuring, clearly know it, and have contained the fire damaged goods… within a Chinese wall of good write offs, asset depreciation and proper risk analysis.

So not much use in crying about spilled milk…

Greece will default sooner or later.

And the key difference is timing.

Because when it defaults it really makes all the difference. If the Greek politicians choose to default and softly restructure the debt now, they will get maximum help and they have a good chance of riding the upward swell to growth and economic prosperity and sovereign respectability. Just look at Brazil and Argentina today, a few years since their own restructuring.  Greece must follow that path instead of being assigned to be forever hemmorhaging slowly. The wave of global recovery is now rolling in and all surfers must be offshore ready to catch it. A really good time to reshuffle the deck and the debt to the maximum benefit of Greece. Add to that the much needed to be reintroduced Drachma and we have a tiller to boost the economic growth. And like in theatre and comedy, timing is king.

If Greece restructures now the benefits are to be massive for her and the citizens, because the Europeans are tied in the same climbing rope… But if Greece restructures later, the detriments clearly outweigh the benefits of it. And it then might go in free fall because all others will be safe and not caring for who holds the Greek lifeline. So the choice is clear.

But according to the indignants and the majority of the Greek people, the fault lies with the politician-thieves, the bunch of dishonest current denizens of the Greek parliament who choose to be subservient to the European and German paymasters and the IMF and sell  their country down the river…

And on top of this, the various little men of finance in official positions claim ethical superiority using the bust Lehman as an example of a crisis averted — only so — if they simply get the Greeks to sign off on this shameful ”Versailles Treaty” type of military surrender they peddle for the once proud nation of free Greeks. But any student of history knows what the Versailles Treaty brought about the Second World War directly. Because the onerous terms of the treaty included that Germany was the only country responsible for WWI, even though it started when a Serbian shot an Austrian. Some Germans like a little colonel from Austria named Adolf, believed that Germany had been made a scapegoat, forcing it to take the blame for the entire war. The treaty also said that Germany would have to pay for all of the damage done to other countries. Germany’s size was reduced by 12.5%, resulting in a decrease in its population by 6,500,000. When the other countries took possession of German land, the people in it did not move. This made them “belong” to the countries that took over that land. Many things were taken away because of the Treaty of Versailles. Germany lost 16.7% of its farmland, 12.5% of its livestock, and 10% of its factories because of the Treaty of Versailles. It reduced Germany’s trading, eliminated its navy, and made its army very small. And article 227 charged former German Emperor, Wilhelm II with supreme offense against international morality. He was to be tried as a war criminal. Articles 228–230 tried many other Germans as war criminals. Article 231 (the “War Guilt Clause”) lays sole responsibility for the war on Germany and her allies, which is to be accountable for all damage to civilian populations of the Allies. That’s the Versailles Treaty in action.

So from today’s ”Greek Treaty” the end result is that Greece will become much smaller. It’s public lands will be given off to the debtors and it’s assets will be sold off for pennies on the dollar. And it’s economy already small – will become negligible. All it’s brains will drain to other countries and it’s citizens will become subjects of others where they will be migrants and servants of other flags. That is all well understood and already established with the passage of the Greek Treaty Memorandum. But where are the criminals who caused all this, in order to be tried in this shameful Greek Treaty?  How can Greece have acceptance if not trying anyone on charges of treason for this debacle? Who is the sovereign who caused this if not the two main leaders and the ministers of the two main parties that ruled the country since 1970’s and looted it in equal measure as admitted publicly by the Vice Prime Minister Pangalos?

Greek people are not forgetful and they do seek justice because they have a really keen sense of it. And although some times it takes a while to arrive – justice will be served – and just deeds will succeed those evil doers. Remember article 231 (the “War Guilt Clause”) of the Treaty of Versailles that says the guilty shall be tried…
And the insistence of the European partners and the global institutions to keep the PASOK government in power and to make them agree with the New Democracy in support of the ”Greek Tragic Treaty” of surrender is pure justice too. Perverted justice perhaps, but the European partners insistence in wanting the ones most responsible for the catastrophe, to be seen to visibly continue the sell off of the Greek sovereignty to the bankers — is a form of undeniable payback. And they want them there because they are useful as ”Collaborateurs.”  Collaborators of foreign occupiers in a suit and tie with white shirt but never the less collaborateurs ready for the picking. Useful bastards the Pasok boys are, and to the last moment they will sell off whatever they themselves couldn’t carry away to Switzerland’s vaults. After all same as their corrupt colleagues of New Democracy, other side of the same bad coin, they are servants to the foreign occupiers and the banks. Because on my simple calculations the Greek debt they are negotiating to load on to the country will not be able to be paid until 2137. Yes one hundred and twenty seven years later the Greek debt might have been paid off. That is a full five generations later. Talk about thinking for the future generations…  and mortgaging their lives. As a point of reference the German nation paid off the last payment of the Versailles Treaty on 2010. A full 90 years later and a few wars past the vaunted Peace, this treaty was supposedly designed to forment.

The Versailles Treaty economic reparations came in a variety of forms, including coal, steel, intellectual property (e.g. the trademark for Aspirin) and agricultural products, in no small part because currency reparations of that order of magnitude would lead to hyperinflation, as actually occurred in post-war Germany (see 1920s German inflation), thus decreasing the benefits to France and the United Kingdom. Reparations due in the form of coal played a big part in punishing Germany. The Treaty of Versailles declared that Germany was responsible for the destruction of coal mines in Northern France, parts of Belgium, and parts of Italy. Therefore, France was awarded full possession of Germany’s coal-bearing Saar basin for a period and of the Rhineland – the heartland of German industrial output for 15 years. Also, Germany was forced to provide France, Belgium, and Italy with millions of tons of coal for ten years. However, under the control of Adolf Hitler, Germany stopped outstanding deliveries of coal within a few years, thus violating the terms of the Treaty of Versailles… and unleashed a blietzkrieg to take over Europe in the bloodiest war the world has ever seen.

Germany finally finished paying its reparations of GBP 59.5 million in 2010 – ninety years after the shameful Treaty.

War – repeated war – warm, hot or cold, but nonetheless war. That is the destiny of the Treaty of Versailles. So it seems to be the destiny of the Treaty of Greece too. And that’s why the perpetrators of the looting of Greece are the ones negotiating the surrender Treaty of Greece, because they are useful idiots. And they are truly working for the incoming fascists too… and the foreign occupiers. That is why Greek people fight like they are in Thermopylae fighting the barbarians at the gates. Pitched battles in the centre of Athens in front of the Parliament are now daily fare broadcast directly into your tube.

Entertaining?

Or a sign of things to come?

And the result of it?

The Treaty of Versailles caused Germany to go through a deep and serious depression. A time of huge unemployment when businesses and people lost a lot of money. Due to this depression, many people lost their jobs. People who could not find jobs naturally gravitated to the extremes and joined either the Communist or the Nazis. Naturally the National Socialist party — being fervently nationalistic — gained the most favour amongst the people of Germany. The Weimar republic era is to be replayed again in Greece only on a far more speedy way. The National Socialist Party’s leader, Adolf Hitler, was gaining more and more power because the German people were upset that their government did little to help them and that the government agreed to the Treaty of Versailles. The indignants of the Parliament square in Athens are just that today. Back then many Germans were truly mad that Germany lost so much land because of the Treaty of Versailles, and because it had to pay huge amounts of reparation money to the Allied countries. They were also mad because the treaty said that Germany alone caused WWI. Many Germans wanted revenge. This is when more Germans began to look up to Adolf Hitler and his National Socialist Party. The rest is history…

Is the prospect of this dismal future better than a speedy and immediate debt restructuring that will only affect the Greek people for a very short time while giving them plentiful jobs, an economic growth trajectory and major hope for the future?

That is the only choice… today.

And the politicians responsible for this mess who are voting today for this shameful Greek Treaty of Versailles today have to be ware of their responsibility. Because it is certain that the Treaty Memorandum will pass with the Pasok party majority in the Greek parliament today, but that it is also certain this will be the beginning of the end of the Greek sovereignty.

So much for the politicians who are forgetting history and are assigned to repeat it. History and Justice will find them wanting and punish them severely.

But what of the errant bankers who are forgetting the recent history and also miscalculating that unlike Greece, Lehman was just one of the tips of a huge economic iceberg and needed to be shaved off for the flow of honest capital to continue. Because Lehman Bros collapse not only revealed all US banks’ huge exposures to the bubble of the mortgage market – large parts of which turned out to be bust — independent of Lehman’s vagaries, but it also unleashed capital for the exits and justified amazing corrective federal action to be taken. This is what we call in public policy the Pearl Harbor Effect.

Again, please note the clear contrast to Greece which isn’t the tip of anything but rather the tail end of a the comet of the European inefficient, anemic and politically uncertain union. The problems with the eurozone’s periphery, are well documented but are also very country specific. A Greek default would not reveal a new hidden world of risk. Neither are the connections to Greek debt within Europe’s banking sector substantial, despite remaining relatively open.

The tide is already out and nobody swims without a swimming trunk – except the Greeks of course. So for the price of a little embarrassment, let Greece restructure it’s debt now and be done with it. Time to reemerge like a Silicon valley entrepreneur wiser from a failed venture but much lighter after a curing bankruptcy. Greece will bounce right back up instead of remaining in bondage for five generations and becoming like a banana republic in service to the fruit company…

A clean bankruptcy is a very cathartic event. Just ask all the Silicon valley entrepreneurs who have learned most from past failures and went on to emerge as winners. hell ask any VC who knows the score and see which entrepreneurs he will back. The ones who have gone through failures and bankruptcies or the virgins?

So you might ask.

What else can be done?

Well…

We know the score and could remedy this disaster otherwise.

Because we are smart financiers and we can learn from the past – in so far – at least to avoid repeating it.  We know what needs to happen. And if you don’t want to listen to my advise, then best follow the advise of the Bank of England Governor Mervyn King. Mervyn is a friend and he says things simply and clearly. He said, that rather than finding new ways to safeguard banks’ exposure to Greece, we should really be asking why these banks haven’t reduced their exposure to Greece and deleveraged, given the plentiful time and risk gradient available to them…  Because it is, and has been, a very profitable exercise for their capital.

And our friend Mervyn King, went ahead to counsel Greece to establish again it’s own monetary policy: Only one way to do this. Get the Drachma up and running again. But the lenders don’t like this too much… Maybe because the profits are too good and the security of the EURO being too big to fail, and thus guaranteed a bailout, the bankers persist and remain ”secret friends” of Greece while publicly trashing the sovereign debt and the nation, causing fear and anguish in the markets to scare off the ”tourists” and ensure the continued bailout supports.

But that’s a silly game because — let’s not kid ourselves – contagion is not a real risk anymore. A small risk maybe, but nonetheless not the big bad scary monster that it’s played out to be. And let’s consider some further reasons why it’s not a big bad gorilla of a risk, here. First, Ireland and Portugal’s funding for the next two years has been sorted fully. They have been secured by their bailout packages, along with their banking sectors, with economic aid tools which are already in place, so these countries are already out of the bond markets. And although there will be some impacts on the secondary markets, the impact would be felt less directly by the leading periphery countries’ government finances and certainly their banking sector is immunized.

And Spain is on the mend just the same… presently immunizing it’s own banks.

Second, the EU’s sickest banks are already heavily reliant on ECB support to stay afloat, which is itself a problem, but their situation can hardly worsen any.  If anything they have written down their exposure and are solvent to boot. And in clear contrast to the Lehman situation, where credit and liquidity dried up immediately, the ECB has existing mechanisms in place to deal with this, which should help absorb the impact. Liquidity isn’t a problem for Greece now either.

In addition, there has already been some limited contagion, but not an outright general infection. And that very limited contagion is a form of immunization in itself for the Euro countries’ fiances. Even with the original bailouts, when most people saw a Greek default as inevitable — this has been fully averted. Therefore, contagion although still a small risk even with a restructuring of Greek sovereign debt, or a structured default, and/or a second bailout, it is really minimal. And particularly even if Greece fails to meet the tough austerity measures imposed on it — not unlikely given the domestic outrage and the continuing failure to meet the original bailout conditions — Greece is plowing ahead to recovery. Under that scenario we could be stuck with a second €100bn-plus bailout and maybe some weakness but not contagion, with taxpayers left to foot the bill and socialize the losses. But there is time and error to contend here and Europe is stead fast as it knows the risks fully and the banks only privatize the gains and profits…

Because both European finance ministers and Madame Lagarde now head of the IMF, know fully well that ultimately if a country with a GDP of only 2.3% of the European economy could bring down the entire system, that’s probably a sign that the system is fundamentally flawed and can’t hold up.  And that is unthinkable. An imponderable for Brussels, Paris and Berlin as well as London. The European finance system will stand and the ascending value of the Euro is giving us a glimpse of the future. The sky is not falling and this massive contagion scare will not happen either because Greece will not be left to fly in the wind or because the restructuring of the debt is inevitable and the best solution – as all the bankers and the clever statesmen already know. And maybe because it is time to build closer brotherhood ties inside the European Common Market and within the European Union itself and this is the golden opportunity to do just that as all intelligent European leaders know. They do know this and are already acting in line with this reasoning.

Regrettably, some – only few  – European politicians are still using the misguided comparisons with Lehman Brothers as an excuse to ignore and perpetuate Europe’s real problems. Because lacking a political union with a central Finance directive, Greece is hostage to the common currency… and it’s inability to regulate Greece’s own monetary policy in order to adjust it’s economy and finance. And still Greece cannot bring down the Euro even if it tried due to it’s small size — two and a half percent — as it compares to the total European GDP.

But Europe must also cure Greece’s unhealthy, undercapitalized banking system and the Euro issue in regards to Greece. Because a monetary union based on the premise that political leaders’ commitment alone could make economic and democratic realities disappear — simply doesn’t work. Not for long anyway. And leaders change and — looking at Norway and Finland — they might even be reactive and retrograde towards the Union.

And maybe that is where, small Greece, with it’s 2.3% budget of the European GDP, now serves a higher purpose too. That purpose is the holy purpose of motivating Europeans to face forgotten realities and force them towards a more perfect Union. A much needed proper political union. Because the US dollar didn’t fail or the federal government wasn’t bankrupted when California fell off the skids… So it should be for Europe in a proper Union. A small state goes belly up but the federal government and the federated currency isn’t affected. And that is the silver lining in this otherwise gray black cloud pregnant with rain. Provided thanks to a small state of Europe called Greece…

Yet before we rush to congratulate Greece’s involvement in pointing the way to a stronger union, we must consider that using punitive interest rates at double the rate the Greek rescue lenders of last resort borrow, is not just criminal — it’s plain stupid.

Because this time the Greek rescue should be the goal — not making money and profits from these fire stopping loans.

But bankers forgetting their current history and grossly distorting the facts is expected.

Yet Greek politicians steeped in the legend of Thermopylae and Leonida’s 300 heroic sacrifice, can’t forget — for this isn’t an easy lesson to forget — and thus forfeit their country.

Because what we are doing now is what you might call playing with fire.

And history punishes severely those that seek to forget…

Yours,

Pano

PS:

So in the end, the Greeks always remember their natural allies and their advise also.

And they should act now to introduce the Drachma and restructure orderly when the fire brigade is ready with hoses out and full of water… Ready to douse the flames.

And lots of good will happen if we restructure now, to put out the fire and save the village.

Good advise its to strike when the iron is hot and the world’s eyes are upon Greece. Restructure now. Not later. No reason to miss a great crisis opportunity to better the odds, land the deal and get the best possible equity for the people and economic prosperity and growth to boot. Yes there will be a few days of hardship and bitter reflex but that’s a small price to pay for long term economic health.

And maybe then the European leaders will also smarten up and understand that the goal is to have a Marshal Plan type of rescue for Greece and not a loan shark short term type of lending to kneecap the borrower…

After all you know the effects of the Treaty of Versailles all too well.

Same goes for the IMF and the ECB…

Do they feel like loan sharks or like intelligent Public Economic Policy practitioners?

And if the future of the world depends on what is playing out in Athens Constitution square, let it rip.

Methinks it’s best for all of us to fight it out on a level playing field.

And much like rugby, let us devise a New Way in the field of battle of ideas and people power.

A New Way is needed.

A far better way than the one the old order of loan sharks and the failed recipes of Cheney’s bush era dictated to Peoples around the world under threat of the gunships… or the bank slips.

Let us find this New Way.


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