Greece in debt bondage: the people will pay
Despite the wealth of Greece’s folktales, it is a Danish one that best describes the country’s current state of affairs. Like Hans Christian Andersen’s Emperor, Greece is trying on a new set of clothes, which promise to help it escape the financial maelstrom. The well-paid tailors who fabricate them swear on their excellent patterns, while the people who don’t discern them are presented as ignorant or ill-fit for their jobs. The government shivers, for it suspects they’re right, but the show keeps going on. Why let reality ruin a good story?
The story’s name is PSI (Private Sector Involvement), subtitled ‘bond swap agreement with Greece’s private creditors’. After months of negotiations, its end could be near, since a deal is expected to be reached in the next few days. The story’s addendum includes a new agreement with the Troika and, yet again, a new set of austerity measures at the population’s expense. The story’s writers, on the other hand, have a lot to gain: Lazard Freres SAS, the Greek government’s financial advisor, is estimated to collect €25 million ($33 million) in the process; while Cleary, Gottlieb Steen & Hamilton LLP, the government’s legal advisor, is set to gain €6 million ($8 million) for its services until October 2011 and up to €1.5 million ($2 million) for each month that its work is prolonged.
The downsides of the bond swap agreement for Greece are already crystal clear. Among others, the new bonds will be issued under the British law. This will worsen the Greek negotiating position during a future restructuring of its debt, which the PSI won’t be able to prevent. The reason is that the Greek debt will still reach 135 per cent of GDP in 2020 – testifying shockingly to the utter failure of the programme imposed on the country. Besides, even if the bond swap proves completely successful, Greece will still be considered as practically bankrupt by the markets. Its dependence from the EU and the IMF will be certain for years to come, and the future painted bleaker for the population. More cuts, more layoffs, more insecurity, more selloffs. This is what they’re demanding, even when the bitter aftertaste of the previous austerity package is still strong in people’s mouths.
Thus, it comes as no surprise that 92 per cent of Greeks are dissatisfied with the government, whose popularity is worse than the colonels’ junta. The people resent the costume that they were made to wear, but the tailors are too busy to pay meaningful attention. Absorbed by the inner-party struggle for the leadership of PASOK (the biggest of the three parties in the Greek government), they are lending a sympathic ear only to keep their constituency from totally running away. In most cases, they vocally declare their opposition to the austerity measures, but support them during parliamentary votes, while in other cases they don’t hesitate to admit their criminal inaptness. The furore was enormous, for example, when the current Minister of Development and wannabe Prime Minister publicly declared that he didn’t read the memorandum with Greece’s creditors before voting for it. As for the second-biggest party in government, certain of its victory in the next elections, it is more occupied with boosting its international profile than with policy-making.
In an era when Greece has been reduced from emperor to beggar, the people know that they should be watchful for the plans of the other kings. Some of them are secret, while others leak to the press, such as the German proposal for a ‘budget commissioner’ who would take control of Greece’s spending and tax policy. In the same document it was proposed that Greece should vote a law that obliges the government first to pay the creditors and then use the rest of the money for pensions, salaries, education and health. Democratic legitimacy and people’s will seem not to be an issue in today’s EU. It is high time therefore for Greece to start looking for viable alternatives.