As politicians and officials manoeuvre to foist yet another load of unrepayable debt upon Greece, the motivations and interests of some are more discernible than others.
The politicians seem the easier to fathom. Angela Merkel wants to appease sentiment amongst her electorate that resents any further German money being used to support what are seen as idle and irresponsible southern Europeans, apparently unaware that a prime object of keeping the Greeks ‘afloat’ is to avoid German banks (among others) being forced to write down the value of large imprudent international loans, and of the wider fact that eurozone policy is run for the benefit of the central European economies such as Germany’s (admittedly Germany apparently did not want the likes of the Greeks to join in the first place). I say ‘appease’ because Mrs Merkel knows that she will have to give in to another Greek/bank ‘rescue’ in the end and it took only a handbagging from John ‘Errol Flynn’ Lipsky, newly in charge of the IMF, to bring her rhetoric to more immediate heel.
Nicolas Sarkozy, the ex-officio Co-Prince of Andorra, and drinking water supplier to Monaco, has a less troublesome electorate in this respect and knows as well as Mrs Merkel that French banks have even more to lose from a Greek default than the Germans.
Our own David Cameron, former special adviser to Norman Lamont, former director of corporate affairs at the late and much lamented Carlton Communications, still a direct descendant of the illegitimate daughter of King William IV, just sees a chance to let others stump up the cash to keep the financial show on the road. Ever focussing on the immediate objective (until it comes to the dismembering of the British state in the interests of private enterprise) he knows that British banks have less to worry about than some in this particular can of worms and lending to Ireland when you expected to get it back with interest is one thing, whilst lending to Greece when you know you will not is another.
In thinking no-one will get it back I defer to the judgement of financial insiders (although it has seemed pretty obvious to the cleaning lady for some time):
“Charles Dumas, of Lombard Street Research, puts it best. He calculates that to stabilise Greece's government debt-to-GDP ratio at 142% (the figure at the end of 2010) would require the budget surplus to be 7%-10% of GDP. The figure was minus 10% in 2009 and is likely to be at least minus 4% in 2010. Now recession is causing tax receipts to crumble. The chances of a 7%-10% surplus are "virtually nil", says Dumas, "meaning debt will escalate indefinitely, which is hardly surprising since only growth (or default) can reliably take care of a major debt problem." In some form, there will be a default.”
Those officials at the supranational financial institutions work in a little more obscurity. John Lipsky, who replaced the unfortunate Dominique Strauss-Kahn the IMF (unfortunate some thought even before his present difficulties) can hardly be accused of a generally low profile (or full face) – even though he is descended not from King William's bar sinister but from the owner of a furniture store. He joined the IMF straight from graduation and served as resident representative in Chile during Pinochet’s time. He then spent a decade and a half in the world of corporate finance with Salomon Brothers and J P Morgan. What exactly persuaded him to forego greater riches and return to the IMF as deputy director and later to reconsider his announced retirement and step into the shoes of DSK?
One must presume it was the overwhelming importance of the preservation of the international banking system. Or one should say prolongation. Everyone, in common with Charles Dumas and the cleaning lady, knows that the banks are going to have to face up to the fact, at some point, that the loans they made in Greece – and Ireland and Portugal – cannot be repaid in full, but the longer the day is put off the more wealth can be transferred from tax-payers to banks and the more state assets can be sold at fire-sale prices to private interests. Why bother about short-termism when the short term is so rosy?
Or take Jean-Claude Trichet, president of the European Central Bank, career French civil servant, former governor of the Banque de France, former head of the French Treasury, adamant opponent of any debt default or ‘reprofiling’. The ECB of course now holds quantities of the debt that might, will, be reprofiled. M Trichet, in the French style, has pursued a career more exclusively in the offices of state than his American and British counterparts but he has had some involvement with non-state banking and in 2003 was “put on trial with 8 others charged with irregularities at Crédit Lyonnais, one of France's biggest banks. Trichet was in charge of the French treasury at that time. He was cleared in June 2003 which left the way clear for him to move to the ECB.” Search Wikipedia and the FBI website for interesting skeletons in the Crédit Lyonnais cupboard.
Then there is Vitor Constancio, former serial governor of the Portuguese Central Bank, present vice-president of the ECB, a man in total agreement with his boss on the subject of haircuts and one who has given faithful service in the cause of keeping the rickety old bus of international finance on the road, for all the world like a back-street mechanic welding yet another piece of metal over the rust patches to get it through its next MOT test.
“During the global economic crisis, it emerged that two banks (Banco Português de Negócios (BPN) and Banco Privado Português (BPP)) had been accumulating losses for years due to bad investments, embezzlement and accounting fraud. In the grounds of avoiding a potentially serious financial crisis in the Portuguese economy, the Portuguese government decided to give them a bailout, eventually at a future loss to taxpayers. Because of that, the role of Banco de Portugal, headed by Constâncio, in regulating and supervising the Portuguese banking system has been the subject of heated argument, particularly whether Vítor Constâncio had the means to do something or whether he revealed gross incompetence, due to the fact that he knew that BPN accounts were wrong since 2001."
The one thing in all this that gives me a little solace is that, although the relationship between political and financial interests is thoroughly incestuous, in Europe and the US, bankers are appointed to run state treasuries, banks fund any political party that has a chance of office, politicians accept remunerative positions in commercial banks as soon as they can get away with it, the two do not quite coincide. You cannot, as an ambitious young man, aspire to be both Bob Diamond and Tony Blair (or even David Cameron), or Lloyd Blankfein and Barack Obama. They are different coal-faces, albeit that the miners at each work in constant hope of breaking through. That is why they have to indulge in such absurdities as Bilderberg, where, behind the shower curtains, the tinted glass and the riot police, the genuinely powerful rub shoulders with B list world dominators. If we were ever allowed to eavesdrop on their deliberations I think we would be more shocked by their motives and intentions than we would be impressed by the smooth efficiency of their machinations. That, however, is not to deny that they have signally succeeded in their purposes so far, and that political and financial elites have indeed successfully constructed, over the past half century, systems for transferring wealth from poor to rich both in national economies and in international trade. Yet, however successful, for instance, the World Trade Organisation has been in its undemocratic and inequitable purposes, it can hardly be accused of being any more of a smooth operator than international finance.
The next time our politicians tell us there is a danger the cash machines may stop working overnight they may just possibly have to decide which particular cash machines they wish to save – the ones in the walls or the ones inside the skyscrapers.
And also: "As City credit analyst Jan Randolph of IHS says: "The achilles heel of the Greek economy is tax evasion. If the rich paid their taxes there wouldn't be a problem." For "Greek" read also...
