Greece's Odious Debt, By Jason Manolopoulos

A tragedy, from the nation that invented it
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The Independent Culture

It is a sad and devastating tale – and one that is far from over.

Greece's financial collapse, echoed by that of Ireland, Portugal, and maybe others, has led to misery within Greece itself, undermined the European banking system, and may yet come to be seen as the event that started the break-up of the eurozone. Jason Manolopoulos's subtitle describes it as "The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community", and it is a story with few heroes and many villains. Heading the latter group are the Greek political leaders but there are also the bankers, who lent the country the money or encouraged others to do so without asking too many questions, and a European Union establishment that drove through a political project, the euro, ahead of economic realities. There are also many victims, not least the ordinary Greek people who now have to suffer years of austerity.

Most of us are familiar with bits of the story and aware of the social and economic strains in Greece itself. But until now there has been no straightforward analysis of the sequence of events that led to the collapse, still less a sketch of how the story might end. Manolopoulos is a Greek hedge fund manager, and so doubly qualified to provide this.

He starts by pointing to the parallels with Argentina, which also tried to use a currency peg, in that case with the dollar, to cut the country's borrowing costs and thereby fund a brief boom. But both countries failed to follow through with economic reforms or tackle deep-seated problems of corruption and bureaucracy. Argentina had to abandon the link and devalued, defaulting on its debts; Greece, as a member of the eurozone, is unable to do that and so has been forced into austerity by its EU partners.

The author is tough on Greece but he is also tough on Europe. The euro was mis-sold and the temporary bail-out has made matters worse.

But some of the most effective passages are simply quotes from public and private sector experts. Here is the EU commissioner Joaquin Almunia in January last year: "A bail-out is not necessary and will not exist." And from the French bank Société Générale, in December 2009: "So Greece should have no problem funding itself over the coming year and probably at much lower yields than today."

And the end of the story? Given what has happened you'd be brave to quarrel with the view that: "The euro as currently configured stands little chance of survival." At least not for Greece.

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