Editor’s note: In my frequent travels to Greece on business, I have witnessed firsthand the devastation which has been visited on this beautiful land by the nation’s European lenders. But the legacy of the corrosive and misguided actions of the nation’s former Prime Minister Alexis Tsipras – an atheist and former member of the Communist Youth of Greece – and his government in dealing with the nation’s fiscal crisis, and his fecklessness in dealing with the Troika particularly, makes him complicit in the spoliation of the country. Tsipras lied to his nation as he came to power on an anti-austerity platform. Yet, despite the fact that 61% of the nation voted to reject the European conditions for a bailout only days after the vote he agreed to the suffocating conditions of the bailout. For his part, Mr. Tsipras was more concerned with whether the Former Yugoslav Republic of Macedonia (FYROM) – a largely Slavic and Albanian nation with no claim to the legacy of Alexander the Great and with perhaps irredentist ambitions for a united Macedonia – could keep the name “Macedonia” in its country name than in navigating the nation through its perilous economic shoals.

The assault of the Troika – the triumvirate of the European Commission, the International Monetary Fund, and the European Central Bank – on the sovereignty of Greece was harsh, unrelenting, and meant to punish the small nation for its apparently spendthrift ways. Ten years after Greece received the first tranche of bailout monies, the nation remains under strict supervision to repay its foreign lenders, principally Germany and France, at the expense of further impoverishing its people, and strangling its economy. As a result, Greece will remain forevermore under scrutiny by its lenders until the approximately $400 billion debt is repaid – which is to say forevermore.

“The fundamental reason why the Greek crisis [has, my italics] lasted so long was the extreme level of austerity that was imposed.” So, says, Ashoka Mody, a former deputy director of the IMF, in his book, Euro Tragedy: A Drama in Nine Acts. Mr. Mody, has gone on to say that the IMF should have “…insisted on a restructuring as a condition of its participation.” It was, however, mind-numbingly irresponsible of Mr. Mody and others at the IMF that they didn’t raise a loud and bloody hell at the time knowing full well that Greece’s debt was unsustainable as many of us on the outside understood.

THE CRISIS IS OVER!

Disgustingly, some Greek politicians are hailing the “end” of the crisis and disingenuously claiming, as Euclid Tsakalotos did, that “…things are improving and people can see that they are improving.” Mr. Tsakalotos, Minister of Finance in Tsipras’ Syriza radical-left government and a student member of the Communist Party of Greece while at Oxford, was reacting to a debt relief deal struck with the Eurozone that would allow Greece to begin to repay its debt in 2032. But, no amount of debt relief – “relief” is merely a euphemism for digging a deeper grave – will make up for a shrinking economy. In any event, that “things are improving,” as Mr. Tsakalotos alleges is more a statement of political expediency than of economic reality, and is the furthest thing from the truth. According to the Organization for Economic Cooperation (OECD), nearly one-third of the population of Greece is living near poverty. Retirees are living with reduced pensions; employers are “hiring” without contracts to avoid making social security and health contributions; and employees with bona-fide jobs can go months without pay while always keeping an eye on the calendar as their one-year anniversary approaches after which it becomes more difficult for them to get fired.

“CONTAGION” IS SCAREMONGERING BY THE EUROPEAN UNION

It has been my position for years that Greece should unilaterally repudiate its debt as it stands and restructure existing bonds at no more than, say, 20%. Interest arrears would be off the table in my scenario.  Clearly, easy credit fueled the Socialist practices of current and previous Greek administrations and it is clear, as well, that no one was minding the shop as the nation lived well beyond its means. What is done is done. But, make no mistake about it, the longer a voluntary default is forestalled the greater the cost will be to both Greece and its European lenders. And, an involuntary default might be inevitable anyway.

The strongest expressed argument coming from the Eurozone against a voluntary default is that it would lead to “contagion” that would spread to other countries. But contagion is precisely what is being precipitated by straight-jacketing the Greek economy with austerity measures that will deepen an already deep recession. These austerity measures will almost guarantee that the growth needed to pay an increasing debt obligation is precluded. And, rest assured, the Greek economy is flat-lining if not eroding. Unemployment currently stands at over 18% (the highest in the European Union), with youth unemployment running at twice that rate. The nation also faces serious long-term demographic challenges. Since the height of the financial crisis in 2008 to the present, Greece has seen more than 500,000 of its citizens or nearly 5% of its population – mostly young and educated citizens – leave the country. Dr. Giannis Ioannidis, Professor of Medicine, and a specialist in statistics at Stanford University, for instance, reckons that only about 14% of the approximately 672 Greek scientists of world-class stature make their home in Greece. And, this is not likely to get better anytime soon as the nation’s fertility rate of 1.35% is much below the required rate of 2.1% needed to maintain the population stable. A scarier demographic scenario can hardly be imagined as the nation will continue to atrophy in size.

No bailout is worth the loss of sovereignty that is in full bloom in Greece at the hands of the bureaucrats in Brussels and who already are making noises about not having enough control over the sovereign nation’s budget. The United Kingdom which had a lot less to lose than Greece voted 52% to 48% to exit the European Union in June of 2017 precisely because they didn’t want Eurocrats calling the shots.

I would give the Eurozone lenders a take it or leave it offer. Either they take the proffered haircut at 80% or Greece returns to the drachma, converts the remaining debt at the old exchange rate of 350 drachmas to the euro, prints money and thus ends up in a better place financially. Meaningfully, credit-card-toting bureaucrats will not be telling Greece how it should run its internal affairs. This path of devaluing the currency will work by ratcheting down prices across the board and thus encouraging entrepreneurs to again take measured risks in lieu of running to offshore locations. It is true, the country will be excoriated in the European and American press and the economic, social, and political flak in the short term will be unceasing. Creditors, too, will have their day in court. Nerves of steel will be the order of the day.

IS ARGENTINA THE MODEL?

The roughly 50% write-down agreed to by Greek bondholders in 2011, in large measure under duress, as part of the bailout has proved to be a Faustian deal.  Again, with little or no economic growth all the debt swaps in the world will fail to work miracles. And, for all of the talk about how Greece cannot be trusted to pay its debts unless it puts up sufficient collateral – some countries have suggested including the Parthenon and some Greek islands as collateral – the country has begun mortgaging its infrastructure by disposing of utilities, airports, seaports and highways mostly to international consortia. Clearly, fire-sale privatizations were also part of the bailout scheme. But it doesn’t end there. The esoteric shell game cooked up by the European Central Bank known as the Securities Market Program, allowed the bank to buy Greek bonds in secondary markets at deep discounts while selling them at par. The profits, which should have been returned to Greece are in arrears to the tune of nearly $10 billion.

The unarticulated reason for protecting Greek bond-holders throughout Europe, and the raison d’être for the Eurozone, in the first place, is that Germany covets as many captive, non-manufacturing country markets for its products as it can stand on the backs of its own citizens. It is clear that what Germany did not accomplish with tanks during World War II it is accomplishing with the complicity of the euro. In fact, it is an undervalued euro – in combination with relatively low wages – which in large measure explains Germany’s world-leading trade surplus of nearly $300 billion in 2019. Lest there be any doubt in anyone’s mind about German designs, it must be remembered that beginning in the late nineteenth century prominent German economists, politicians, and scientists held the view that it fell to Germany to “organize” the continent of Europe. That is hardly a faded dream. To this day that theme persists. German Sociologist, Wolfgang Streeck, author of How Will Capitalism End? Essays on a Failing System, for example, hails what he calls a “consolidation state” where a nation state’s market-conforming fiscal policy, a policy of austerity, and debt service take precedence over public policy.

There is no ignominy in being associated with an Argentine-styled default. Certainly, no more scorn could possibly be heaped on Greece than by those who have taken to the airwaves, social media or their print presses across the globe and spoken of the country’s “moral collapse.”  There is life after default, however. Argentina is proof of that. Argentina’s 2001 default restructuring offered investors a 70% haircut, which three out of four investors accepted. That was a wise decision on the part of investors as the country was not open to further negotiation.  The restructuring was also a wise decision on the part of Argentina as GDP subsequently soared. That Argentina has suffered additional defaults since 2001 speaks as much to creditor greed as it does to the fiscal mismanagement of South America’s second largest economy.

CAN ANYTHING ELSE GO WRONG?

Adding to Greece’s financial woes are two other exacerbating factors neither of which are of Greece’s doing: The first is the migrant crisis which has seen over one million refugees transit through the country. An equivalent percentage of migrants into the United States, by way of example, would amount to over thirty million people. The migrant crisis was born of German Chancellor, Angela Merkel’s open border conceit and financial leverage over a diffident Greek government but it is aggressively fueled by Turkish smuggling bands. Many Greek islands of the Eastern Aegean – Kos, Lesvos, Samos, and Chios have been particularly hard hit – have been turned into public sewers by the migrants which have overrun historically pristine beaches, desecrated Christian crosses, complained about Greek food and free accommodations, caused civil disturbances, and helped fuel a surge in prostitution. The European Union, an amalgam of 500 hundred million people, now finds reason to rebuke a nation of under eleven million for not doing enough for the migrants.

Now comes the onslaught brought on by the Chinese Communist Virus. The current Greek Prime Minister, Kyriakos Mitsotakis, panicked and overreacted by taking a heavy hand to impose severe lockdown conditions on the country such as banning inter-city travel, closing schools, shuttering places of worship, and enforcing early evening curfews. Violating lockdown restrictions can cost a citizen up to 600 euros. This, in addition to the imposition of a fine – the Prime Minister refers to this as a “health fee” – of 100 euros per month for citizens who are over the age of sixty and who remain unvaccinated.  This group of citizens, incidentally, amounts to all of 17% of the cohort population. The Prime Minister, however incongruously, has seen fit to re-establish diplomatic relations with the murderous regime of Syria’s Bashar-al-Assad whose civil war has cost the lives of approximately 500,000 people.

LET’S START AT THE BEGINNING

Against this backdrop, I would move to reopen negotiations with the European lenders. The point of departure for a new set of negotiations would start by taking account of the Romans’ endless pillaging of Greece; or the Venetokratia, following the sack of Constantinople during the Fourth Crusade, which lay waste to the Byzantine capital. The looted art treasures served to adorn Venetian churches such as St. Mark’s with friezes, enamels, columns, capitals, mosaics, and the four copper-gilded horses stolen from the Hippodrome; or the horrific savaging of the Parthenon, destruction of its statues, and plunder of the Piraeus Lion – which majestically but most shamefully stands guard at the Arsenal in Venice – by the sadistic Venetian Doge, Francesco Morosini, who was hailed at home for his bestiality; or by the thievery of ancient Greek marbles by Lord Elgin who to this day is defended by British Prime Minister, Boris Johnson for his actions; or the theft by French historian Emmanuel Miller of caryatids from Thessaloniki in 1864 which are housed in the Louvre Museum; or the winged Nike of Samothrace which commands the top of the staircase at the Louvre and which was appropriated by Charles Champoiseau in 1863; or the depredations of the Franco-British legations who attempted to destabilize the nation during the First World War; or by the savage and site-damaging excavations by amateur archaeologist Heinrich Schliemann including the demolition of Frankish treasures at the Acropolis; or the incalculable death and destruction suffered at the hands of the Germans and the Italians leading up to and during the Second World War. Clearly, if Greece calls in all of these IOU’s, Greece and its European lenders will be all fair and square.

Raul Pupo

Management Advisor