A great deal has been written about the banks, politicians and the economic crisis – who owns what to whom, how much and why – but Dan Hannan has a few very simple paragraphs in the DT this morning which reiterates the bottom line:
“Foreign financial institutions currently own 42% of Greek debts, and foreign governments 26%, the rest being owed domestically. By 2014, those figures will be 12% and 64% respectively. European banks, in other words, will have shuffled off their losses onto European taxpayers.”
The interminable shuffling of bailout money between governments and banks is doing nothing to protect the people from the catastrophic fallout of bad policy and regulation. Our Westminster Assembly assures us constantly that it is doing everything it can to resolve the national debt & deficit but you don’t have to look too closely to spot the anomalies (£6bn saved, £12bn given to the EU; increased money for wars; increased money for aid; doubling of our ‘contribution’ to the IMF and so on).
Golem XIV is still my favourite financial blog for getting to the bottom of what’s going on.
In this post from last month he asks something I’ve often wondered: why don’t banks have a ‘debt jubilee’. It makes sense that if I owe you £100 but you owe me £60, if we cross-cancel and I pay you £40 we’ll be quits.
UPDATE: Like me, you’ve probably noticed that any discussion of the euro-zone crisis and Greek debt inevitably includes a comparison to the 2008 collapse of Lehman Brothers. Raoul Ruparel, of the Open Europe think-tank, shows why the comparison doesn’t stand up:
“…the majority of those peddling this myth have a significant vested interest in avoiding a Greek default or restructuring. It was the European Central Bank that first floated the Lehman analogy. 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 default.
Many commercial banks across Europe have joined the chorus of scaremongers (“liquidity will dry up”, “contagion will spread”, “savings will be wiped out”, etc) for much the same reason. 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 socialised.”
And there’s that phrase again: privatised profits, socialised losses.
See also Plan ‘B’:
“The plan is distinct from a French proposal for private sector involvement in a second Greek bailout program and is being discussed despite European Commission President Jose Manuel Barroso and other senior EU officials repeatedly saying that “there is no Plan B for Greece.”