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Foreign Correspondent

by international syndicated columnist &
broadcaster Eric Margolis
22 February 2010


NEW YORK - In Greek mythology, the fifth epic labor of Hercules was to clean up the manure created by thousands of oxen over three decades from the stable of Augeas.

Hercules cleaned the stable by diverting two rivers through it. Then, he went on to found the Olympics.

Today, Greece’s public finances are another Augean Stable. In spite of being a small nation of only 10.7 million, Greece’s financial mismanagement risks igniting the biggest financial crisis since the collapse of New York’s Lehman Brothers bank in 2008.

Greece’s new socialist prime minister, George Papandreou, will need the strength and wits of hero Hercules to restore Greece’s economy and prevent its crisis from infecting other financially weak members of the European Union.

Greece is rich by people, but historically impoverished by government. Greeks are very smart, tough, and fiercely hard-working. When Greeks settle abroad, they excel. For example, Greeks are believed to own over 25% of all restaurants and eateries in America.

But at home, in the cradle of democracy, Greeks have long been cursed by corrupt governments, political tribal warfare, mutual suspicion, and disreputable finances. The same holds for other Balkan nations.

In fact, Greece’s finances have been in the red for at least half of the time over the past two centuries. Interestingly, in the Ottoman Empire and Soviet Union, ethnic Greeks formed, along with Jews and Armenians, their principal money managers and financial experts. But not, alas, in Greece’s government.

Greece’s economy was unready to join the European Union when it was too hastily admitted in 1981, and remains equally unready today. Nor was Greece ready to join the euro zone. Bulgaria, Romania and the Greek portion of Cyprus were and remain similarly unprepared. Yet they were all welcomed into the union while Turkey’s 70 million citizens were given the cold shoulder.

In retrospect, it is clear that the EU was expanded too far, too quickly.

Now, the new government in Athens has admitted that Greece met the EU’s financial admission standards by falsifying its books.

Greece’s alternating conservative and socialist governments were both responsible for its dishonest finances and for pandering to every kind of special interest group they could find.

A third of Greek workers are employed by government. Belligerent public sector unions threaten paralyzing strikes and riots if they don’t get fully paid retirement at 61-63 years, generous wages, and long vacations. Athens in bracing for more violence as public sector workers refuse to accept necessary austerity measures.

Ludicrously, half of Greek taxpayers reportedly declare annual income under 12,000 euros, and pay no tax. Greek business is adept at evading taxes. Government corruption, both petty and grand, is ubiquitous.

Like President Barack Obama, PM Papandreou inherited a monstrous financial mess from the previous conservative government which claimed Greece’s deficit was only 3.7% of GDP, thus in line with EU regulations.

But the budgetary figures put out by this bunch of Aegean pirates were fraudulent. Greece’s real budget deficit was at least 12.7%. Athens owes billions in loans it can’t repay. $30 billion in loans alone are due this coming April. Athens will have to beg or borrow these funds somewhere.

A century ago, a fleet from western creditor nations would have bombarded Piraeus and Salonika, or seized the Partheon and carried it off, unless the Greeks paid up. Today, the EU does not even have an official mechanism for dealing with deadbeat members.

We also learn with Wall Street’s increasingly notorious Goldman Sachs bank reportedly helped Greece hide its debts through opaque financial derivatives worthy of Enron. So not only did Wall Street cause the current world financial crisis, New York’s money lenders also exported their sleazy alchemy around the globe.

In fact, previous delinquent Greek governments look like mere Aegean beggars compared to the titanic swindles concocted by Wall Street and their enablers in the White House and Congress.

Europe’s weak financial sisters, Portugal, Italy, Ireland and Spain risk infection from Greece’s crisis. Their debts are far too high, and financial reporting deeply unreliable. Britain, another major financial malefactor that became dangerously addicted to debt, also faces its own looming day of reckoning.

Meanwhile, Papandreou has had the hubris (a good Greek word meaning overwhelming pride) to demand the EU pay Athens’ debts.

In mythology, Greek gods destroy those with hubris.

It looks as if EU bigwigs Germany and France will have to rescue Greece. But their voters are just as outraged as angry Americans by growing governments debts and have zero sympathy for Greece.

Polls show 70% of thrifty Germans and French oppose rescuing the profligate Greeks. Chancellor Angela Merkel rightly asked why Germans, who must work until 67 before retiring, should bail out Greek workers so they can retire at 61.

And who else, asked German officials, would have to be rescued next? Italy just reported its public-spirited citizens have avoided taxes by stashing away at least $80 billion in Switzerland alone.

Russia’s PM Vladimir Putin just cuttingly observed that America is no better than Greece at handling its financial mess. In both cases, supposedly conservative governments permitted massive financial fraud and left an Augean stable of debt.

Putin’s comment is interesting. Russia has the world’s fourth largest monetary reserves. Moscow is expanding its political and military presence in Serbia, and could conceivably rescue Greece, thus renewing its influence in the Balkans. That would be a real strategic coup.

In the end, France and Germany will probably have to hold their noses and somehow underwrite Greece’s Mt Olympus of debts even though doing so would violate EU rules. The alternative is risking the spread of financial contagion.

Meanwhile, the continuing crisis is depressing the euro and undermining the entire EU. The first result is not so bad, since the overvalued euro hurts European exports. But the Greek crisis is also opening dangerous fissures in the already rickety structure of semi-united Europe.

If the crisis infects Italy, Spain and other Mediterranean miscreants, watch out. Many Europeans want the naughty Greeks kicked out of the euro zone and maybe out of the EU. Other delinquents like Romania and Bulgaria could follow. A smaller EU would be a stronger European Union.

Copyright Eric S. Margolis 2009.

Published at since 1995
with permission, as a courtesy and in appreciation.

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Eric Margolis
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The Toronto Sun
333 King St. East
Toronto Ontario Canada
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