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The Spanakopita Syndrome

By Jonathan J. Ariel - posted Friday, 1 July 2011

If you thought Australian cattle had it bad in Indonesian abattoirs, spare a thought for the Germans. These hard working, thrifty, productive, responsible and economically literate volk are nervously waiting to have their financial throats cut by fellow Europeans, in cahoots with the Obama administration: All in the name of ‘maintaining’ the Euro.

This week in Athens, a €28 billion austerity package must pass, in order to free another €12 billion from the €110 billion bailout, proffered by the European Union (read Germany and France) and the International Monetary Fund (read the United States).

If this is a loan, then that’s one thing. But if proves to be a gift, then it’s nothing less than a wrongheaded reward ostensibly from the economic maestros at 97 Wilhelmstrasse in Berlin to the economic miscreants in Syntagma Square for the latter’s years of shameless overspending and a pathological resistance to root and branch reform of the Greek economy.


Of course this isn’t the story apologists for a Greece feasting on other people’s money would have you believe. And for apologists, you don’t have to go all the way to the Plaka. Economic revisionists are thick on the ground in your own living room. On cable television. Take the Daily Show’s John Stewart. Now he is one funny guy. But to pin the blame of Greek debt on one firm, Goldman Sachs, only telegraphs what little he knows. But hey, it’s good to have a villain around isn’t it?

And what’s better than a richly paid American liberal talk show host exonerating up-to-their-chins in debt Europeans, for their own incompetence, by sheeting the blame on, you guessed it, the nasty types on ‘Wall Street’. That said his clip is indeed funny. To understand just how much poo the Greek economy is in, take a look at 10-year government bond rates across the Eurozone. On Monday 27 June the rates were:


Interest rate (%)

Recent change in rate (%)



0.06 (up) as investors in European banks fear taking a hit so as to stave off a Greek default.



0.10 (up)



0.30 (up). 



0.12 (up)



0.03 (up)

Greece 2-yr bond


1.08 (up) The 2 year rate has climbed 17 per cent since January

Bloomberg News quoted Kornelius Purps, a bond strategist in the Munich office of Italy’s UniCredit: “The Greek vote will increase nervousness. Even if the Greek parliament doesn’t vote in favour of the austerity measures, the European Union will probably still pay out some of the aid tranche but things will get uglier.” Without a bailout of some type, the Hellenic Republic faces the prospect of becoming the first Eurozone country to evade its debts, an event likely to drag down its (mainly) Franco-German creditor banks.

Northern European and trans Atlantic fears have been met with increasing anger in Greece. The Prime Minister, Mr Papandreou – hopefully only playing to a domestic audience – every now and then lashes out at the credit rating agencies, saying, "We’re seeking to shape our destiny and determine the future of our children".He speaks as though his Republic was not sinking in the stinking poo of their own making.

The recent French banks’ proposal to rollover 30 per cent of Greece’s debt (and pretend that it really is an asset on the balance sheet when the evidence says otherwise) came as a response to demands that private creditors help fix Greece’s debt problems. The bankers are hoping to have a basic plan ready by this weekend. Next Monday European finance ministers hold yet another meeting. The European Central Bank welcomes the French plan. However, this plan won't necessarily be taken up. Others holding Greek debt have their own views to air.


French President Nicolas Sarkozy calls for the Euro to be saved, presumably by any means. He is ably assisted by French bankers who are keen to keep their place at the head of any repayment queue by offering to “organise” an orderly solution for private creditors of the Greece’s debt problem.

The French have two objectives. First to muzzle German opposition to another taxpayer funded handout to Greece, and to ‘walk’ Standard & Poors and Moody’s through the ‘restructure’ (as they would have the world believe it is), all the while never using the  “D” (for ‘Default’) word. The second objective is to hope the rest of the EU’s creditor class nations ignore the fact that two huge French financial houses, Societe Generale and Credit Agricole, have controlling interests in Greek banks. The former in Geniki Bank and the latter in Emporiki Bank. But it’s not something the French broadcast prominently on their web sites.

Under the French plan, financial institutions would effectively tie their hands to Greece for a long, long time by committing to buy up to 30-year bonds. Long after retired French bankers took home golden handshakes and mind numbing bonuses.

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About the Author

Jonathan J. Ariel is an economist and financial analyst. He holds a MBA from the Australian Graduate School of Management. He can be contacted at

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