Thrilling Thursday – The Greek Tragedy Continues

Does Greece matter?  

As you can see from the chart on the right, Greece’s $360Bn in debt is mainly owed to the EFSF – the European Financial Stability Facility, which has loaned Greece $162Bn since 2010, rolling over half their debt into this “bailout” fund.  

Of course, it’s not actually a bailout fund if you have to pay it back, with interest.  Fortunately, for Greece, the interest costs are low (2% over EURIBOR, which is almost 0) but that’s not really the point when Greece couldn’t pay the original debts in the first place so adding more debt and more interest certainly wasn’t going to help.  

Here’s what happened.  In 2006, Greece was $220Bn in debt, about 70% of their GDP but it was worse than it looked because, since 2002, Goldman Sachs (GS) had been helping the Government hide debt from the EU by juggling their books.  This trick worked until the Financial Crisis, when Greece actually needed the money Goldman was pretending they had (kind of like sub-prime loans here).  A new Government was elected, uncovered the plot and Greece’s debt suddenly jumped 60%, to $345Bn without any benefit whatsoever from the borrowed funds.

With the uncovered shenanigans, the cost of borrowing shot up for Greece and they were rolling debt over at 10-20%, putting them $30-50Bn more in debt each year on interest alone until the EFSF was formed in June of 2010 and began to roll Greece’s debt at more normalized rates.  But it was too late – the damage was done because two years of EU dithering had cost Greece $100Bn.  

Even worse, the EFSF was a Central Bankster solution and essentially what it did was REWARD the people who sold Greece 20% notes by guaranteeing their EXREMELY RISKY PAPER as if it were AAA-rated.  

That’s not how bonds are supposed to work!  People putting the screws to a country for 20% interest on loans know damned well those loans have a high likelihood of default.  Not in the EU, apparently.  

And, of course, with Greece trapped in the EU, they couldn’t print their own money…