The agony of watching a country (and a planet) slip.
Readers will be aware that I very rarely stroll through the tangled pastures of international politics and finance. The only reason that I do so today is on the back of a very impressive letter published in the German newspaper Handelsblatt. That was brought to my attention by my subscription to Mike Shedlock’s (Mish) Blog Mish’s Global Economic Trend Analysis. You will see that I muse at two levels about where we are today.
Earlier, I had read in last Saturday’s, The Economist a leader on Greece’s debt crisis, entitled Trichet the intransigent. That started thus,
The European Central Bank’s refusal to consider a restructuring of Greek debt could wreck the euro zone
May 12th 2011 | from the print edition
IF THE stakes were not so high, Europeans’ incompetence in the euro-zone debt crisis would be comic.
and concluded thus,
It is time for the Germans and the IMF to call the ECB’s bluff. Together they should demand, and instigate, a restructuring of Greek debt. Germany should push other European governments to cough up money to support Greek banks and, if necessary, to make whole the ECB. The fund, which knows how to restructure debt, must ensure the process is run in a competent manner. The ECB will then be faced with a choice: go along with an orderly restructuring, or trigger a much greater mess by in effect forcing Greece out of the euro zone. Surely Mr Trichet does not want that to be his legacy.
So with that as background, the letter to Georgios Papandreou, Prime Minister of Greece written by Gabor Steingart is powerful and hard hitting. Here it is in full.
Mr. Prime Minister,
Dear Mr. Papandreou,
With the greatest respect, the Western world is monitoring your efforts to master your country’s debt crisis. No other democratic country has ever managed anything like that in peacetime. You are shrinking the state apparatus; you are fighting corruption; you are teaching your fellow countrymen how to become honest tax-payers.
You are a modern hero. You are attempting the impossible. As the son of a persecuted and ostracized politician who was chased by the military junta you grew up close to danger. When the officers were looking for your father who was hiding in the attic, they threatened you by putting an unlocked pistol to your forehead and challenged you to betray your father. You denied your father’s presence until he, worried about his son’s life, left his hiding place.Later you fled with him to America where you spent your adolescence. You are alarger-than-life-character.
Preceding governments almost ruined your country. Debts amounting to 340 billion Euros are burdening the Greek state,equaling 155 times the profit of the 60 largest companies of your country and 1.5 times the amount of debts the Maastricht Treaty allows. A year ago, this newspaper, Germany’s biggest Business Daily, appealed to the public to buy Greek government bonds in order to give to the country what Greece needs just as urgently as money: confidence. We also wanted to assist in breaking through the negative spiral of growing doubt and increasing interest rates. Everyone who granted you guarantees and loans wanted it, the European Union, the International Monetary Fund, the heads of state and government.
But since then, the spiral has picked up in speed instead of slowing down. In May 2010 the interest rate at which your country was given money on a ten year basis was at eight per cent. Today, it is at 16 per cent. And in all probability, it will be going up further. The bitter truth to which you and all parties who wanted to help Greece have to admit is that the help doesn’t help. Your country is getting deeper and deeper into the mess. Debts are growing, the gross national product will decrease by at least three per cent in 2011. But it would have to grow by three per cent instead if you were to lower your debt to the allowedlimit until 2040. This is becoming more and more unrealistic. You can’t starve and build up your muscles at the same time.
The truth that Greece has to cut back and save has turned into an untruth. The right thing has turned into the wrong thing. You already cut pensions, lowered the salaries of civil servants by 30 per cent and raised the prices of gas by almost 50 per cent. You can’t restore the health of your country by saving. And the European Union can’t restore your country’s health by again and again injecting new loans.
Soon, the day will come when the tortured body will surrender. The Greek construction industry already shrank by 70 per cent. Sales of car dealers sank by half. A daily export volume of 50 million Euros Greece is achieving far too little. Soon the day will come which investors fear in their nightmares. Then the word “insolvency” will be on everyone’s lips.
But it is also the day when a new truth will be born: Don’t save but invest, they will tell you – so that the Greek economy will grow again. Do not service debt with debt, you then will be recommended, but spread out the debt service, cut it and maybe even completely suspend it for a while. It will be a day of impositions, especially for those who lendmoney to you and your people. Financial markets will grind to a halt in horror – and then they will turn to embrace the future. Because Argentina in 2001, Mexico at the beginning of the eighties and Germany after World War II taught us that there is a life after death – at least, in the case of highly indebted states.
Mr. Papandreou, so far, you attempted the impossible. Now you should do the possible. Just as you deceived the officers as a boy and denied to know where your father was hiding you now must repudiate the pride of the Greeks – in order to save your country. Come to meet the new uncomfortable truth before it knocks at your door. It’s already on its way.
The author is an award winning Journalist, the former White House Correspondent of “Der Spiegel” and now Handelsblatt’s Editor-in-Chief. His book “The war for wealth. The true story of globalization or while the flat world is broken” was published in the US, GB, China and several other countries by McGraw Hill, New York, in 2008.
You may contact him at
Powerful, as I said.
In a sense, in a very real sense, this illustration of the end game of our love affair with debt is symptomatic of the end game in terms of mankind’s love affair with, well with mankind. The following was written by an inmate of Oklahoma Prison in 1998.
At the root of my humanity lies a potentially insatiable self-centredness. Given its way, it can become unquenchable. Nothing, not even the richest of imagination, will put out its fire.
This ‘what’s in it for me’ mindset is at the root of all my problems and is where my fears live. From those fears come anger, greed, intolerance, and a host of other shortcomings.
It is no accident that all religions point to the forgetting of self, because all religions know salvation lies in self-forgetting.
As we head relentlessly towards a level of 400 parts per million (PPM) of carbon dioxide in the atmosphere, 50 PPM above the highest safe limit determined by climate scientists, the time for mankind to move on from the debt-laden, over-leveraged, disconnected life from Planet Earth, is now.