The narrative of the Greek debt crisis seems to be that a nation has been living it up subsidised by European taxpayers through bailout money. The reality, however, is far different.
Greece has a 25 per cent unemployment rate, a third of the people live below the poverty line, 300,000 are living with no electricity, and infant mortality rates have jumped over the years. These problems are largely due to forced budget cuts of the past five years. Between 2009 and 2011, hospital budgets were cut by 25 per cent, while pharmaceutical spending was cut in half, leaving 800,000 people lacking health services.
Now, it is quite clear that the further budget cuts that the Troika is currently demanding will only deepen this humanitarian crisis. How did Greece fall into such an economic disaster?
In 2002, Goldman Sachs secretly bought up €2.3 billion in Greek government debt, converted it all into yen and dollars, then immediately sold it back to Greece. Goldman took a huge loss on the trade.
The deal was a con, with Goldman making up a phony exchange rate for the transaction. Goldman had cut a secret deal with the Greek government in power then.
Their game: to conceal a massive budget deficit. Goldman’s fake loss was the Greek government’s fake gain.
Goldman would get repayment of its “loss” from the government at loan-shark rates. Greece’s right-wing free-market government was able to pretend its deficits never exceeded 3 percent of GDP.
This met the entry criteria for the euro. Goldman charged the Greeks over a quarter of a billion dollars in fees.
When the new Socialist government of George Papandreou came into office, they opened up the books and Goldman’s bats flew out. Investors’ went berserk, demanding monster interest rates to lend more money to roll over this debt.