Merkel's Mistake: Greek Bailout Actually for German, French Banks
04 May 2010. While it deserves a full Featured Analysis, which it will receive at some point in the not-so-distant future,
one of the points that has tended to become lost in this whole discussion of the Greek bailout
is that the REAL beneficiaries of the whole operation are not the Greek people -
although they ARE the ones who will suffer most from the brutal austerity program that is only going to make their lives more difficult -
but the FOREIGN BANKS - MOSTLY FROM GERMANY AND FRANCE - that are the actual holders of Greek government bonds.
Why no one seems to have told Merkel this is beyond me - or maybe they DID tell her, but she ignored them.
The fact is, though, a European bail-out of Greece is simply transferring money from the right hand to the left,
as pointed out here in this excellent News Analysis of the situation in the New York Times:
Embedded in the euro and thus no longer in control of its own currency, Greece cannot take the easy way out of its debt by devaluing.
So Greece must either cut its spending sharply or default on its loans — which would badly damage German and French banks carrying a lot of Greek debt.
That is considered one reason President Nicolas Sarkozy of France has been so quiet on the Greek crisis, Mr. Fitoussi said.
The Greek deal “is an indirect way of bailing out French and German banks,” he said. “The French understood this from the start, but Germany didn’t seem to.”
Katinka Barysch, an economist and deputy director of the Center for European Reform in London, said that that realization had hit home in Germany.
“It might be unpopular for the Germans and Europeans to bail out Greece, but it will be even more unpopular for them to bail out the banks that owned Greek bonds,” she said.
04 May 2010. While it deserves a full Featured Analysis, which it will receive at some point in the not-so-distant future,
one of the points that has tended to become lost in this whole discussion of the Greek bailout
is that the REAL beneficiaries of the whole operation are not the Greek people -
although they ARE the ones who will suffer most from the brutal austerity program that is only going to make their lives more difficult -
but the FOREIGN BANKS - MOSTLY FROM GERMANY AND FRANCE - that are the actual holders of Greek government bonds.
Why no one seems to have told Merkel this is beyond me - or maybe they DID tell her, but she ignored them.
The fact is, though, a European bail-out of Greece is simply transferring money from the right hand to the left,
as pointed out here in this excellent News Analysis of the situation in the New York Times:
Embedded in the euro and thus no longer in control of its own currency, Greece cannot take the easy way out of its debt by devaluing.
So Greece must either cut its spending sharply or default on its loans — which would badly damage German and French banks carrying a lot of Greek debt.
That is considered one reason President Nicolas Sarkozy of France has been so quiet on the Greek crisis, Mr. Fitoussi said.
The Greek deal “is an indirect way of bailing out French and German banks,” he said. “The French understood this from the start, but Germany didn’t seem to.”
Katinka Barysch, an economist and deputy director of the Center for European Reform in London, said that that realization had hit home in Germany.
“It might be unpopular for the Germans and Europeans to bail out Greece, but it will be even more unpopular for them to bail out the banks that owned Greek bonds,” she said.