Why European Citizens Are Angry With The Wrong People About Greece’s Bail Outs

Leiderdorp, a.d. XVI Kal. Sep. MMDCCLXVIII A.U.C.

Recently Greece’s third bail out was passed by European leaders, and subsequently by European parliaments (Source). Being a Hellenophile, I personally certainly am glad that this happened. However, there was a lot of criticism on this deal, ranging from empirically based views, arguing that this was just a ‘postponement of execution,’ as Greece would default at some point anyway, to morally based views, arguing that EU citizens should not have to pay for (according to some, lazy) Greeks.

To contend with the latter view, I think Greek citizens suffered most from the corrupt politicians that caused this mess in the first place. Preventing Greece from a complete catastrophe is the humane thing to do, and a government default would definitely cause a catastrophe for the people there. Moreover, I think asking Greece to reform its economy, and more importantly, its public sector, makes sense, as this realistically speaking is necessary. Syriza’s plans for Greece would only have let to a more bloated public sector, even if they would have prevented some human suffering on the short term. Lastly, as someone who believes in the European Union (although I realize EU reforms are necessary), I think some financial North-South transfers are necessary to keep the Union together.

However, morals aside, i think it very likely that Greece will default at some point in the future. The last bail out was about Greece not being able to service its public debts, in other words, other Euro countries lent Greece money, in order to pay back those very same countries. While refinancing debt is quite widespread, the degree to which Greece needs to do this, they need to take on more debt simply to pay the interest on their debt, is rather unstable. This sounds a lot like an EU orchestrated Ponzi scheme, which might very well turn out to be unsustainable. Yet, at the same time, it makes a lot of sense that EU leaders refuse to let Greece default, because they would have to explain to their constituents why they suddenly lost some € (Source). European leaders, thus, have every incentive to push off a Greek default as long as possible, preferably until after their term has ended.

Thus, European citizens certainly have reason to be angry, they are likely to lose money on a deal they did not ask for in the first place, even if they are in favour of a united Europe. The bail out is extremely detrimental to the EU’s image (Source), and rightfully so, because one thing has been completely ignored in most main stream media, namely the reason how we got into this mess (definition of a clusterfuck).

In 2012, as part of the bail out, European governments and institutions took on a large chunk of Greece’s debt (Source), thus saving Europe from a financial disaster. Banks wrote off part of Greece’s debt, and shifted another part of the debt to taxpayers. Anno 2015, it is these taxpayers that would have to pay if Greece defaulted, while most banks are safe and sound, because of the bail out they received. Initially banks took large risks (they must have known Greece was fraudulent), betting on bail outs if something were to grow wrong, and indeed they were bailed out. Thus all the gains would have gone to the banks, but all the risks were easily transferred to taxpayers in 2012, under the motto of ‘too-big-to-fail’. Pro- or anti-EU, EU citizens have every reason to be enraged by such blatant disrespect for them. With most European banks farther away from cliff’s edge and other Southern-European governments and Ireland removed from immediate danger, it should be time to start asking banks to take further losses. If Greece defaults, it should first and foremost default on private creditors, not the IMF or EU institutions.

In other words, the Greek public debt crisis is not only about keeping the EU together, or saving many Greeks from suffering, the public debate should just as much have been about how we want to structure our monetary system and economy. Public outrage should not have been pointed at the average Greek citizens, it should have been pointed at European politicans and bankers, who cooperated in a transfer of wealth from the taxpayer to the private investor. Both socialists and liberals should not want the current system, the former, because the bail outs were a transfer of wealth from the poor to the rich, the latter, because all companies should abide by the laws of the free market, while right now everyone is equal, but some more equal than others.

Bottom line: EU citizens have every right to be enraged by the third bail out of Greece, but they should focus their anger on banks and politicians, both Greek and non-Greek, and not on ‘Kostas the plumber.’


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