Greece Is Bankrupt (Morally at least) - Τάκης Μίχας - The Wall Street Journal Europe

The Wall Street Journal Europe

10 February 2010

 Greece Is Bankrupt (Morally at least)

 By Takis Michas

In Greece, as elsewhere, if the management of a company reports misleading figures about the company’s financial situation in order to boost the price of the shares or to support the sale of securities, it risks facing criminal charges. Around the world, including in Greece, this is securities fraud.



But in Greece, unlike elsewhere, if those responsible for the deception are members of a (previous) government and if the victims are “foreigners” (“xenoi,” in Greek) they run no such risk. The most they can expect is slap on the wrist and a mild “Please don’t do it again!”

This in a nutshell describes the Greek financial situation. Although it is certain by now that the former New Democracy government fiddled with the statistics in order to boost Greece’s economic image with investors, no legal charges have been brought against either the former prime minister Costas Karamanlis nor his economic entourage. Yet the conscious distortion of the figures concerning Greece’s fiscal deficit clearly constitutes deception of the perspective buyers of Greek debt. The latter were led to demand a much lower risk premium than they would have, had the true facts of the situation been known to them. And although the present prime minister George Papandreou was brave enough—by Greek standards—to reveal the magnitude of the financial misdeeds of the previous administration, he nevertheless shied away from ordering a full scale investigation into this fraud.

The unwillingness or inability of the Greek legal and political system to seek out and punish the perpetrators of this act of disinformation has created a moral vacuum in which all kinds of conspiracy theories flourish. They all have in common that they blame the victims—the holders of Greek debt—for Greece’s present predicament. Everday, the Greek media are filled with stories about the despicable “speculators,” “profiteers,” “bankers,” “financiers,” and “Shylocks” that are to blame for the economic mess the country is in.

According to the dominant conspiracy theory, Greece is presently engaged in a gigantic fight to save the honor of the euro zone—believe it or not. The “attacks” of the “foreign speculators“ against Greece in effect represent an onslaught against the euro by all the “dark forces” (read: Americans) who do not wish Europe to prosper and assume its rightful place on the international scene. This is a discourse that goes down extremely well with the majority of the population. For 30 years, all of Greece’s political parties have fed them a steady diet of “anti-imperialist” rhetoric, according to which the causes of Greece’s misfortunes is always the xenoi and the machinations of “neoliberal profiteering.” So it comes as little surprise that such conspiracy theories are so popular. Indeed, when one does hear an average Greek say, “We can blame only ourselves” for the crisis, what he usually means is that Greeks hurt themselves by revealing to the “foreigners” the true size of the fiscal deficit. If only the present government had not revealed to the world the deception, Greece, according to this narrative, could continue to milk the “stupid Franks” for many years to come. In other words, the problem is not the size of the deficit per se but the fact the present government of Greece chose to tell the world about it.

In other words, Greece’s problem is not only economic. It is also moral.

“The fudging of statistical data,” says Prof. George Bitros of the Athens Univeristy of Economics and Buisiness, ”has been a long tradition in Greece and not just because of interventions on the part of the government.” He goes on: “It is a serious systemic failure that has its roots in the failure of the political system as well as the structure and lack of transparency in the public sector. This is to say that the cancer has spread deeper into the structure of the system and would turn even saints into Rasputins.”

Failing to punish those who bear the political responsibility for this massive deception will do nothing to restore Greece’s credibility among international investors. On the other hand instituting legal proceedings against those responsible may not necessarily pacify the markets but will definitely show the world that deception is not tolerated in Greece—even if the victims are the xenoi.

Mr. Michas writes for the news portal www.newtime.gr