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Greek Debt Crisis Caused by Military Spending, Deficits, and Goldman Sachs Corruption

By Erik Fair and Beat Balzli

Al-Jazeerah, CCUN, July 6, 2015

Editor's Note:

The Greek tragedy of insolveable national debt is a lesson to all nations of the world to be careful about their financing. Otherwise, they become slaves to the international usurious financial system.

To avoid a similar Greek financial tragedy, nations need to spend within their ability to pay for their expenditure, to avoid the temptation for high military spending, and not to fall to the trap of international bankers, such as Goldman Sachs, who facilitate borrowing while knowing that borrowers may not be able to pay back their debt.

More important is not to trust politicians, who are elected to lead governments in the corrupt capitalist-democratic systems. These are more likely to be servants to the donors who enable them to get elected, then blackmail them to accept the enslavement of their nations through debt.


How do you explain the Greek crisis to a layman? What is the crisis all about?

By Erik Fair

Quora, June 29, 2015

It seems impossible to have a unbiased opinion about the Crisis in Greece, but could we try to create a list of real facts about the situation in Greece that allows us to judge by ourselves?

  1. Greece committed Fraud to join the Euro (currency) and Eurozone: they materially misrepresented the state of their national finances in order to meet qualification requirements for Eurozone membership, with the aid of Goldman Sachs; see 
    Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt
    , and they consistently falsified their national economic statistics: In Greece, A Technocrat Faces Life In Prison.
  2. Greece subsequently borrowed excessive amounts of Euros at low interest rates in gross violation of their treaty obligations under the Stability and Growth Pact.
  3. Greece borrowed so much because its Transfer Payments and government expenditures consistently exceeded tax revenues, and the Economy of Greece is grossly inefficient, so there's not enough tax base to tax even if Tax Evasion wasn't endemic in Greek Culture. Which is to say, Greek government Fiscal Policy was not sustainable: if they can't borrow money without limit, they crash.
  4. When the most cautious private creditors sold off their holdings of Greek Sovereign Debt, that triggered the 2008 Greek Financial Crisis. That was the Bond Market saying, "no more borrowing for you we don't think you're going to pay us back with interest as contractually required/agreed."
  5. Remaining creditors took an 80% "haircut" (loss) on that debt as part of the first rescue/bailout deal. Anyone who says there hasn't been any debt forgiveness to Greece as part of this mess is ignorant or lying.
  6. Greece has been living on the quite charitable good graces of the rest of the Eurozone member nations and "the Troika" (a.k.a. "the institutions", meaning the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Commission) ever since.
  7. In the 4th quarter of 2014, prior to the Greek Parliamentary Election 2015 which brought SYRIZA into government, the Economy of Greece had begun to experience Economic Growth for the first time since the crisis began, and the national budget was in primary surplus (exclusive of debt service) - the January 2015 election and subsequent events undid that progress.
  8. Greece is demanding yet more debt forgiveness as part of a third bailout deal.
  9. Greece has refused to fully implement all of the required and necessary changes to its laws and government budgets for Economic Growth and Global Competitiveness (despite repeated exhortations from its creditors) which would make it possible for Greece to both service and ultimately pay off the debts they've voluntarily incurred.

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt

By Beat Balzli


Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers they are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.


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