The news about the Greek financial mess is everywhere. Most people mistakenly believe that the fault lay solely on the people of Greece. It is true that part of the blame goes to years of corruption and tax avoidance by its wealthy. But how many people are talking about the role that Goldman Sachs played in this catastrophe.
Wall Street padded profits by leveraging the Greek economy with secret debt deals based on cooked up books. This entire crisis threatens to trigger another world economic crisis and it all stems from a secret deal that Goldman Sachs’ Lloyd Blankfein engineered.
According to a report from Bloomberg, Blankfein worked with former head of Greece’s Public Debt Management Agency,Christoforos Sardelis, to help the Greek government hide the true extent of its national debt.
The first part of the debt deal was struck in 2001, when Greece owed about 600 million euros ($793 million) more than the 2.8 billion euros it had borrowed. Goldman then cooked up an off-the-books derivative for Greece that disguised the shortfall but increased the government’s losses to 5.1 billion euros.
In 2005, the deal was restructured and the 5.1 billion euro debt was locked in. After that, Goldman and the rest of Wall Street pulled the global economy to its knees—whacking Greece even harder.
The complexity of the deal helped Goldman reap a bigger payday. In fact, the loan was so confusing that even the Greece government had trouble understanding it and thought it was much cheaper than it actually was. The Bloomberg report simplifies the situation with this telling quote:
Like the municipalities, Greece is just another example of a poorly-governed client that got taken apart … These trades are structured not to be unwound, and Goldman is ruthless about ensuring that its interests aren’t compromised — it’s part of the DNA of that organization.
Did any of its executives ever go to jail? Of course not. They all got fat bonuses and promotions. Blankfein, now CEO, raked in $24 million in 2014 alone. Meanwhile, the people of Greece struggle to buy medicine and food. Where is our outrage?
Okay. So let’s say that the Greek people bear some responsibility for mismanaging their financial situation and letting the sharks rake them over the coals. What’s the cost of this lesson. According to economists Thomas Piketty and Jeffrey Sachs in a letter published by The Nation, Euro austerity measures have hit Greece’s vulnerable population the hardest.
40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent.
Most people agree that debt restructuring must be part of any solution for economic reforms in Greece. But what the European powers have done is add additional eleventh-hour, draconian demands that Greece slash pensions even further, privatize even more core state functions, and attack unions and workers’ collective bargaining rights.
What has the U.S. done? We’ve stood by and done nothing. Not only do we have diplomatic influence, we are also a charter member of the IMF – we can actually vote in favor of better terms for Greece. Obama and Secretary of the Treasury Jack Lew could use these tools to help steer this crisis away from catastrophe.
We can demand action, help push the powers along for solutions, or we can idly stand by and watch the people of Greece absorb the full brunt of an American-made economic implosion. We can also draw a line in the sand and let everyone know that austerity is off the negotiating table.
If we don’t, then guess who are the criminals of the Greek debt?
Post note: Yeah, I shamelessly pulled text from a Moveon letter that I got. So what? It’s a serious situation. I donated and I’m activating.