Sorting out the numbers in modern Greece is like trying to reconcile the irreconcilable
In ancient Greek, ta mathematika means the ‘things that are known’, from which we derive ‘mathematics’. Sorting out the numbers in modern Greece, however, is like trying to reconcile the irreconcilable.
Greece cannot begin to repay its monstrous debts: some of us guessed this would be the case long before Greece joined the euro, in 2001, before the blood-sucking Goldman Sucks doctored the numbers down. The creditor banks agreed to a 20% haircut last summer, but now they are being asked to forego 70% of their loans.
The banks are stuck at 50%, on the basis that foregoing 70% is as near as dammit the whole 100%, so they want to shovel some pain back onto the borrower, understandably. Behind this charade is a bigger issue: if there is an agreed haircut, Greece is not technically defaulting, so CDSs on Greek debt will not be triggered. If they are, the losses will spread to God knows which banks.
And again, there is another bigger issue: the ECB is not part of these discussions, but is sitting on €40 billion of Greek bonds as a result of its recent “limited” market operations; however, it has a lesser standing in the bank’s pecking order in the event of default. Ouch! And the biggest issue of all is that without an agreement over the size of the haircut, the next €120 billion bail-out for Greece will not happen.
All these manoeuvrings are designed to leave Greece with debt of just 120% of GDP post that bail-out, the same level as when Greece joined EMU ten years ago. You don’t have to be a mathematician to work out something clearly does not quite add up here.
Say Greece pulls off this coup, or rather pulls the wool over the eyes of all its creditors, can it recover from 120% debt? Answer: not on the evidence of the last decade, no. So why is everyone burying their head in the sands, and pretending that mathematics no longer exists? Answer: it’s all about saving the eurozone if you are not a Greek, but all about repeating the con of the first decade of EMU if you are a Greek – after all €100 billion of debt write-offs every decade means the Greeks might as well go on living in, or off, the eurozone.
What Merkozy is worried about is that if Greece is ejected from the euro-club, the precedent could easily appeal to the rest of the PIGS, and the euro will be no more. Would this be a bad thing? Not as far as anyone who does mathematics can tell. So Merkozy has resorted to hysterical claims that the euro has kept the peace of Europe for 67 years, although it has only been around for the last 12 of those years: German defeat in 1945, the British Army of the Rhine, NATO and the nuclear deterrent have nothing to do with it, apparently.
Now the Merkozy rhetoric – rant might be a better word – is saying that the collapse of the euro would mean fresh war in Europe! They have nothing else they can say, is the only conclusion to such a nonsensical view. No wonder S&P sharpened their pencils last week, causing the usual screams from those in denial of basic maths.