The Greek Extortion Racket In Its Final Spasm

Wolf Richter's picture

Wolf Richter

A sad incident got picked up by the German national media, made even sadder by the very fact that it got picked up: in the tourist town Monemvasia at the southern tip of the Peloponnese in Greece, some local guys accosted a 78-year old Dutchman who has lived there since the 1990s. They thought he was German. So he corrected them. “German or Dutch, it’s the same thing,” they told him and broke his jaw and nose.

Two guys in their forties were arrested and charged. Police chiefs visited the victim in the hospital. And German tourists had one more reason not to vacation in Greece—though aggressions occur in all countries, including Germany, often with deadly outcomes. Nevertheless, fears of these kinds of incidents, mediatized strikes and tumults, and images of German Chancellor Angela Merkel as a Hitler figure have coagulated into a toxic mix. And Germans decided to vacation elsewhere. It’s going to be a tough season for the Greek tourism industry, the only industry that actually grew last year.

The Greek economy has shriveled for four years—in the last two years by nearly 15%. Small businesses cratered, unemployment is spreading like wildfire, and those who still have jobs watch their pay and benefits dwindle. The government, up to the gills in debt, is cut off from the capital markets and defaulted on part of its debt. The country depends on being spoon-fed by the bailout Troika—the ECB, IMF, and European Union. One spoon at a time. With periods of desperation in between.

The Troika has used this process as a carrot and stick, rewarding Greek politicians and bureaucrats for good behavior (promising and implementing reforms) and punishing them for bad behavior (reneging on reforms). And so the bailout fund EFSF transferred €4.2 billion in scheduled aid a few days ago, the first tranche of the second bailout package. But it was €1 billion short—the stick that all political parties should heed.

And the Greek political elite have used this process to extort billions from donor countries. Early November, Giorgios Papandreou, Prime Minister at the time, said a single sentence about a referendum on staying in the Eurozone, and it knocked worldwide financial markets into a vertigo-inducing tailspin. For that debacle, read... Greece’s Extortion Racket Jumps To The Next Level.

In early January, the new Prime Minister Lucas Papademos turned extortion against his own people to get labor unions to agree to Troika-imposed wage cuts. “Without an agreement with the troika and the ensuing funding, Greece faces the threat of a disorderly default in March.” Read.... Greece’s Extortion Racket Maxed Out.

“Disorderly default” has been the ultimate threat ever since. President Karolos Papoulias added to the pressure by announcing that the new out-of-money-date would be June 10. And now comes the charismatic 37-year-old Alexis Tsipras, leader of the left-wing SYRIZA, which, according to the latest poll, has surged to number one in the June 17 elections. Under him, Greece would stay in the Eurozone, he promised, but without adhering to the reforms. He wants the Troika to open the money spigot without conditions. Let the good times roll—at the expense of taxpayers elsewhere. And he ratcheted up the extortion racket one more notch when he proclaimed, “If the disease of austerity destroys Greece, it will spread to the rest of Europe.”

In a broad counterattack, top officials from across Europe have started to openly discuss Greece’s exit from the Eurozone, sometimes in an encouraging manner. There was EU Commission President Jose Manuel Barroso with the dual message that “we” wanted Greece to remain in the Eurozone, “but the ultimate resolve” to do so would have to come “from Greece itself.” A number of ECB council members have also voiced that possibility, including President Mario Draghi. IMF Managing Director Christine Lagarde suggested that the other option for Greece, if it didn’t honor the budgetary commitments, would be its “orderly exit.” And today, German Banking Association President Andreas Schmitz jumped into the fray, wondering “if the country with its own currency, supported by a sort of ‘Marshall Plan’ from the European Union, wouldn’t be better able to solve its problems.”

And the noose tightened. About €800 million had been yanked out of Greek banks in a single day, caused by “great fear that could develop into panic,” President Karolos Papoulias warned political leaders. More than €5 billion had apparently evaporated since May 6. And the ECB, which is supposed to conduct refinancing operations only with solvent banks, cut off Greek banks from Emergency Liquidity Assistance because they haven’t been recapitalized after the haircut of Greek bonds on their books had wiped out all traces of equity capital.

There isn’t much room for optimism. Pushed into a dead-end like this, a country would normally print money to fund its deficits, and it would devalue its currency to become more competitive, however much pain that would spread around. But Greece can’t “solve” its problems that way. Not yet. And its caretaker government is helpless. So words fly about wildly from all directions to influence the Greek people who’ll get another whack at deciding their future on June 17. But the Greek people have been driven to the limit. Read.... The Endgame: “Greeks feel hopeless”

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JB's picture

the real tragedy is that NONE of the money (DEBT) that has been going to Greece the past couple years has been used for the benefit of the Greek people... they are being saddled with an enormous burden and reaping zero benefits.


the same could be said for the US. if you think the situation is bad in Greece, just wait until the government handouts end for 50 million people in the US. it's gonna get VERY ugly.

worbsid's picture

Greece is faced with similar problems to most developed countries. Aging populations, big bureaucratic governments, optimistic promises made by politicians and all the rest. Their major problem is they are stuck in a fixed currency, the Euro, and cannot print more. The vampire squids will take advantage of that. 

walküre's picture

That's plain wrong. How do you think their system kept paying bills including public salaries, benefits and pensions? Completely unsustainable on its own of course and that is where the rubber now meets the road.

honestann's picture

Paying government salaries and pensions is BAD for the country.  What they need is to cut government by 90% or more, cut government salaries by 70% or more, and cut pensions by 70% or more.

Anyone who defines "the country" as "the government workers" is one sick puppy!

CTG_Sweden's picture

I wonder whether shipyards located in Greece would be competitive if they would re-introduce the drachma and if the drachma would depreciate by about 50 % almost instantly.


To me, it makes sense to have big shipyards in Greece since they have a large shipping industry. I also think that it should be easier to make shipyards in Greece competitive by re-introducing the drachma than by cutting wages and benefits for people.


Peter Pan's picture

What the two men did to that elderly man is terrible. But the real tragedy will be if the courts slap these two on the wrist and let them off lightly.

NEOSERF's picture

If I was Greece at this point, I would want to be first out so that like Iceland, I was first to stabilize and get tourism going again...

TJ00's picture

It seems they want Greece out of the Euro so Greece can get money from the EIB which is supported by all the EU countries not just those in the Euro, foisting the debt on those who are legally not responsible for it, I would as a Brit take this to not only be a fraud on my country but an act of war.

HungrySeagull's picture

I don't know... I have played some computer scenarios where I though a European war is crazy...

Not so much today.

I think that Europe will not be so stupid as to descend into war.

fattail's picture

If they have pulled $5 billion out since May 6, what are they doing with it?


What do physical gold and silver sell for now.  I would think there would be tremendous demand for physical PM, if you could find them.

Lost My Shorts's picture

Wow, those Greeks are tough.  They don't care if the guy is younger than 80 or it's only 2 against one.  They will take him.  Jackie Chan watch out.

Bagbalm's picture

Time to send in the NATO peacekeepers to protect foreigners.

battle axe's picture

And the cracks start to widen......

Cycle's picture

Replying to bank guy in Brussels

I don't think NATO is the real problem here - it is the military industrial complex with an accesory army of well funded lobbyists that has captured Congress and the US Dept of Defense. US foreign policy seems run to provide a market for their goods.   They probably paid some bribes to Greek politicians to get those defense contracts through. . Of course, a foreign policy that continuously irritates the Russians and Iranians and anyone else opposing unipolar world hegemony is a proven moneymaker for those scumsucking anti-democratic corporations.

Olympia's picture

How is it possible that the European Union allows the weak states to enter the international money market and borrow the money they need without help – based on their own potentials? How is it possible that the “chain” of interests of euro can let its weak “links” exposed to outside pressuresHow is it possible for a “herd” with common interests to let each “ship” defend itself against the wolves, without help, and its general security threatened? How is it possible for Greece, which represents a minor 3% of the Eurozone’s economy, to be allowed to threaten the other 97% of that economy, due to the latter’s weakness?

The European Union should be the one borrowing from the national banking system – thus dealing with profiteers itself based on its overall potential – not its weak “links” alone. The latter should be under the EU’s protection and constant monitoring. They should borrow from it at a subsequent time and if they became victims of profiteering, the problem should be kept in the bosom of the euro. Domestic profiteering should bring profits to Europe’s influentials, therefore bring profits in the euro area, and not threaten it.

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007


Authored by Panagiotis Traianou

Wolferl's picture

Dutch, Deutsch, German in English, IS actually the same thing.

Jonas Parker's picture

Come on over and tell my Dutch wife that! I dare ya! I double dog dare ya!

Wolferl's picture

Pity for you, since you are stuck with an ignorant language (English).

Cycle's picture

Please share your insight with anyone in the Netherlands who was starved during the German blockade.

Wolferl's picture

I agree with all my friends from the Netherland on this topic.


There never has been a German blockade of the Netherlands.


What the stupid English world calls "Germany" is Duitsland for the people of the Netherlands.     


Btw, even in the anthym of the Netherlands they sing that their national hero is German.







Cycle's picture

Well, then, do the world a favor and edit the Wiki on the subject, which seems to contradict you.  Of course, it's Wiki...

The Dutch famine of 1944, known as the Hongerwinter ("Hunger winter") in Dutch, was a famine that took place in the German-occupied part of the Netherlands, especially in the densely populated western provinces above the great rivers, during the winter of 1944-1945, near the end of World War II. A German blockade cut off food and fuel shipments from farm areas to punish the reluctance of the Dutch to aid the Nazi war effort. Some 4.5 millions were affected and survived because of soup kitchens. About 18,000 died due to the famine.

worbsid's picture

My Dutch room mate in aviation cadets in 1952 told about the Germans in the Netherlands during WWII. Is your story different?   

bank guy in Brussels's picture

And then there are the figures showing that the hundreds of billions of Greek government 'debt', as pointed out by John Ward in 'The Slog', is basically the same amount Greece has spent on arms-buying for its Nato military these recent years, with debt interest added ...arms purchases from German and French weapons-makers!

In other words, according to Ward, Greece would hardly have any public debt, if it weren't for buying military equipment desired by Nato and mostly sold by French and Greek arms companies.

So no mystery why French and German banks, and pension funds, are 'vulnerable' to so-called 'Greek' debts not being paid, the logical people to 'invest' in German and French arms sales.

Nato wants Greece to have all these weapons in that strategic corner there by the Middle East ... weapons that serve the US empire and Nato ... and somehow only Greek workers are expected to pay for these Nato weapons, pay and with interest, for the rest of their lives.

There is just more and more horrifying dirt involved in this, the more one learns about it.

ElvisDog's picture

My personal favorite was when Greece was buying submarines from Germany. Why does Greece need submarines again?

lasvegaspersona's picture

James Bond was involved in Greece in the 60s. Many good movies involving espionage and women with large luxurious breasts swimming in the ocean feature Greece. Submarines are much needed...see...

Freddie's picture

Those women in Bond films were not Greek women.   He Tyler's have the SnorgTees banner ad with chick in T shirt and panties.  Sure beats the Oba-ma banner ads.

I am on to you's picture

You can include 450 used Abraham tanks tree French Fregats/Sarcostacys, and warplanes,maybe thats why they need submarines,to have a private wargame in Greece,kind of a pre Olympic cenario! 

Bennie Noakes's picture

This article:

says that Greek military spending has run at an average of 4% of GDP over the past 10 years. Ten years times 4% would give 40% of GDP, whereas Greek debt is well over 100%. Also, not all of that 4% was spent on weapons. A goodly percentage went to things like soldier's pay, fuel, etc.

Never heard of John Ward or 'The Slog', but the numbers you quote seem wildly exaggerated.

Peter Pan's picture

My friend you forgot the small matter of compounding interest.

Bennie Noakes's picture

Greek arms imports averaged about 1B euro/year during the period:

Greek GDP was in the range of 150-180B euro/year during the period. So arms imports were considerably less than 1% of GDP during the period.

And Greek 10 year interest rates were in the 5% range until Jan 2010.

So how does that work out to anywhere near 100% of GDP?