Thursday, July 9, 2015

HuffPo Fail: Greece Has Worse Default History than Germany

Germany worse than Greece on defaults?

In a piece designed to bolster Greece’s flagging reputation as a state teetering on the financial brink, Huffington Post Germany released an article claiming that Germany is the real default offender, and has no business shaming Greek culture or defaming the Greek government for its tradition of sloth, graft, waste, and fraud.

The piece opens up with the usual litany of Greek crises and the impending Grexit, then segues to slamming Germany’s financial (and warlike) past:

There is a general assumption that Europe’s future is jeopardized by “the Greeks,“ and the German newspaper Bild did the math, converting the financial aid into truck loads: “In order to get 215.7 billion euros in bills of 100 euros on a truck to Athens, you would have to send off 88 40-ton trucks."

All this propaganda against Athens fails to acknowledge one fact: Within the last two centuries, the Germans, or more precisely the Prussians, have pulled off more bankruptcies than the Greeks.

Right away, the writer has to back away from the bald assumption of the headline. Prussia, one northeastern Germanic state, was not the entire German state which exists today. In fact, Prussia hugged a wide swath of the Baltic coast, and resided in much of the territory which now lies in Northern Poland.

Then the figures roll out:

In the aftermath of the Napoleonic wars at the beginning of the 19th century, the Prussian treasuries were empty. Creditors were waiting in vain for the redemption of their credits not only in 1807, but also in 1813 and 1850.

Germany was also virtually broke after World War I and World War II. There were four instances in which the creditors granted massive debt relief: 1924, 1929, 1932 and 1953. Sixty-two years ago, Chancellor Konrad Adenauer’s government negotiated with 20 states, reaching the London Debt Agreement. By the way, Greece took part in these negotiations.

In fact, because of the hyperinflation following World War One, the German people adopted a culture of austerity and frugality (Bloomberg News provides a neat visual representation to explain the wide differences between Greek and German culture).

The final result of the HuffPo puff analysis?

Throughout its history, Greece has been bankrupt six times -– so it would only catch up with Germany now, if no agreement with the creditors was reached.

The Atlantic Monthly provide a more thorough history of Greek debt crises. Unlike the German, er. . Prussian debt legacy, Greek financial dysfunction, debt, and ultimately default depended on a Greek culture of conflict, mismanagement, and cultural decay.

First, an identity crisis:

The [Greek] revolution worked, culminating in international recognition of a new Greek state in 1832. It also successfully planted Hellenism as the nation’s foundational myth, reorienting Greek speakers toward a national identity centered on the glory of antiquity.

Almost immediately, problems began to emerge.

“[Europeans] had these exalted ideas—‘We’re going to run into Agamemnon and Pericles’—and they were disappointed by the Greeks,” Greene said. “There’s Europe and then there’s Europe, and this wasn’t the right Europe.”

With a fractured, undefined national identity, followed a long estrangement of the Greek people from their own governance:

That translated into the actual Greeks being cut out of their own government. There would be no immediate reprise of Athenian democracy. With nascent independent Greece in chaos, European powers gathered in London and installed a king—Otto, a Bavarian prince transplanted—and set limitations on the Greek military.

This last part, based in research and reporting from economic and social historians, points out that a codependence culture of mixed identity and European posturing has enabled Greece to slouch alog for the greater part of its existence in default mode:

The history of Greek national default is inextricably tied to this troubled relationship with Europe. As some commentators have noted, the country has been in default for roughly half of its existence as an independent state. The pattern is more complicated than just a repeated failure to pay debts. It’s a recurring vicious cycle of foolish lending by European creditors and profligate mismanagement by Greeks going back nearly 200 years.

The Huffington Post article, in true bait-and-switch fashion, finally concedes at the end of its own pro-Greek reporting that Germany (and before that, Prussia’s) defaults came as a result of war. In Greece, domestic and international causes, based on foundational errors and poor rapprochement, generated a Greek legacy of debt and default.
Greek Debt Crisis in Europe explained (Bloomberg News)

Oh, and Greeks don’t pay their taxes.

Many reporters, for example, have repeated a claim that tax-shirking was a patriotic gesture in Ottoman Greece, a way to resist Istanbul’s authority. It is true that an inability to effectively enforce tax laws has drained the Greek government of revenue. . .

This is no surprise, actually, since even Greeks themselves participate in their country’s culture of corruption. The New York Post reports:

It’s not just Greek governments that went wrong for decades — it’s also the people who elected them.

If you keep voting for politicians who promise far more than the state can afford, the wheels eventually come off.

That’s how you wind up with decades of fraud, like that outlined in James Angelos’ “The Full Catastrophe.” Fraud like hundreds of people on a single island falsely claiming blindness to collect $400-a-month disability pensions, or tens of thousands of cases nationwide of dead people “collecting” pension checks that actually enriched family members.

Or like vast tax evasion — just a few thousand people reporting incomes over $100,000 in a nation of 11 million.

Huffington Post strangely ignores these cultural undercurrents while outlining that Germany (in reality, Prussia) has had more national defaults than Greece (so far).

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