Debt crisis: who brought athens to its knees – and who pays for it

Because refinancing on the financial markets has become too expensive, Greece has to lay down its arms and apply for EU aid. Not only the disrupted public finances have brought the country so far, speculators have also exacerbated the crisis. The German taxpayer has to pay that too.

In New York, some hedge fund managers are currently celebrating in a champagne mood: They recently met at a posh address in the US metropolis for a parade – to debate how best to bring the euro to its knees through the Greek crisis. That has paid off: within a few weeks, they have succeeded in making Athens ready for a storm through ever new rumors and speculations about the already ailing situation in Greece. Now Hellas had no choice but to capitulate. The speculators have thus achieved what they wanted – to worsen the situation so that the European Union now has to pay state aid and the euro is losing value.

For investors, that means gushing profits. Because with corresponding futures they had previously bet on falling euro rates. Now you will soon have the common currency where you want it: at times the euro was only quoted at around 1.32 dollars – a loss since the high of late November 2009 of almost thirteen percent. And a huge profit for the speculators who had bet on these low prices and are now making the rub.

Overreaction of the markets

"There is massive speculation about the insolvency of Greece," says the chief economist of the bank HSBC Trinkhaus. With the aim of putting the euro under pressure. The speculators have repeatedly spread false rumors in order to achieve their goal, says the respected market strategist Folker Hellmeyer from Bremer Landesbank. "The current situation is factual and fundamentally unnecessary," Hellmeyer told this site. The Anglo-Saxon investors artificially brought about the crisis. "We are seeing a complete overreaction of the markets", which is not justifiable in view of the low economic importance of Greece.

One attack after the other

In fact, the "economic mouse" Greece accounts for just 2.6 percent of the eurozone’s gross domestic product. Hellas has accumulated massive debts, tricked him into joining the Euro Club and fooled the statisticians of the European authority Eurostat for years. But the crisis was exacerbated because speculators have been using the situation for months to cook their own soup at the expense of the general public and to ride one attack after the other against the euro.

First of all, they forced the heads of state and government of the euro zone to offer Greece general financial aid – an unprecedented act, because the Maastricht Treaty clearly forbids this. When that was not enough for them, the speculators forced the heads of state and government in a hasty weekend video conference to put the potential aid at around 30 billion euros per year from the EU fund and a further 15 billion euros from the International Monetary Fund (IMF).

Refinancing costs soared

But the euro attackers were not satisfied with that either. In an unholy alliance with the highly controversial rating agencies that continued to add fuel to the fire by constantly questioning or downgrading Greece’s creditworthiness, they drove the cost of new borrowing in the financial markets so high that Greece took up arms had to stretch. Greece had to offer investors more than ten percent return at the end of the week in order for Athens to get rid of its government bonds. A few days ago it was around seven percent. And this was also significantly more than the roughly three percent that has to be paid for German government bonds. Refinancing costs for the country on the Mediterranean rose to an extent that the eurozone had never seen before.

No wonder that Athens could no longer finance this and that we now have to ask the EU for help. Because every percentage point that Greece has to pay more in interest to borrow money in the capital markets, exacerbates the tense financial situation.

For the German taxpayer, this means that he will contribute 8.4 billion euros to aid for Greece in the first year. Athens is currently negotiating with the European Central Bank, the euro states and the IMF on the technical implementation.

A plus for lenders in Germany is also possible

However, it has not yet been agreed that the Federal Republic will ultimately be left with the costs. Because Greece does not get the money for free, but also has to pay interest to the EU donor states – around five percent according to the current state of negotiations. This is significantly less than in the financial markets. Since the Federal Republic of Germany, for example, has a comparatively high credit rating, it should be able to raise the money for around three percent on the markets. So there remains a difference of two percentage points, which brings in a government income of 1.7 billion euros for ten years of aid. But only if Greece succeeds in paying off its debts in the end.

The driver pays for the Greek crisis

The normal citizen is still stupid. The falling euro is helping the German export economy, for example, because it makes exports cheaper. But imports are becoming much more expensive – for German citizens especially visible at the petrol pump. The recent jump in gasoline prices is clearly a consequence of the weak euro, as oil is billed in US dollars. The consequences of speculation in Greece are paid for by drivers, for example.

The door and gate are open to speculators in the financial markets

The euro zone is now facing a practical test in the next few months. The European Central Bank in particular fears that the Greek crisis could trigger a conflagration, because other countries such as Portugal, Italy and Ireland also have extremely high levels of debt. In the Eurotower in Frankfurt, the warning lights have been glowing for weeks. ECB boss Jean Claude Trichet has never been seen so tense. The basic evil, so the opinion of more and more market observers, is the fact that the door and gate is open to speculators in the financial markets because many countries have been resisting stricter regulations and a ban on such speculative transactions for years.

So the winners of this crisis, the elitist club of speculators, will soon gather again for the parade. Hopefully, after Greece, Portugal or Ireland will not be on the menu.

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