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Greece, The Banks Didn't Sink The Country

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http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?printable=true

The banks of Greece never really got involved with derivatives and sub prime bonds, their only real mistake was to lend the Greek government billions of Euros. The place is in a far worse state than many imagine. Long piece but worth a read.

snip

]When Papaconstantinou arrived here, last October, the Greek government had estimated its 2009 budget deficit at 3.7 percent. Two weeks later that number was revised upward to 12.5 percent and actually turned out to be nearly 14 percent. He was the man whose job it had been to figure out and explain to the world why. “The second day on the job I had to call a meeting to look at the budget,” he says. “I gathered everyone from the general accounting office, and we started this, like, discovery process.” Each day they discovered some incredible omission. A pension debt of a billion dollars every year somehow remained off the government’s books, where everyone pretended it did not exist, even though the government paid it; the hole in the pension plan for the self-employed was not the 300 million they had assumed but 1.1 billion euros; and so on. “At the end of each day I would say, ‘O.K., guys, is this all?’ And they would say ‘Yeah.’ The next morning there would be this little hand rising in the back of the room: ‘Actually, Minister, there’s this other 100-to-200-million-euro gap.’ ”

This went on for a week. Among other things turned up were a great number of off-the-books phony job-creation programs. “The Ministry of Agriculture had created an off-the-books unit employing 270 people to digitize the photographs of Greek public lands,” the finance minister tells me. “The trouble was that none of the 270 people had any experience with digital photography. The actual professions of these people were, like, hairdressers.”

By the final day of discovery, after the last little hand had gone up in the back of the room, a projected deficit of roughly 7 billion euros was actually more than 30 billion. The natural question—How is this possible?—is easily answered: until that moment, no one had bothered to count it all up. “We had no Congressional Budget Office,

Edited by richyc

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snip

Tax Collector No. 2—casual in manner and dress, beer-drinking, but terrified that others might discover he had spoken to me—also arrived with a binder full of papers, only his was stuffed with real-world examples not of Greek people but Greek companies that had cheated on their taxes. He then started to rattle off examples (“only the ones I personally witnessed”). The first was an Athenian construction company that had built seven giant apartment buildings and sold off nearly 1,000 condominiums in the heart of the city. Its corporate tax bill honestly computed came to 15 million euros, but the company had paid nothing at all. Zero. To evade taxes it had done several things. First, it never declared itself a corporation; second, it employed one of the dozens of companies that do nothing but create fraudulent receipts for expenses never incurred and then, when the tax collector stumbled upon the situation, offered him a bribe. The tax collector blew the whistle and referred the case to his bosses—whereupon he found himself being tailed by a private investigator, and his phones tapped. In the end the case was resolved, with the construction company paying 2,000 euros. “After that I was taken off all tax investigations,” said the tax collector, “because I was good at it.”

Edited by richyc

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...great investigative journalism ...excellent read:

...The average government job pays almost three times the average private-sector job. ....

...The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses.....

....Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay......”

....The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland’s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something.....

....Here, in 2001, entered Goldman Sachs, which engaged in a series of apparently legal but nonetheless repellent deals designed to hide the Greek government’s true level of indebtedness. ....

.....Thousands upon thousands of government employees take to the streets to protest the bill. Here is Greece’s version of the Tea Party: tax collectors on the take, public-school teachers who don’t really teach, well-paid employees of bankrupt state railroads whose trains never run on time, state hospital workers bribed to buy overpriced supplies. Here they are, and here we are: a nation of people looking for anyone to blame but themselves.....

Edited by South Lorne

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That VF article is fantastic.

The only thing I would add is that I suspect the Greek mentality to the state is a legacy of Ottoman imperialism where the state was the enemy, the other, the coloniser, and should be cheated in any way possible as a matter of Greek identity and pride.

It's a lot to answer for, the Ottoman empire, and no one ever lays any blame at its feet.

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A pension debt of a billion dollars every year somehow remained off the government’s books, where everyone pretended it did not exist,...

SOMEHOW remained off the government's books.......

:lol::lol::lol: yeah right :P

As the article points out didn't Goldman Sachs have a contribution in the Greek collapse. Something about Goldman advising new ways for the Greek government to hide/offset/obscure increased levels of debt/deficit via dodgy derivative/swap accounting in the style of the great Enron. I'm sure the article has likely hit on a truth about basic levels of dodgy accounting but with Goldman being a bank the banks can't be entirely blameless in the Greek debacle, probably far from it. Maybe not the Greek banks themselves but were they completely unaware.

http://www.nytimes.com/2010/02/14/business/global/14debt.html

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

When the Greek problems emerged apparently Goldman claimed something along the lines that the practice was very common and most governments were doing it. So far the UK government haven't admitted to being involved in the same way as Greece but it does make you wonder.

Edited by billybong

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And who financed it?

Oh yeah - German banksters. So they could sell them all those submarines and cars and washing machines.

But the german banksters could see their economy was up the spout though right? I mean these guys are clever with Boss suits and neat haircuts and engineering doctorates and everything.

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And who financed it?

Oh yeah - German banksters. So they could sell them all those submarines and cars and washing machines.

But the german banksters could see their economy was up the spout though right? I mean these guys are clever with Boss suits and neat haircuts and engineering doctorates and everything.

You preferring one fraudster over another? Let them all burn.

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SOMEHOW remained off the government's books..

So far the UK government haven't admitted to being involved in the same way as Greece but it does make you wonder.

....whereabouts are the UK Public Pensions accounted ...not in the deficit or debt.....off balance sheet...?.... :rolleyes:

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....wonder if others do similar...?..... :rolleyes:

To lower Greek inflation the government did things like freeze prices for electricity and water and other government-supplied goods, and cut taxes on gas, alcohol, and tobacco. Greek-government statisticians did things like remove (high-priced) tomatoes from the consumer price index on the day inflation was measured. “We went to see the guy who created all these numbers,” a former Wall Street analyst of European economies told me. “We could not stop laughing. He explained how he took out the lemons and put in the oranges. There was a lot of massaging of the index.”

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....wonder if others do similar...?..... :rolleyes:

I think when we do it more money is saved by stinging anyone drawing a pension, seems like the Greeks probably don't link their 'golden other peoples money' state pensions to anything.

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I think when we do it more money is saved by stinging anyone drawing a pension, seems like the Greeks probably don't link their 'golden other peoples money' state pensions to anything.

...they were doing it to keep within ECB Euro guidelines for a defined level of low inflation..... :rolleyes:

Edited by South Lorne

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...they were doing it to keep within ECB Euro guidelines for a defined level of low inflation..... :rolleyes:

I know but when you said " I wonder if others do the same.." I immediately thought of our own CPI and RPI adjustments etc etc and the obvious implications here.

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An excellent article. This situation has been going on in Greece for about 30 years. Both major political parties are guilty. At least now everyone knows exactly what grubby little game they've been playing. Can the situation ever be redeemed? Sadly, I doubt it. Greek society is endemically selfish. One look at the average supermarket car park will tell you this. Disabled parking / mother and child spaces?? These are predominately used by 150 kilo waddling women or surly 50 year men. And if those are taken, well there's always the drop curb where your supposed to get your trolley down to get into the carpark.

'Me first and stuff the rest,' should be the Greek national motto.

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Incredible, one does wonder though how many other nations have done this?

Correcting this mess is going to cause a lot of pain.

Yep, looks like a great many governments swallowed the fallacious trick of off-the-books accounting, most infamously demonstrated by a certain former US energy company.

We went from having a global economy to having a global enronomy.

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That VF article is fantastic.

The only thing I would add is that I suspect the Greek mentality to the state is a legacy of Ottoman imperialism where the state was the enemy, the other, the coloniser, and should be cheated in any way possible as a matter of Greek identity and pride.

It's a lot to answer for, the Ottoman empire, and no one ever lays any blame at its feet.

Indeed. The Ottomans just left us basket cases.

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http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?printable=true

The banks of Greece never really got involved with derivatives and sub prime bonds, their only real mistake was to lend the Greek government billions of Euros. The place is in a far worse state than many imagine. Long piece but worth a read.

snip

]When Papaconstantinou arrived here, last October, the Greek government had estimated its 2009 budget deficit at 3.7 percent. Two weeks later that number was revised upward to 12.5 percent and actually turned out to be nearly 14 percent. He was the man whose job it had been to figure out and explain to the world why. “The second day on the job I had to call a meeting to look at the budget,” he says. “I gathered everyone from the general accounting office, and we started this, like, discovery process.” Each day they discovered some incredible omission. A pension debt of a billion dollars every year somehow remained off the government’s books, where everyone pretended it did not exist, even though the government paid it; the hole in the pension plan for the self-employed was not the 300 million they had assumed but 1.1 billion euros; and so on. “At the end of each day I would say, ‘O.K., guys, is this all?’ And they would say ‘Yeah.’ The next morning there would be this little hand rising in the back of the room: ‘Actually, Minister, there’s this other 100-to-200-million-euro gap.’ ”

This went on for a week. Among other things turned up were a great number of off-the-books phony job-creation programs. “The Ministry of Agriculture had created an off-the-books unit employing 270 people to digitize the photographs of Greek public lands,” the finance minister tells me. “The trouble was that none of the 270 people had any experience with digital photography. The actual professions of these people were, like, hairdressers.”

By the final day of discovery, after the last little hand had gone up in the back of the room, a projected deficit of roughly 7 billion euros was actually more than 30 billion. The natural question—How is this possible?—is easily answered: until that moment, no one had bothered to count it all up. “We had no Congressional Budget Office,

Great find. What a brilliant article. Makes me worried for the sanity of those Norweigans supposedly buying Greek bonds.

And what about the IMF? What on earth are they doing lending the Greeks more money? They will never be able to pay it all back, the best that can be done is to stop lending them money and take the hit now. Lending them more money kicks the can down the road, but the hit will be much larger when it happens.

I bet that there will be similar stories in Italy and Spain. No wonder the world is buying gold.

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Great find. What a brilliant article. Makes me worried for the sanity of those Norweigans supposedly buying Greek bonds.

And what about the IMF? What on earth are they doing lending the Greeks more money? They will never be able to pay it all back, the best that can be done is to stop lending them money and take the hit now. Lending them more money kicks the can down the road, but the hit will be much larger when it happens.

I bet that there will be similar stories in Italy and Spain. No wonder the world is buying gold.

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“The Ministry of Agriculture had created an off-the-books unit employing 270 people.....

SOMEHOW they'd managed to keep the current/future taxes people had to pay for this ON the books though :lol:

Edited by billybong

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Great find. What a brilliant article. Makes me worried for the sanity of those Norweigans supposedly buying Greek bonds.

And what about the IMF? What on earth are they doing lending the Greeks more money? They will never be able to pay it all back, the best that can be done is to stop lending them money and take the hit now. Lending them more money kicks the can down the road, but the hit will be much larger when it happens.

I bet that there will be similar stories in Italy and Spain. No wonder the world is buying gold.

They're indirectly bailing out the German banks who have been recycling German surpluses into Greece to buy German manufactures.

It's got little to do with Greece and everything to do with protecting the German shell game.

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Great find. What a brilliant article. Makes me worried for the sanity of those Norweigans supposedly buying Greek bonds.

And what about the IMF? What on earth are they doing lending the Greeks more money? They will never be able to pay it all back, the best that can be done is to stop lending them money and take the hit now. Lending them more money kicks the can down the road, but the hit will be much larger when it happens.

I bet that there will be similar stories in Italy and Spain. No wonder the world is buying gold.

I think the IMF is hoping the global perpetual growth machine gets a kick start so that everyone can get back to servicing debts and we can leave the worry about how the hell anyone can pay the money back to some distant point in the future.

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  • 246 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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