The Global Financial Crisis Chapter 7B

1
The Global Financial Crisis Chapter 7B

• From the US subprime mortgage crisis to European
  sovereign debt

2
Chapter 7B

• Greece The epicenter of the Eurocrisis

3
Greek politics fomented the crisis

•  

4
Prominent Greek political families dominate

• From the early 1960s three prominent Greek
  families dominated the political scene in Greece.
• Two recent prime ministers, George Papandreou and
  Kostas Karamanlis, have done significant damage
  to their country.
• Papandreou exposed Greece to unnecessary negative
  publicity.
• Karamanlis government bloated the public sector,
  which led Greece to accumulate an unsustainable
  level of public debt.

5
Grexit

• Grexit is a term used to denote the possibility
  of Greece leaving the EMU.
• The term became popular in some northern EU
  countries, where Grexit became front page news as
  populist politicians and newspapers made it a
  daily topic in news coverage.

6
Grexit

• Such treatment of Greece not only worsened the
  Greek recession, but it also affected the other
  bailout recipient countries.
• A critical moment of a Grexit took place in
  Cannes, France on November 2, 2011, during a
  pre-G20 summit meeting of EU/IMF officials and
  two EU country leaders.

7
The cancelled referendum

• In October 2011 an agreement for a second Greek
  bailout was reached between the Greek delegation
  and the EU and IMF.
• After he returned from Brussels where the
  agreement for the second bailout was reached,
  Prime Minister Papandreou decided to hold a
  referendum. He wanted to offer Greek voters the
  option to accept or reject the bailout.
• Rumors about the Greek bailout referendum spread
  quickly, reaching various EU policy circles.

8
The cancelled referendum

• Nicholas Sarkozy and Angela Merkel were opposed
  to a Greek referendum.
• On November 2, 2011 Prime Minister Papandreou,
  along with his finance minister Evangelos
  Venizelos, were invited to a pre-G20 summit
  meeting in Nice, France.
• In addition to Sarkozy and Merkel, the President
  of the European Council, Herman Van Rompuy the
  President of the Commission, Jose Manuel Barroso
  the President of ECOFIN, Jean Claude Juncker the
  Director of the IMF, Christine Lagarde and the
  President of the United States, Barack Obama
  were all present.

9
The cancelled referendum

• This meeting turned out to be very important for
  the future of both Greece and the EU.
• Everyone at the meeting tried to convince
  Papandreou that a referendum was a very bad idea.
  
• It was clear to all participants that a negative
  outcome to the Greek referendum could have meant
  the end of the EMU.

10
The cancelled referendum

• It became clear that the intervention of the two
  largest EU country leaders was an unorthodox and
  brutal move that made a few people in the room
  very uncomfortable.
• How could the leaders of the two largest economic
  powers in Europe dictate policy to an elected
  leader of a small EU country?
• The same disconnect felt between EU leaders and
  citizens experienced in the pre-G20 summit
  meeting was also revealed in the results of the
  2014 European Parliament elections.
• EU leaders failed to pay attention to major
  issues, and as a result, major problems
  threatened the course of European integration.

11
Replacement of elected EU country leaders by
Eurocrats

• Five days after returning to Greece from Cannes,
  Prime Minister Papandreou was forced to resign.
• He also stepped down as leader of PASOK and was
  replaced by his finance minister, Evangelos
  Venizelos, who was against the referendum.

12
Austerity brought misery and poverty

• Much evidence supports the claim that austerity
  caused an unprecedented increase in physical and
  mental diseases in Greece.
• For most Greeks, health insurance was linked to
  employment, so when citizens lost their jobs they
  also lost their health insurance.
• Imposed reductions in government health
  expenditures by the Troika negatively impacted
  the health of millions of Greeks.

13
Austerity brought misery and poverty

• Various studies undertaken regarding health
  conditions in Greece found substantial
  deterioration in health in several areas,
  including
• Increase in the number of suicides
• Increase in heart attacks
• Reappearance of rare diseases, such as malaria
• Increase in infant mortality rates
• Drastic reduction in medical supplies
• Low morale of hospital employees due to deferred
  wages.

14
Austerity brought misery and poverty

• According to experts from Oxford, Cambridge, and
  the London School of Hygiene and Tropical
  Medicine, Greek hospital budgets were reduced by
  25 between 2009 and 2011, and pharmaceutical
  spending was reduced by 50.
• The joint report by the three universities
  criticized the Greek government and the Troika
  for continuing to impose austerity without
  realizing the magnitude of the health crisis.

15
Austerity brought misery and poverty

• Foreign humanitarian organizations, such as
  Doctors Without Borders and Doctors of the World,
  worked with Greek humanitarian groups to provide
  free health services.
• Prior to the crisis there were malfunctions in
  the Greek health system, and shortages of medical
  services were very common.
• During the Eurocrisis a black market formed
  between patients seeking medical care and
  doctors who habitually accepted bribes.

16
Austerity brought misery and poverty

• Many believed structural changes implemented by
  the Troika were a great opportunity to overhaul
  the healthcare system, so that it could become
  more efficient and better serve the citizens.
• According to many studies, however, healthcare in
  Greece has gravely deteriorated since the outset
  of the crisis.

17
Hungry and homeless

• The crisis did not spare anyone in Greece.
• Children were malnourished, and some young pupils
  were forced to search in trash cans and ask other
  students for leftovers.
• Several international and Greek humanitarian
  groups began offering free meals to thousands of
  children.

18
Hungry and homeless

• The search for free food increased substantially
  throughout the crisis.
• At one point over 700 soup kitchens were open in
  Athens.
• Along with Greek churches and humanitarian
  organizations, Greek municipalities began
  offering free meals as well.

19
Hungry and homeless

• According to journalist Julianne Mendelsohn, the
  problem in Greece is not that Greeks are lazy, an
  idea that was publicized by the German newspaper
  Bild, but simply that there were no jobs
  available.
• Ms. Mendelsohn met many hungry and homeless
  Greeks, and was struck by the sadness and pain in
  peoples eyes At the moment they thought nobody
  was watching them.

20
Hungry and homeless

• Since 2010, Greece has been transformed into a
  different country.
• By 2015 Greece had developed a multitude of
  social and economic problems.
• Austerity programs increased unemployment in
  every country, especially in Spain and Greece
  where a quarter of the labor force became
  unemployed.
• The prolonged recession triggered many protests.

21
The un-repaid, forced World War II loan to Germany

• One of the fiercest protestors was Manolis
  Glezos, a left-wing politician who was admired by
  many Greeks.
• Glezos gained the respect of Greeks on May 20,
  1941 while the country was under German
  occupation.
• Glezos was 18 years old at the time and together
  with his friend Apostolos Santas climbed the
  Acropolis rock, brought down the swastika, and
  replaced it with the blue and white Greek flag.
• Such a courageous act brought hope to Greeks and
  other Europeans being oppressed by the Nazis.

22
The un-repaid, forced World War II loan to Germany

• Manolis Glezos was elected to the European
  Parliament (EP) in May 2014 with about 500,000
  votes, more than any other EP candidate.
• Glezos believes Germany is obligated to assist
  Greece not only as a gesture of European
  solidarity, but as partial repayment for the
  famine and looting of the country which occurred
  during the German occupation.
• Greece lost a substantial portion of its
  population in mass executions, as reprisals for
  the guerilla attacks against the occupying Nazi
  forces.

23
The un-repaid, forced World War II loan to Germany

• Chancellor Merkel was critical of over-indebted
  countries for being reckless prior to and during
  the crisis therefore according to Merkel, those
  countries should be responsible for their public
  debt.
• The Guardian, a British newspaper, was critical
  of Chancellor Merkel for not repaying two loans
  that the occupying German regime extracted from
  the central bank of Greece during World War II.

24
The un-repaid, forced World War II loan to Germany

• During a historic visit to Greece by German
  President Joachim Gauch in 2013, the question of
  forced war loans from Greece and the war
  reparations resurfaced.
• In a joint appearance with Greek President
  Karolos Papulias, Mr. Gauch stated that after
  Germany paid 115 million deutschmarks in 1960,
  the issue was closed.
• Karolos Papulias disagreed and said the two
  countries should start discussing a settlement as
  soon as possible.

25
The un-repaid, forced World War II loan to Germany

• President Cauch stated that Germany bore a moral
  debt for the dozens of massacres committed by
  the Nazis, and as a reminder to future
  generations, Germany would put money into a fund
  to assist the families of murdered Greeks.
• The gesture of the German president revealed good
  intentions but many Greeks felt this would not
  address the issue of economic reparations, which
  were of a much greater magnitude.

26
The un-repaid, forced World War II loan to Germany

• There are not many official war monuments, such
  as the one in Kalavrita in the Peloponnese where
  the Nazis massacred the entire male population,
  or the one in Dystomo in Central Greece where the
  Nazis killed almost the entire population.
• Despite the lack of monuments, mass execution
  sites are all over Greece and the elderly
  remember precisely the locations and the victims.
• Many villages were burned to ashes, and a large
  number of Greeks were sent to Germany to work and
  to be humiliated in concentration camps.

27
The un-repaid, forced World War II loan to Germany

• Many Greeks are now convinced that a large
  percentage of Germans wish to dominate other
  countries economically.

28
The un-repaid, forced World War II loan to Germany

• In April 2013 the Greek newspaper To Vima
  published an 80-page report by a commission of
  experts within the finance department of the
  Greek government suggesting an investigation into
  the status and value of the two World War II
  forced loans.
• The commission estimated the value of the unpaid
  reparations to be 162 billion 108 billion for
  the destruction of infrastructure and looting of
  the country, and 54 billion for the forced loan
  from the Central Bank of Greece.

29
The un-repaid, forced World War II loan to Germany

• The issue of World War II reparations to Greece
  resurfaced again in the summer of 2015 when the
  third Greek bailout was being negotiated.
• This time the challenge came from inside the
  German government, from two politicians in
  Chancellor Merkels party and one from the Green
  Party.

30
The un-repaid, forced World War II loan to Germany

• Ms. Cesine Schawn accused the German government
  of not wanting to face its responsibilities.
• A German historian, Eberhard Roydholz,
  investigated Germanys claim that it had fully
  repaid its debts to Greece.
• He concluded that the case of the German war
  reparations to Greece was not closed as the
  German government had announced.

31
The un-repaid, forced World War II loan to Germany

• Although many agree that the timing of the Greek
  government is wrong, it is still an issue that
  should be addressed.
• Germany must be responsible for all its public
  debts, past and present, including the debts
  incurred during World War II.

32
A moral lesson to the world by a German couple

• Help for Greece can come from where it is least
  expected. A German couple who came to Greece in
  March 2015 visited the mayor of the picturesque
  city of Nafplio in the eastern Peloponnese.
• Ludwig Zacaro and Nina Lahge offered the mayor a
  check for 875. In an interview, Ms. Lahge
  stated, We are guests in this beautiful country,
  and we want to give something back. Not charity,
  but something that belongs to you.

33
A moral lesson to the world by a German couple

• Such behavior is moving and unites European
  people, unlike the Greek bashing by the German
  news media that unearthed old wounds and divided
  Europe.

34
A neo-Nazi party on the rise

• One of the most undesirable side effects of the
  Greek debt crisis was the rise in popularity of
  the extreme right-wing political party, Golden
  Dawn.
• Golden Dawn gained popularity when it began
  providing many missing services for the disabled
  Greek state.
• It protected people and businesses and provided
  food and jobs for the impoverished.

35
A neo-Nazi party on the rise

• Golden Dawn discriminates against immigrants, and
  did not support the bailouts because its members
  feel the international lenders are exploiting
  Greece.
• It gained popularity as a result of its strong
  views against austerity and the bailouts.

36
A neo-Nazi party on the rise

• In 1990, Golden Dawn received 0.29 of 1 of the
  popular vote in the national elections. In 2012,
  the party received 6 of the vote and sent 18
  members to the Greek parliament.
• Political analysts interpreted this startling
  outcome to be the result of a protest vote
  against the two major political parties that
  shamelessly led Greece into bankruptcy.

37
A neo-Nazi party on the rise

• Golden Dawn has been known to use the Nazi
  salute, and there is blind obedience to its
  leader Nikolaos Mihaloliakos, who prefers to be
  called Führer.
• It is surprising that Golden Dawn has gained so
  much popularity in a place that suffered so much
  under Nazi rule during World War II.
• Golden Dawn has committed crimes against
  immigrants, yet approximately half of the Greek
  population are immigrants in other countries.

38
A change in the wind for Golden Dawn

• On September 17, 2013 a left-wing musician,
  Pavlos Fyssas, was murdered outside a café in the
  Keratsini district of west Athens. Fyssas was
  stabbed to death by a man who admitted to being a
  member of Golden Dawn.
• The assassination could signal the ending of
  Golden Dawn by the Greek judiciary.
• According to Helena Smith, a writer for the
  Guardian, three women were destined to play a
  role in the punishment of the violent
  male-dominated party.

39
A change in the wind for Golden Dawn

• A gutsy female prosecutor appointed two female
  judges to investigate Golden Dawn.
• The two judges have a reputation for being
  fearless, non-partisan, diligent, and
  meticulous.
• They have gathered evidence that includes up to
  15,000 pages of speeches, confiscated hard
  drives, videos, and other documents.
• They were provided 24-hour protection and were
  given 18 months to bring members of Golden Dawn
  to trial.

40
A change in the wind for Golden Dawn

• According to Pavlos Tsimas, a respected Greek
  journalist, Golden Dawn is different from every
  other political party in Europe because it aims
  to destroy democracy.
• Golden Dawns ideology is influenced by the
  three-year civil war that broke out at the
  conclusion of World War II.
• The right-wing government won, and thus there are
  still many supporters of Golden Dawn within the
  deep Greek state of the police and the military.

41
Golden Dawn to stand trial

• In a 697-page report the Greek public prosecutor,
  Isidoros Dogiakos, accused 69 members of Golden
  Dawn of a variety of criminal offenses ranging
  from murder to violent hate crimes.
• Among the accused are all 16 Golden Dawn members
  of the Greek Parliament.
• Helena Smith explained that the strength of
  Golden Dawn lies in the gruelling austerity
  imposed on Greece.