As also might be expected the editors of the Wall Street Journal blame the situation in Greece solely on the Greeks:
But whatever Greeks choose, it’s at least clear that they can no longer hold the rest of Europe hostage to their politics, and that they are responsible for their own pain. It’s a tragedy for the poorest Greeks in particular, but better for Greece to serve Europe as a lesson than as a model.
Is it really true that the bankers who issued loans to the Greek government were simply outwitted by a bunch of Greek con men? Whatever happened to due diligence?
IMO the more likely explanation is that the bankers knew exactly what they were doing and issued loans they knew could never be repaid, secure in the knowledge that their alleged “risks” would be backstopped by the European Central Bank and the IMF. Or, in other words, there were con men on both sides of the deal.
The Greek debacle will affect more than three countries plus Greece. Greek debt is spread across the EU, and as the Greek banks fail, it will begin to trigger additional events. Then, there is the private banking and financial sector where all sorts of gambling has been occurring, and there is no telling what carnage this will cause.
Then, there are the other ailing EU countries. With Greece showing the way, they will have a path forward, and as they are saddled with debt from other imploding EU countries, they will fall like dominoes.
There is also Russia. Putin has been grooming Greece and Tsipras for an exit from the Eurozone or the EU proper. I am sure Russia would pay a hefty price for a naval base in Greece. I am not sure what the NATO rules are, but there are no rules that Greece must remain a NATO member.
As is usually the case, the experts will realize at the last minute they were not just a little wrong. They will realize they were catastrophically wrong.
I think the alternative explanation, or parallel, is not so much that the bankers knew, just that they didn’t care. Incentives for bankers are different than for the banks. If the banker can get a large bonus/commission up front, who cares what happens afterwards. If they were also convinced there would be a bailout, so much the better. (Same basic rationale for liars loans.)
On the debt issue, we in the US stopped holding creditors responsible for their part in bad loans a while ago. Sad to say this holds in Europe also.
Steve
WhY do the Greeks think their democratic vote somehow trumps all the other European democratic votes? No one really care if the Greeks slide into obscurity, and Europe will be better off I’d they do.