Greece: Punish the Politicians and Bankers, Not the Public - by Eric Margolis

In 1922, Greek armies trying to conquer western Anatolia were routed by Turkey's military leader, Mustafa Kemal Ataturk. Hundreds of thousands of ethnic Greeks were uprooted from Ionian coastal areas. After this debacle, Greek officers took three former prime ministers, a general and two other politicians who had led the Turkish-Greek War and shot them. Greeks cheered. Many Greeks today must be wishing to see similar punishment inflicted on their politicians and bankers who were responsible for the nation's bankruptcy and staggering $500 billion debt.


Today 2011 after intense debate, Greece's EU partners and the International Monetary Fund have just staved off Greece's impending default on its maturing debt by a $165 billion loan. But Athens must soon make more huge payments. The EU aid package piles more debt onto Greece's already mountainous debts -- just as President Barack Obama is doing in the US.

Greece politicians and bankers are using the same scare-tactics that the supposedly too-big-to-fail insolvent US banks employed in 2008: "If I go down, I'll take everyone with me." In this case, it's Europe's big banks. Three big French banks, BNP, Crédit Agricole, Société Général, hold large chunks of Greece's debt. If Greece defaults, goes the hue and cry, French, German, Swiss, and Belgian banks may crash.

Politicians have allowed the banking industry not only to grow larger than manufacturing, notably in the United States, where the top five banks control 40% of all deposits, but to become so powerful, over-extended, and risky they are a danger to itself and the public. It's time for the bankers to pay for the mess their greed and recklessness created.

The fact is that bankers who invested in Greek debt or US subprime mortgages were greedy fools and should be fired, not rescued. Just this week we learned that the US government loaned $15 billion to Goldman Sachs during the 2008 crisis.


Bottom-line: Greece's only viable solution is to renege on its debts, go bankrupt like Argentina did, and start afresh. If the European banking system is such a house of cards that the collapse of tiny Greece, with only 10 million people, will bring it crashing down, it should be nationalized, set right, and refloated as private corporations. The US should have done the same instead of allowing insolvent banks to continue as financial zombies.

Europe's banks obviously will be shaken, but they will survive the jolt, just as the US banking system survived 2008. Time for Europe's banks to get these bad debts off their balance sheets. Rescue funds should be focused on Spain and Italy, if necessary.

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