Greece’s (Fascinating) Debt Crisis

Michael Lewis is what you would call a diverse writer. The words “financial journalist” don’t exactly strike excitement in the hearts of millions, but that has not stopped him from incredible success.

Lewis got his bachelor’s degree in art history, and got a job in the 1980’s at Salomon Brothers on Wall Street as a bond salesman. Despite his lack of knowledge, he was allowed to handle billions of dollars, and in 1987, having grown dissatisfied with work there, wrote a book about his experience called Liar’s Poker. Several influential articles and books followed. In 2006 he wrote a biographical sports book about a young black man taken in by a charitable family in the South. The book gained enormous popularity in part because of the movie of the same name, starring Sandra Bullock, called The Blind Side. Afterwards, he returned to his roots by writing “The Big Short,” a clean account of the dirty mess that Wall Street has gotten itself into by trading what are called derivatives. Reportedly, several members of Congress turned to the book to understand this complicated financial tool that helped bring ruin to the economy.

I have never had a particular interest in Greece, and so when recent news reports came out about Greece’s financial troubles, the first thought in my head was Boring Finance + Boring Country = Double Boredom. The only Greeks I knew lived in Canada. They were miserable people…perhaps the most miserable people. Jews or Greeks don’t exactly like missionaries, but I have met a nice Jew. The same cannot be said of Greeks. They hate you, they hate your message and everybody in it, and perhaps most crippling of all, they hate each other. But after reading Lewis’ Vanity Fair piece called “Beware of Greeks Bearing Bonds,” I immediately became fascinated with Greek’s debt crisis. Here’s why.

Lewis manages to show that Greeks had a system of corruption so widespread that it affected not only government but almost all average citizens. When the lights were out and no one was looking, Greek’s system of morality nearly completely collapsed; next to nobody pays taxes in Greece. Financial numbers and debts were going unreported or exaggerated, there were bribes, leaders were corrupt—you name it, and it was happening. Having been introduced to a system of cheap credit where no one was watching, they no longer seem capable of living within their means. In a supposed collective society, individual greed and corruption is so widespread that, in short, Greeks cannot even trust their neighbors.

Lewis went to Greece to find out about some Christian monks’ involvement with the corruption scandals (hence the picture at the head), and in so doing he found out just how much corruption there actually was.

In talking to the minister of finance, he found out interesting facts like, “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.”

He found a couple of tax collectors who decided finally to speak out against the corruption (although they refused to be called by name), and found out that two-thirds of Greek doctors reported incomes of less than 12,000 euros per year. So even the high profile plastic surgeons who raked in millions per year paid no taxes at all. The problem isn’t the law, but the enforcement of it.

Greece had been misreporting information for 10 years, probably since it joined the European Union in ­­­­­2001. (When Greek joined, by the way, it was only with the help of another shady institution: Goldman Sachs.) So the question arises—shouldn’t somebody have known about this? What was the EU doing this whole time? In truth, the Greeks simply lied to create the statistics that others wanted. To stop inflation, they would do things like remove high priced every-day items like tomatoes from the consumer price index on the day that inflation was measured. An IMF official, when he found out, said that, “We could not stop laughing. There was a lot of massaging of the index.”

But the recent riots in the city show that, to the Greeks, this is no laughing matter. They face a massive debt crisis, one that seems all the more serious considering most of the country is still drunk on the wine of cheap credit and not willing to work. It would seem that they have no choice but to default. But if they do, and government begins to cut costs and raise taxes, Lewis wonders, do they even have the ability to buckle down and get to work?

“Even if it is technically possible for these people to repay their debts, live within their means, and return to good standing inside the European Union, do they have the inner resources to do it? Or have they so lost their ability to feel connected to anything outside their small worlds that they would rather just shed themselves of the obligations?” After all, they are in the streets protesting the actions of Greek bankers; not doing what they probably should have been doing and protesting the morals of average citizens.

Suddenly, the question of whether or not Greeks will default becomes intriguing, and that is why Lewis is so good at what he does. Read it; you won’t regret it.

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