If you’re still wondering how an Aegean wonderland of sun, sea and sand slid into a money pit and began dragging the euro with it, pick up Jason Manolopoulos’s “Greece’s ‘Odious’ Debt.”
Blunt, rigorous and shrewd, Manolopoulos resembles a wise uncle explaining how a ne’er-do-well cousin gambled away the family’s future: He spares his compatriots no embarrassment, yet recalls in memorable detail how fickle German friends and French moneylenders egged them on.
Manolopoulos is a hedge-fund manager who specializes in emerging markets at Dromeus Capital Group. As he sees it, Greece is more emerging than developed and had no business joining the euro to begin with.
Forget the clever “Western branding” of his homeland as the cradle of philosophy and government by the demos. Greece today has become a kleptocracy, not a democracy in the northern European sense, he says. The latest European Union rescue package, seen in this light, marks little more than an attempt to bolt a bank’s doors after a team of safecrackers has cleaned out the vaults.
Greece has become a monster, Manolopoulos says -- “a modern-day hydra with seven heads: cronyism, statism, nepotism, clientelism, corruption, closed shops and waste.”
Warped by more than 300 years of occupation under the Ottoman Empire and still smarting from horrendous human losses in two World Wars, a civil war and a dictatorship in the 20th century, the Greeks emerged with a tradition of avoiding taxes, a sense of entitlement -- the West owes us, right? -- and a heavy emphasis on family and clan. One can only wonder why they didn’t run up far more sovereign debt.
Manolopoulos lays out his case with statistics, anecdotes and mordant asides. Default, he says, has long been inevitable. When Greece joined the euro in 2001, it had an undiversified economy that relied on tourism, shipping and agriculture. The country had much in common with Argentina a decade earlier, when the government of President Carlos Menem pegged the peso to the dollar. And that, he argues, is the nub of the matter.
The euro, for Greece, is an unsustainable currency peg -- a link that initially created an appearance of wealth by allowing the country to borrow in a hard currency that it could ill afford to repay. As with Argentina in the 1990s, debt-fueled spending masked a lack of sustainable growth.
“The Greeks were selling tomatoes to buy Louis Vuitton, and imagining it didn’t have to stop one day,” Manolopoulos writes with justified sarcasm.
Much of the money was squandered, swallowed up by what he calls Hellenic Peronism, or the practice of distributing subsidies and favors to interest groups instead of creating wealth. Gorging on easy credit, the Greeks bought second homes, holiday homes and Porsche Cayennes to reach them.
The newfound wealth hardly transformed them into model citizens overnight. Manolopoulos rattles off telling numbers, beginning with 321 people aged more than 100 who had died yet were still being paid pensions. And 324 householders in northern Athens who declared their ownership of swimming pools for tax purposes -- compared with 16,974 residential pools in the neighborhood captured on satellite photos.
As if all this weren’t bad enough, Greece had plenty of accomplices. Ambitious EU leaders, bent on building the widest euro empire possible, created a loophole that permitted the Greeks to fiddle their public-deficit figures. Northern European banks, for their part, were only too happy to loan billions of euros to the Greek government, which spent much of it on arms purchases from French and German companies, Manolopoulos says.
German readers who rail against the Greek rescue will find plenty of ammunition in these pages. They’ll be less pleased with Manolopoulos’s analysis of how the euro they now bemoan pulled their own country out of a balance-sheet recession and boosted its exports. Germany, he concludes, has been the biggest benefactor from the single currency.
All of which raises the question of whom, exactly, the EU is bailing out: The Greeks themselves? Banks holding Greek government bonds? German exporters?
The “odious debt” in the title refers to the legal concept that a nation shouldn’t be liable for debts despotic rulers incur to prop up their regimes. Manolopoulos isn’t saying that this applies to all or even most of Greece’s debt. He does suggest, rightly, that Greece and other small economies should perhaps be prevented, by international agreement, from borrowing vast amounts of hard currency.
That might be a small price to pay for a euro intended to be as strong as the deutsche mark, not as weak as the drachma.
“Greece’s ‘Odious’ Debt: The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community” is from Anthem Press (288 pages, $29.95, 16.99 pounds). To buy this book in North America, click here.
(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)
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