Greek crisis

12 charts and maps that explain the Greek crisis

Updated by Ezra Klein on July 1, 2015, 8:30 a.m. ET @ezraklein

http://www.vox.com/2015/7/1/8871509/greece-charts

1) If you had to pick one chart that encapsulates Greece's crisis, it would be this one

Desmond Lachman/American Enterprise Institute

The roots of Greece's crisis are simple. Before Greece joined the Eurozone, investors treated it as a middle-income country with poor governance — which is to say, a credit risk. After Greece joined the Eurozone, investors thought that Greece was no longer a credit risk — they figured, if push came to shove, other Eurozone members like Germany would bail Greece out. They were wrong.

As this chart, via the American Enterprise Institute's Desmond Lachman, shows, after Greece joined the Eurozone, investors began lending to Greece at about the same rates as they lend to Germany. Faced with this sudden availability of cheap money, Greece began borrowing like crazy. And then, when it couldn't pay back its debts, it turned out financial markers were wrong: Germany and other Eurozone nations weren't willing to simply bail Greece out.

That led the market to panic around 2010, and you can see interest rates on Greek debt spike once again. Those high interest rates make it basically impossible for Greece to borrow, and that makes it impossible for Greece to pay its debts.

The result: Greece is insolvent and the Eurozone isn't as tight a union as the financial markets — and maybe the Eurozone's member states — believed. That's the crisis.

2) Greece's debt-to-GDP ratio is an insane 172%

It's much higher than any other country in the Eurozone. But making matters worse is the fact that the financial markets no longer see Greece as debt-worthy. No one wants to lend to Greece at reasonable rates, and so Greece can't keep paying to service its current debts while carrying out basic government functions.

3) This is the most important chart if you live in Greece

Greece's problems are often framed as a financial crisis, or a political crisis. But what they really are is a human crisis. Unemployment in Greece is over 25 percent now — higher than the United States during the Great Depression. And high unemployment is leading to political backlash.

The latest round of the Greek crisis began when Greece rejected its two main political parties in favor of the far-left Syriza. The main reason? Syriza promised to free Greece from the grinding austerity that was leading to such widespread human misery. The only problem? Syriza had no actual plan for freeing Greece from austerity; they tried to renegotiate the terms of the Eurozone's support for Greece and came away basically empty handed.

And so Syriza is asking the Greek people to vote on whether to accept the Eurozone's terms — and, by proxy, to remain in the Eurozone. The vote is basically a final, desperate ploy for leverage, and one that's likely to fail. Either the Greek people endorse more of the same, which Syriza doesn't want, or they reject the Eurozone's offer, and basically have to leave the Eurozone, which would also be a disaster.

This is perhaps the most important, and most depressing, reality of the Greek crisis: there are no good outcomes that are remotely plausible.

4) Greece's recession is worse than America's Great Depression

American Enterprise Institute

This chart also comes via the American Enterprise Institute's Desmond Lachman, who presented it in testimony before Congress. His summation is about as concise a description of the economic nightmare the country is living through that you'll find, so I'll quote it at length:

Over the past six years, Greece has experienced an economic depression on the scale of that experienced by the United States in the 1930s. Its economy has contracted by around 25 percent, its unemployment rate has exceeded 25 percent, and its youth unemployment has risen to over 50 percent.

At the same time, despite five years of budget austerity and a major write-down of its privately owned sovereign debt, Greece's public debt to GDP ratio has risen to 180 percent. At the heart of Greece's economic collapse has been the application of draconian budget austerity within a Euro straitjacket. That straitjacket has precluded exchange rate depreciation or the use of an independent monetary policy as a policy offset to the adverse impact of budget belt-tightening on aggregate demand.

In other words, the debt crisis destroyed Greece's economy, which in turn destroyed Greece's ability to pay back its creditors or employ its people, which in turn forced Greece to beg the Eurozone and IMF for help and the austerity measures they demanded destroyed Greece's economy even more.

5) Greeks are fleeing Greece

Quartz Atlas

This is a particularly depressing chart about Greece's long-term prospect from Quartz. Before the crisis, Greece's population was growing. Since the crisis, it's shrinking. And it's a good bet that the people leaving Greece are some of the most economically productive. After all, it's a lot easier to emigrate if you have an engineering PhD and resources than if you lack in-demand skills and the money necessary to travel. But as rational as Greek emigration is, it means it will be that much harder for the Greek economy to recover.

6) Money is fleeing Greek banks

Greece is in the throes of a full-fledged bank run. You can see it in photos: the Greek people have been lining up at ATMs to pull their money out. But you can also see it in this chart, which shows Greek bank deposits falling to their lowest levels in a decade.

The reason? Greeks are worried that Greece is going to leave the Euro, in whole or in part. They worry that Greece is either going to return to its own currency, or in order to keep paying its debts, revert to some kind of temporary government scrip. Either way, whatever replaces euros will be worth a whole lot less than the euro, and so anyone who can get their money out is doing it as fast as they can.

Or, at least, they were doing it as fast as they can. Greece has shut down its banks and imposed limits on daily ATM withdrawals in order to end the run.

7) This is now a Greek crisis, not a Eurozone crisis

Bloomberg

A few years ago, Greece's crisis was the Eurozone's crisis. After all, it wasn't just Greece sagging under the weight of debts it couldn't obviously pay back; it was Spain, Portugal, and Italy, to name just a few.

But no longer. This chart, using Bloomberg data, shows the price of 10-year government bonds from Greece (orange), Portugal (blue), Spain (red), and Italy (green) over the last five years. Focus on the right edge of the chart. You can see prices on Greek bonds rising amidst the latest panic. But Spain, Portugal and Italy are unperturbed. The Eurozone has convinced the financial markets that this a Greek problem, not a Eurozone problem.

While that may be good for the Eurozone, it's bad for Greece, as it reduces their negotiating leverage. Four years ago, the Eurozone believe that it needed to save Greece to survive. Now it thinks it can survive a "Grexit" just fine.

8) Greece has done a lot of austerity

As my colleague Matt Yglesias writes, the austerity question is a bit twisted when it comes to Greece. In America, austerity was a choice: markets were, and are, happy to lend us more money. In Greece, however, markets have no interest in lending to Greece, and so the alternative to accepting the austere conditions imposed by the Eurozone and the IMF is is accepting the yet-more severe austerity that markets would force.

That said, there is a peculiar narrative that Greece has somehow been resisting the imposition of austerity. That narrative is dead wrong.

The unemployment numbers should put to rest any belief that the Greek people are somehow surviving this crisis unscathed, but if you want something more specific, then this chart, via the Center for European Reform's Simon Tillford, is useful. If you take 2007 as a baseline, Greece has cut government spending by much more than other Eurozone countries.

Indeed, as Paul Krugman wrote, "If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus."

But Greece is in worse shape than ever. Why? Krugman again: "Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it."

The Greeks may not have had a choice other than austerity. But austerity has still been a disaster for them.

9) The value of the Euro held against the dollar — and that's been a disaster for Greece

Google finance

This chart shows the value of the euro against the dollar, and the basic takeaway is simple: it's held pretty steady through Greece's crisis.

That's been a disaster for Greece.

The normal way a country like Greece would deal with these kinds of problems is to sharply devalue their currency in order to boost tourism and exports. But because Greece is part of the euro, and because they don't control Eurozone monetary policy, they haven't been able to devalue. (Eurozone monetary policy is controlled by the European Central Bank, which is more or less controlled by Germany, and so, unsurprisingly, Eurozone monetary policy has been much better for Germany than for Greece.)

So membership in the Eurozone has slammed Greece coming and going: it led to the crazy borrowing rates that fueled the crisis and then it made the crisis much more painful for Greece.

For more on the failure of the euro in the crisis, see this great piece for Tim Lee.

10) Greece is crap at collecting taxes

Speaking of tax revenues, there's no real need to belabor this, but Greece is unusually bad at collecting taxes. These numbers come from the Organization for Economic Cooperation and Development, and they show what an outlier Greece is when it comes to tax collection. This isn't the cause of Greece's crisis, but it's definitely not helping them get out of it.

11) Two views of Greece's economic boom — and crash

World Bank data/Matt Yglesias

This chart, which my colleague Matt Yglesias made with World Bank data and the program Paintbrush, is a bit odd, but it's makes an important point. I'll let him explain it.

"The magenta line is more or less how things look to Greek people. Since 2008 or so, under the watchful eye of European Union elites (the central bank, the European Commission, the International Monetary Fund, the government of Germany, etc.), the Greek economy has completely collapsed. And the Greek population has been thrown into a state of dire immiseration."

"The yellow line reflects more how things look to European officialdom. Greece is about on track for where you would expect it to be if you extrapolated forward from the pre-euro era. The prosperity of seven years ago was a bubble, driven by imprudent lending and dodgy government finances. Meanwhile, though Greece is a lot poorer than it was it's not actually a poor country in the global sense. As a supplicant looking for charity, Greece is a lot less compelling than India or Guatemala or any number of sub-Saharan African countries."

12) The Greek people don't think their voice counts in the Eurozone (and they're right)

European Commission

This 2014 poll by the European Commission offers a damning look at the resentments building within the Eurozone. Only 23 percent of Greeks — they are, confusing for Americans, abbreviated as "EL" on the above chart — believe their voice is listened to within the Eurozone. But perhaps more tellingly, only 52 percent of Germans — abbreviated as "DE" — feel the same.

This speaks to the fact that while the Greeks feel completely oppressed by the Eurozone, Germans, despite their strength, also feel like they're getting a raw deal because they've had to subsidize countries like Greece. Indeed, a March poll found that a majority of Germans wanted to see Greece leave the Eurozone.

1. The Eurozone is a political project, not an economic one

   If you try to understand the Eurozone as an economic policy idea you'll quickly start to see that it's a pretty stupid idea. That will lead naturally to the conclusion that its architects were stupid people, and that the policymakers in Brussels and Frankfurt who oversee it today are also stupid people. And if you try to understand everything that's going on through the lens of stupid people doing stupid things, you'll end up misunderstanding the situation.

   The single most important thing to understand about the Eurozone — the group of 19 European Union member states who use the Euro as their official currency — is that it's primarily a political project, not an economic one. And despite the considerable problems with European economies, it gives every indication of succeeding in its political goal of pushing deeper and deeper integration of European countries.

   Ireland's main trading partners are the United States and the United Kingdom. Finland's main trading partners are Russia and Sweden. Economics simply can't explain why they would want to be in a currency union with Italy and Portugal and Greece.

   
   

   

   
   

   (ssolbergj)

   The Eurozone's member states — Portugal, Spain, France, Luxembourg, Belgium, the Netherlands, Germany, Italy, Austria, Ireland, Finland, Cyprus, Estonia, Malta, Greece, Slovakia, Slovenia, Lithuania, and Latvia — have all forsworn sovereign control over monetary policy and handed it over to the European Central Bank in Frankfurt. The ECB sets interest rates, controls the quantity of Euros in circulation, and generally performs for its members the functions that the Federal Reserve does for the United States, or the Bank of Japan does for Japan.

   As an economic policy, this is an idea with some serious flaws. The Eurozone is not what economists call an optimal currency area — its economies are too big and disparate.

   One way this flaw plays out is that Europe has very limited labor mobility compared to, say, the United States. If the economy is strong in the Netherlands but weak in Spain, it's difficult for Spanish people to simply move to Amsterdam where they don't speak Dutch. European countries maintain separate welfare states, and have very different average living standards. Consequently, economic conditions can be very different in one part of the Eurozone than in another, making it difficult for the ECB to create policy that is appropriate everywhere.

   These problems are why economics writers fall all over themselves these days to come up with stronger condemnations of the Eurozone's fundamental flaws. Matt O'Brien calls it "a doomsday device for turning recessions into depressions," which is pretty good.

   But European Monetary Union isn't a blunder, it's an incredibly ambitious political idea. In the late-1940s and early-1950s, European leaders decided that World War II was not just a uniquely horrible event but the culmination of a centuries-long process of great power rivalry. They committed to the construction of a series of institutions — first the European Coal and Steel Community, then the European Economic Community, then the European Union — that would make war impossible. By integrating the steel industries of France and Germany, it would be impossible for either country to produce war materiel without the cooperation of the other. Deeper integration in subsequent decades only makes military hostility even more difficult.

   The slogan underlying these efforts is "ever closer union" and the monetary union is a step toward that goal. And indeed while the past five years have been a time of economic trouble for members of the Eurozone, those very troubles have pushed the member states toward even closer forms of political and economic integration on subjects like budget discipline and bank regulation.

   The political meaning of the Eurozone and the European Project differs a bit from place to place. To France and Germany, it means the end of war. To Ireland, it means independence from the United Kingdom. To Finland and Latvia and other eastern states, it means independence from the Russian sphere of influence. For Spain and Portugal, it means the end of dictatorship and integration into the realm of democracies. For Greece, it means (unlike Turkey) certification as a real European country.

   These big political ideas are what drives the Eurozone and the vast majority of mainstream European leaders. It's why these countries are willing to put up with a lot of pain to keep the Eurozone alive. Everything beyond the survival of this dream — including the practical economics — is secondary.

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Greece - What You Are Not Being Told by the Media

According to mainstream media, the current economic crisis in Greece is due to the government spending too much money on its people that it went broke. This claim however, is a lie. It was the banks that wrecked the country so oligarchs and international corporations could benefit.

By Chris Kanthan / nationofchange.org

Every single mainstream media has the following narrative for the economic crisis in Greece: the government spent too much money and went broke; the generous banks gave them money, but Greece still can’t pay the bills because it mismanaged the money that was given. It sounds quite reasonable, right?

Except that it is a big fat lie … not only about Greece, but about other European countries such as Spain, Portugal, Italy and Ireland who are all experiencing various degrees of austerity. It was also the same big, fat lie that was used by banks and corporations to exploit many Latin American, Asian and African countries for many decades.

Greece did not fail on its own. It was made to fail.

In summary, the banks wrecked the Greek government and deliberately pushed it into unsustainable debt so that oligarchs and international corporations can profit from the ensuing chaos and misery.

If you are a fan of mafia movies, you know how the mafia would take over a popular restaurant. First, they would do something to disrupt the business – stage a murder at the restaurant or start a fire. When the business starts to suffer, the Godfather would generously offer some money as a token of friendship. In return, Greasy Thumb takes over the restaurant’s accounting, Big Joey is put in charge of procurement, and so on. Needless to say, it’s a journey down a spiral of misery for the owner who will soon be broke and, if lucky, alive.

Now, let’s map the mafia story to international finance in four stages.

Stage 1: The first and foremost reason that Greece got into trouble was the “Great Financial Crisis” of 2008 that was the brainchild of Wall Street and international bankers. If you remember, banks came up with an awesome idea of giving subprime mortgages to anyone who can fog a mirror. They then packaged up all these ticking financial bombs and sold them as “mortgage-backed securities” at a huge profit to various financial entities in countries around the world.

A big enabler of this criminal activity was another branch of the banking system, the group of rating agencies – S&P, Fitch and Moody’s – who gave stellar ratings to these destined-to-fail financial products. Unscrupulous politicians such as Tony Blair got paid by Big Banks to peddle these dangerous securities to pension funds and municipalities and countries around Europe. Banks and Wall Street gurus made hundreds of billions of dollars in this scheme.

But this was just Stage 1 of their enormous scam. There was much more profit to be made in the next three stages!

Stage 2 is when the financial time bombs exploded. Commercial and investment banks around the world started collapsing in a matter of weeks. Governments at local and regional level saw their investments and assets evaporate. Chaos everywhere!

Vultures like Goldman Sachs and other big banks profited enormously in three ways: one, they could buy other banks such as Lehman brothers and Washington Mutual for pennies on the dollar. Second, more heinously, Goldman Sachs and insiders such as John Paulson (who recently donated $400 million to Harvard) had made bets that these securities would blow up. Paulson made billions, and the media celebrated his acumen. (For an analogy, imagine the terrorists betting on 9/11 and profiting from it.) Third, to scrub salt in the wound, the big banks demanded a bailout from the very citizens whose lives the bankers had ruined! Bankers have chutzpah. In the U.S., they got hundreds of billions of dollars from the taxpayers and trillions from the Federal Reserve Bank which is nothing but a front group for the bankers.

In Greece, the domestic banks got more than $30 billion of bailout from the Greek people. Let that sink in for a moment – the supposedly irresponsible Greek government had to bail out the hardcore capitalist bankers.

Stage 3 is when the banks force the government to accept massive debts. For a biology metaphor, consider a virus or a bacteria. All of them have unique strategies to weaken the immune system of the host. One of the proven techniques used by the parasitic international bankers is to downgrade the bonds of a country. And that’s exactly what the bankers did, starting at the end of 2009. This immediately makes the interest rates (“yields”) on the bonds go up, making it more and more expensive for the country to borrow money or even just roll over the existing bonds.

From 2009 to mid-2010, the yields on 10-year Greek bonds almost tripled! This cruel financial assault brought the Greek government to its knees, and the banksters won their first debt deal of a whopping 110 billion Euros.

The banks also control the politics of nations. In 2011, when the Greek prime minister refused to accept a second massive bailout, the banks forced him out of the office and immediately replaced him with the Vice President of ECB (European Central Bank)! No elections needed. Screw democracy. And what would this new guy do? Sign on the dotted line of every paperwork that the bankers bring in.

(By the way, the very next day, the exact same thing happened in Italy where the Prime Minister resigned, only to be replaced by a banker/economist puppet. Ten days later, Spain had a premature election where a banker puppet won the election).

The puppet masters had the best month ever in November 2011.

Few months later, in 2012, the exact bond market manipulation was used when the banksters turned up the Greek bonds’ yields to 50%!!! This financial terrorism immediately had the desired effect: The Greek parliament agreed to a second massive bailout, even larger than the first one.

Now, here is another fact that most people don’t understand. The loans are not just simple loans like you would get from a credit card or a bank. These are loans come with very special strings attached that demand privatization of a country’s assets. If you have seen Godfather III, you would remember Hyman Roth, the investor who was carving up Cuba among his friends. Replace Hyman Roth with Goldman Sachs or IMF (International Monetary Fund) or ECB, and you get the picture.

Stage 4: Now, the rape and humiliation of a nation begin under the name of “austerity” or “structural reforms.” For the debt that was forced upon it, Greece had to sell many of its profitable assets to oligarchs and international corporations. And privatizations are ruthless, involving everything and anything that is profitable. In Greece, privatization included water, electricity, post offices, airport services, national banks, telecommunication, port authorities (which is huge in a country that is a world leader in shipping) etc. Of course, the ever-manipulative bankers always demand immediate privatization of all media which means that the country gets photogenic TV anchors who spew establishment propaganda every day and tell the people that crooked and greedy banksters are saviors; and slavery under austerity is so much better than the alternative.

In addition to that, the banker tyrants also get to dictate every single line item in the government’s budget. Want to cut military spending? NO! Want to raise tax on the oligarchs or big corporations? NO! Such micro-management is non-existent in any other creditor-debtor relationship.

So what happens after privatization and despotism under bankers? Of course, the government’s revenue goes down and the debt increases further. How do you “fix” that? Of course, cut spending! Lay off public workers, cut minimum wage, cut pensions (same as our social security), cut public services, and raise taxes on things that would affect the 99% but not the 1%. For example, pension has been cut in half and sales tax increase to more than 20%. All these measures have resulted in Greece going through a financial calamity that is worse than the Great Depression of the U.S. in the 1930s.

After all this, what is the solution proposed by the heartless bankers? Higher taxes! More cuts to the pension! It takes a special kind of a psychopath to put a country through austerity, an economic holocaust.

If every Greek person had known the truth about austerity, they wouldn’t have fallen for this. Same goes for Spain, Italy, Portugal, Ireland and other countries going through austerity. The sad aspect of all this is that these are not unique strategies. Since World War II, these predatory practices have been used countless times by the IMF and the World Bank in Latin America, Asia, and Africa.

This is the essence of the New World Order — a world owned by a handful of corporations and banks; a world that is full of obedient, powerless debt serfs.

So, it’s time for the proud people of Greece to rise up like Zeus and say NO (“OXI” in Greece) to the greedy puppet masters, unpatriotic oligarchs, parasitic bankers and corrupt politicians.

Dear Greece, know that the world is praying for you and rooting for you. This weekend, vote NO to austerity. Say YES to freedom, independence, self-government, sovereignty, and democracy. Go to the polls this weekend and give a resounding, clear victory for the 99% in Greece, Europe, and the entire western world.