Looking at the data, it's curious how Greece managed to continually borrow and spend money in the amounts that it did without significant increases in the interest rates it was charged or increased concerns over its ability to repay its obligations.
Notice that despite the dramatic increases in public sector spending, and the liabilities incurred from the "securities other than shares" on its balance sheet, its interest (shown in red) remained more or less the same. How did Greece pull off such financial magic? By entering into transactions with other financial institutions (specifically American ones) that utilized instruments that wouldn't appear as loans or short term securities on its balance sheet. In The New York Times articles titled, "Wall St. Helped To Mask Debt Fueling Europe's Crisis" and "Banks Bet Greece Defaults On Debt They Helped Hide" several of these transaction types are described in detail; all were designed to allow Greece to access new capital while sheltering its debts away from European regulators. These instruments allowed Greece to hide billions of Euros of debt until, of course, they had borrowed more than their economy could chew and had to ask their central banker for money.
Continued in Part 4
Article comments
1 - Glenn Contrarian
Alex -
Excellent article. There's so many lessons therein that apply to America's economic woes, such as the rush of a certain segment of our political spectrum to slash education and infrastructure funding, the danger of enabling citizens to hide so much of their taxable income overseas, and particularly the great need for strong regulation of Wall Street, given their culpability in enabling fraud at home and overseas.
2 - Alexander J Smith III
Glenn,
Thank you for your comment. As I research the conditions that are at the center of the crisis in Europe and the United States, the need for more regulation of these financial firms, especially when it comes to their size and accounting practices. There are trillions of dollars worth of derivatives and credits that get moved around between banks using verbal agreements that don't require any real accounting and its the consumer that ends up losing.
3 - Igor
Excellent article.
4 - Igor
In the long term we need to improve regulation and slow down the rate of transactions by imposing transaction taxes.
In the short term we need to send fraudsters to prison to get them out of the system.
5 - Igor
One of the really bad things is that the government, in it's stated attempt to detect and stop bank fraud, is setting up ordinary citizens to be even more abused by the Criminal International Financial System.
More impositions are being put on citizens that inherently make them more susceptible to crooks. This empowerment of crooks will drive more people into activities that are marginally criminal themselves.
Crook vs. crook. (as in the old MAD magazine Spy vs. Spy cartoons).
Pretty soon it'll be like the old Soviet East German STASI here.
But the real criminals will escape. They'll buy their way out. Aided by government officials they've bought.