How to Save Europe

From the Financial Times, Sat., May 8: “European banks in bonds plea: Europe’s banks yesterday make a desperate appeal for the European Central Bank to buy the bonds of crisis-hit eurozone members.” Yesterday, the banks and other investors got their bailout wish. Following a great circular path, the first wads of cash flowed from the ECB to Germany and other euro governments, which then shipped figurative armoured trucks loaded with euros to Greece, where €8.5-billion was immediately unloaded and transferred into the pockets of bankers and bondholders. That’s euro-finance in action.

The 10-year bonds redeemed yesterday were first issued back in 2000, a year before Greece joined the euro. Bloomberg reports that Greece’s debt then was already 103% of GDP. But never mind. Greece had been awarded the 2004 Summer Olympics only three years earlier, and it needed lots of new debt to fund the project and maintain its bloated welfare state and corrupt political system. At the time, also, Greece was on the brink of joining the eurozone, an event hailed by all as a crowning achievement of the New Europe. Greece’s debt later soared to more than US$600-billion, or 133% of GDP — a big number for a country whose population is roughly the size of Michigan’s.