The Default Line: THE INSIDE STORY OF PEOPLE, BANKS AND ENTIRE NATIONS ON THE EDGE by Faisal Islam Page B
Authors: Faisal Islam
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devil they knew and therefore preferred. In the Square the expressions on the faces in the crowd were remarkable. Not of hope, but of fear. As one ND candidate told me, ‘These are the faces of people wondering whether they’ll have to take their life savings out of the bank on Sunday night.’ That is, if they had not done so already. Many in the crowd believed in one simple equation: ‘Syriza win = bank run on Sunday evening.’ Privately, Syriza’s top advisers also believe that, in broad terms, Greece’s electorate is splitting in two, ‘those with bank accounts/savings and those without’.
When push came to shove, Greeks voted to stay in the euro, and Antonis Samaras became prime minister. However unpopular the Troika programme, it was insufficiently unpopular for Grexit. Greece had defaulted on a third of its debt. It voted not to default on the deal to stay in the Eurozone. Instead, like large swathes of the Eurozone periphery, Greece was defaulting on its version of Europe’s social contract. But the New Democracy victory rally in Syntagma Square was far from euphoric. Syriza had hugely increased its share of the vote, and party insiders suggested to me they were relieved not to win, as they had not really prepared for government. But the question remains: can a society survive generational splits like this between savers and those with no hope of being able to save?
Greece also left the Troika with a rather inconsistent approach to dealing with sovereign-debt crises in the Eurozone. Everywhere the ‘sovereign signature’ was to be honoured in full, meaning that banks that had stupidly lent to these nations paid no price – except in Greece, whose foreign bankers were not so much singed as flamed. Indeed, the Eurozone had quixotically placed its own head in the guillotine, in place of private bankers, for any future repeat Greek debt write-off. The Eurozone authorities, or ‘official sector’ in the jargon, are now Greece’s banker. But that is a story for later (see here ).
The day after the June election I went to Athens fish market and met Vasili, a 21-year-old worker there. ‘Young Greeks have no dreams any more,’ he told me. He does not want to sell fish. He is an economics graduate from a top university in Greece, and wants to be a journalist like me. Another fish seller, an Albanian who had lived in Athens for twenty years, told me he was planning to return to Tirana, where the economy was booming and he could earn more. A third man, in his twenties like Vasili, does not flinch as he calmly explains why he voted for neo-Nazis. Although they ‘occasionally do bad things’, he says, at least they are ‘proud Greeks’.
The cash machines did work on the Sunday after the election, partly thanks to the second secret Athens Airlift. There were contingency plans afoot to deal with the consequences should an enforced euro exit come about. At the Bank of Greece, there were discussions about whether or not some sort of controls should be implemented if the outcome of the elections was ‘worrying’ and could cause a bank run. The Greek newspaper To Vima was told that at one point someone ‘stupidly’ tossed the idea of imposing a €20 withdrawal limit from banks, but that others at the Bank of Greece rejected the idea. However there was a contingency for the imposition of a specific withdrawal limit, in the event that an Alexis Tsipras election win had sent Greeks to mount a run on their banks. The night before the election, an international energy company, fearful of an immediate return to the drachma, asked for and got payment of a massive bill in euros. No one could have predicted how a society as concussed and volatile as Greece might have responded. A clue was to be provided nine months later, not so far away – in Cyprus (see here ).
2
Of Fiscal Criminals and Bond Vigilantes
Dramatis personae
Nick Clegg, UK Liberal Democrat leader
Sir Mervyn King, governor of the Bank of England
When push came to shove, Greeks voted to stay in the euro, and Antonis Samaras became prime minister. However unpopular the Troika programme, it was insufficiently unpopular for Grexit. Greece had defaulted on a third of its debt. It voted not to default on the deal to stay in the Eurozone. Instead, like large swathes of the Eurozone periphery, Greece was defaulting on its version of Europe’s social contract. But the New Democracy victory rally in Syntagma Square was far from euphoric. Syriza had hugely increased its share of the vote, and party insiders suggested to me they were relieved not to win, as they had not really prepared for government. But the question remains: can a society survive generational splits like this between savers and those with no hope of being able to save?
Greece also left the Troika with a rather inconsistent approach to dealing with sovereign-debt crises in the Eurozone. Everywhere the ‘sovereign signature’ was to be honoured in full, meaning that banks that had stupidly lent to these nations paid no price – except in Greece, whose foreign bankers were not so much singed as flamed. Indeed, the Eurozone had quixotically placed its own head in the guillotine, in place of private bankers, for any future repeat Greek debt write-off. The Eurozone authorities, or ‘official sector’ in the jargon, are now Greece’s banker. But that is a story for later (see here ).
The day after the June election I went to Athens fish market and met Vasili, a 21-year-old worker there. ‘Young Greeks have no dreams any more,’ he told me. He does not want to sell fish. He is an economics graduate from a top university in Greece, and wants to be a journalist like me. Another fish seller, an Albanian who had lived in Athens for twenty years, told me he was planning to return to Tirana, where the economy was booming and he could earn more. A third man, in his twenties like Vasili, does not flinch as he calmly explains why he voted for neo-Nazis. Although they ‘occasionally do bad things’, he says, at least they are ‘proud Greeks’.
The cash machines did work on the Sunday after the election, partly thanks to the second secret Athens Airlift. There were contingency plans afoot to deal with the consequences should an enforced euro exit come about. At the Bank of Greece, there were discussions about whether or not some sort of controls should be implemented if the outcome of the elections was ‘worrying’ and could cause a bank run. The Greek newspaper To Vima was told that at one point someone ‘stupidly’ tossed the idea of imposing a €20 withdrawal limit from banks, but that others at the Bank of Greece rejected the idea. However there was a contingency for the imposition of a specific withdrawal limit, in the event that an Alexis Tsipras election win had sent Greeks to mount a run on their banks. The night before the election, an international energy company, fearful of an immediate return to the drachma, asked for and got payment of a massive bill in euros. No one could have predicted how a society as concussed and volatile as Greece might have responded. A clue was to be provided nine months later, not so far away – in Cyprus (see here ).
2
Of Fiscal Criminals and Bond Vigilantes
Dramatis personae
Nick Clegg, UK Liberal Democrat leader
Sir Mervyn King, governor of the Bank of England
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