CRUSH THE GREEKS! The Greek bailout revisited in the light of the Geithner revelations

geithnerTim Geithner is now on the public record,[1] confirming that which we have always known: In February 2010, clueless as to the Euro Crisis that was about to engulf them, Northern European leaders decided to crush Greece. Collectively to punish (against even the Geneva Convention) a nation for having gone bankrupt within a Eurozone whose architecture never took into consideration the possibility that a member-state could become insolvent. 

“We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them.’ [That] was their basic attitude, all of them.”

Geithner’s reaction, to such talk, was not concern over the Greeks’ impending ‘crushing’ but that the Northern Europeans were, in the process of crushing the Greeks, about to shoot themselves in the foot. As I was writing in 2010 (in an article entitled ‘A New Versailles Haunts Europe’):…

“…turning countries like Greece into sundrenched wastelands, and forcing the rest of the Eurozone into an even faster debt-deflationary downward spiral, is a most efficient way of undermining Germany’s own economy. Assuming, for argument’s sake, that Greece is getting its just deserts, do the hard working Germans deserve a political elite that quickmarches them straight into economic catastrophe?”

Geithner was the only person in that room of morally enraged Europeans with his eye on the proverbial ball.

“But the main thing is I remember saying to these guys: You can put your foot on the neck of those guys if that’s what you want to do. But you’ve got to make sure that you send a countervailing signal of reassurance to Europe and the world that you’re going to hold the thing together and not let it go. [You’re] going to protect the rest of the place.”

The rest is, of course, history. Greece was crushed. And it was crushed not by letting it default but, instead, by imposing the largest loan in history upon its weakened shoulders on condition that it should forfeit 30% of its nominal (euro-denominated) GDP. In the process, the rest of the Periphery (where the ‘Crush Greece’ model of crisis management was exported) was fiscally waterboarded with the result that the Eurozone came to the brink and, once Mr Draghi intervened, entered a long, slow-burning debt-deflationary spiral from which only fragmentation and discord can spring.

Back in Greece, the establishment who signed Greece’s Versailles Treaty, and who remain in power (in a mutated form), are invoking the Geithner revelations to say (to people like me): “See what the mood in Europe was at the time? If we had acted tough, as you were suggesting, they would have crushed us!”

My retort is: “They did crush us through the loan agreement that you signed and which you continue to pretend to honour! Exactly as Germany was crushed by the victorious allies after the Great War by being forced to sign the Versailles Treaty, so was Greece crushed by being forced to take on the toxic troika loans which bailed out, not Greece, but Northern European banks, with Bailout Mk1, and the Greek bankers (who, unlike the weaker Greeks, were never crushed), with Bailout Mk2.”

The choice Greece had in early 2010, at the time of the meetings Geithner is relating, was simple: Default within the euro or be crushed within the euro. All the threats of pushing Greece out of the euro were empty in the sense that, if they were carried out, the euro would have collapsed in short order.

Tragically, Greece’s establishment chose to allow the Northern European establishment to crush the weaker Greeks, sparing them in the process and putting Europe onto a glidepath to misanthropy, authoritarianism and fragmentation. As I was writing in that same article back in 2010, quoting Keynes’ Economic Consequences of the Peace

…the insincere acceptance … of impossible conditions which it was not intended to carry out [made] Greece* almost as guilty to accept what she could not fulfil as the troika** to impose what they were not entitled to exact

(*) Here I replaced the Germany with Greece; and (**) here I replaced the Allies with the troica

[1] See the transcripts of the Geithner tapes released by Peter Spiegel in his Financial Times blog.


  • Yes you are right about the unfairness of the north and the feebleness of Greece (and Ireland.) the difference, unfortunately, is that the Germans were naturally powerful enough to bring civilization to the edge of destruction

    • History never repeats itself, yet it seems that consistent patterns of abuse and exploitation can be discerned. Germany, for one, has never shown itself to be a nation-state with honourable intent or conduct its neighbours. Quite why other countries of the eurozone allowed themselves either to be part of the conspiracy or to be humiliated will make interesting historical reading. Presumably, the explanation lies in the serious democratic deficit of the EU and the refusal of national governments to cede power to a much-needed democratic federal structure to address our economic failings in a serious manner.

      Given the popular anti-federalist mood across Europe now, the only logical outcome can be continued and irredeemable economic decline for most of the EU. Goodbye Europe, Hello China.

    • @ Guest(xenos)

      History may not repeat itself but it is certainly written by the victors. Right now, those are the major financial corporations and their owners who were fortunate enough to have been relieved of their toxic assets by the european taxpayers. And so, consequently, the narrative now goes along the lines of Greece and the rest of the periphery being responsible for the whole mess and punishing them is the only apropriate cause of action.
      By the way, Germany has never shown itself to be much of a nation state at all until the late nineteenth century. And even after the ‘Reich’ of the prussian emperors had been fully formed, the german people only ever really felt like belonging to a nation when they were united against an alleged common enemy. Even today there is no end to the amount of bickering and outright harassment between the german states, especially when it comes to fiscal transfers from the south to the north and from the west to the east.
      The only thing that can temporarily put a halt to this german notion of ‘to each his own’ and unite everybody under a common cause, is when we find somebody else to blame, judge and punish for our own problems.

    • I would say the silence of the german politicians and the complete lack of coverage on those comments in the german media amount to an even greater level of shamefulness.

    • In my opinion this is not a competition on the degree of shamefulness ….but since you mentioned it please note that I do agree the Germans’ response not been adequate. My focus as a Greek taxpayer is not what the leaders of other countries do or do not as in this case. I am merely concerned with the leaders of my country and their actions. In particular to the extend of having put Greece in such position….

    • Thank you Hubert!
      But then wait read Geithner’s reaction, ‘go ahead and crash the Greeks’.

    • With all due respect you are taking the Geithner response out of contest … It is clear that Geithner did not agree with proposed crashing action. But being desperate to convince the Europeans of the larger issue at hand (i.e the collapse of EU) he used this phrase (ok crash them but …) in order to bring the focus of their attention to another issue .snd bypass the minor issue of Grreece… In short give the Germans something to chew on (the desire to crash the Greeks) so he can focus on the larger points. If one looks at the way Geithner orchestrated the US bailout in detail then it is obvious that even for players he disliked he did not choose the crash option. His approach has been bail them out, save them and then manage them for a long time ….

  • Shouldn’t the appropriate response then ought to be that we now have a moral obligation to crush the Germans so that Beast of Berlin learns once and for all not to entertain the slightest hint of a their miserable propensity of wanting to crush other people?

  • Germany after Versailles? Greece should have it so good! The infamous reparations were never paid, and hyperinflation rid Germany of its domestic war debt. Greece can neither default nor inflate, and so must go to the wall.

    • A slight omission and problem:
      The Gold Standard. I.e. the archetypal worldwide Eurozone on steroids.

    • Most of all, hyperinflation and the following mass unemployment during the world financial crisis in the late twenties rid Germany of democracy. Back then, chancelor Brüning’s government had only one recipe to counter the crisis and – guess what – it was a rigid austerity program that made the situation even worse.
      Domestic war debt was the least of their concern when Mr Hitler and his cronies took advatage of the situation. The Nazis were elected only because they presented the starving Germans with a seemingly easy solution to their economic problems, for which they blamed the jews, the bolsheviks, the French and basically everybody else who wasn’t german. They took that as an excuse to rebuild the german war machine and necessary infrastructure to move it across the country, creating new jobs for the masses and gaining even more support.
      Nobody gave a damn about where the funds for that giant ‘investment program’ were coming from until the ensuing world war was over and millions of innocent people had been slaughtered.

  • Dear Yanis.
    That is not amazing to most of us, . Europe has largely proven to be ruled by a bunch of sociopathic people, with anti-democratic and antisocial pulsions. This is the reason why I can’t understand you when you keep looking for solutions aimed to save this ill system, which is meant to protect financial interests and not people interests.
    I say that without any polemic spirit, I really do would like to understand.

  • I agree with every thing you said except the idea that by doing so the Germans somehow undermined their own economy. How is Germany’s economy undermined? Their trade surplus just broke a new record in september. Several hundreds of thousants of young educated Spaniards, Italians and Greeks are rushing to their country to take precarious and low-wage jobs saving them for the effects of the demographic deficit. Merkel can now do whatever she wishes within the U.E. The Euro crisis is a huge success for Germany. The French, the Italians, the Spaniards sure did shot themselves in the foot (not to mention the Irish, the Portugueses, the Chypriots and so on), but the Germans? I don’t see it…

    • How have the German people benefitted from the trade surplus? It has created a glut of capital in the financial sector that pushes real interest rates below zero, depleting pensions funds and putting a further strain on an aging population. Meanwhile, wages remain exceptionally low, poverty amongst working Germans is rising, productivity is stagnant and investment is substantially lower than it was in 1993! From a mercantilist viewpoint, Germany is doing well. From a humanist and social perspective it is stagnating – and only seems reasonably well because all other nations in the Eurozone are suffocating. In short, Germany has shot itself in the foot, even if everyone else got the bullet in the torso…

    • Ah but we don’t talk about the same thing! I’m talking about Germany, you answer about German people! Germany as a country has benefited from the crisis. German people (at least some of them) are paying the price of the war their elite choose to launch. Just like (to take your analogy) back in 1918, most of the winners of the war paid a great human price for their victory.

    • Daphne is 100% right. The German elite which runs Germany suffers from a punctuated and pronounced case of uber statetism. The “German volk” is a completely different issue. The Beast of Berlin cares not about the diverse predicaments of the constituencies comprising the “German people”.

    • Yiani,
      Germany is glowing in negative interest rates and 5% unemployment with East Germany included. Your article is spot on regarding Greece, however stop trying to sell the Germans on the idea that they will be better off by saving Greece. They look at their numbers and frankly they could care less.

    • Not so. Poverty in Germany has doubled in the past 10 years. Unemployment is low only because millions of German workers work less than 16 hours weekly and collect 450 euros monthly. Productivity growth is laughable. Investment is lower than it was in 1989. For a country that is aging fast, all this bodes extremely ill.

    • Of course there is no productivvity growth without Investment and of course there is no Investment if politicians, the EU and the ECB do everything to send money to the South where private money after a decade of malinvestment does not want to go voluntarily anymore.

      You have to decide what to do with the German money, you can spend it only once. Either on bailouts for the South or as Investment in Germany.

  • The German volk are no better or worse than the Greek poloi. It is the German and the Greek politicians that you have to worry about.

    True sociopaths occur at about 1% in the general population, but are found at about 10% in politics. After all, if you are strongly attracted to money and power, and your main talents are lying, stealing and stabbing your friends in the back, politics is a natural home.

    Once any institution contains 10% sociopaths, who inevitably become gate-keepers, it is deeply and perhaps irreversibly dysfunctional.

    The German man and woman in the street is just as screwed as the average Greek, or American. And some of them have realised this.

  • Grieken moesten in de euro. Gevolg de vakantiegangers in Europa gaan naar de erfvijand van de Grieken, turkije. Achteraf niet zo slim. Zou met de griekse drachme een goedkoop vakantieland zijn. Iedereen belasting betalen in Griekenland zou ook helpen, inclusief de rijken.

  • “The choice Greece had in early 2010, at the time of the meetings Geithner is relating, was simple: Default within the euro or be crushed within the euro.”

    Exactly what I say since years. And as I also said, the right choice would of course have been to default. Boy, how long it took you to aceppt this.

    What you still don’t accept is the fact that it was *only* the Greeks themselves who brought upon them the desaster their country is in now, they started decades before they joined the Euro, and took up speed since then.

    Another fact that you still don’t accept is the logical conclusion from the previous one: it can only be the Greeks themselves to pull their country out of this nightmare: leave the Eurozone and default. The creditors of course would have to accept a huge debt relief. Reads: realize huge losses, but they won’t get their money back anyway.

    • The right choice would have been QE, no haircuts and no euro exit.
      But you are German and as such you will always reach for the cold ruthless unemotional decisions that have so much characterized your people over the years.
      It is for this reason alone that the Eurozone cannot go on as it is. It might take people a while to realize this but eventually they will.

    • We all talk about what Greece should do in order to pay back these enormous loan amounts. We should also talk about WHY the Greek politicians, with the help of the International Financial Institutions, obtained these loans and mortgaged the country for billions of dollars. What happened to the money? We all know now that the Greek people have to pay back these billions of dollars with interest.

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