Exclusive: The after-shocks from the Wall Street crash of 2007-08 continue to rattle international stability, with Greece now rejecting never-ending demands for more belt-tightening and raising the specter of a splintered European Union, as ex-U.S. diplomat William R. Polk explains.
By William R. Polk
The Greek people have not only spoken; they have shouted. More than six in ten voters said “no.” So what does that mean and what will happen next?
What it means is twofold: Domestically, it means that the Greek people in vast numbers refuse to accept the verdict of the European Central Bank, the International Monetary Fund and the creditor nations. That verdict would have amounted to a generation or more of continued suffering for the Greeks in pursuit of the receding goal of repaying the creditors for their loans.
Greek Prime Minister Alexis Tsipras (center) with French President Francois Hollande (left) and German Chancellor Angela Merkel.
As German Chancellor Angela Merkel has said, loans must be repaid. In principle, of course, she is right, but there are extenuating circumstances, including that the lenders baited the trap in which the Greeks have fallen. The lenders offered loans when they should have known that the borrowers had little chance of repaying them.
Sometimes in Greece — as, for example, in Latin America — bank officers encouraged borrowing because they got bonuses for generating business, a common banking practice. Other loans were made for political purposes. Some also had “security” aspects.
Collectively, the Greeks are “guilty” of accepting the loans. They should have known how hard it would be to repay them. Some, prudently, refused, but when the loans temporarily created a minor boom, almost everyone was swept up in the euphoria.
After years of warfare, poverty and turmoil, it seemed that a new day was dawning. A “bubble” of expectation seemed to have changed the rules of the game. So both the government and the people plunged into the financial trap.
And the Greeks were not alone. Other heavy borrowers included the governments and peoples of Spain, Portugal, Italy and Ireland. This is what makes the current crisis more…