If Greeks Did This, the Terrible Crisis Would Be Over

by Wolf Richter, Wolf Street The Greeks – the poor, downtrodden, Troika-tortured Greeks – yanked €12 billion out of their own banks in January alone to send this moolah out of the country or hide it in their fridges, culminating waves of capital flight that started years ago. Greeks have been busy siphoning their wealth out of Greece in other ways too, buying homes in Berlin and London, and investing their money elsewhere in a myriad ways. The Greeks trust their already bailed-out but still putrefying banks as far as they can throw them. To keep them from toppling, the ECB is propping them up via the Emergency Liquidity Assistance (ELA) program, providing many billions in cash so that Greeks can continue to yank their own money out and send it for safekeeping somewhere else. Greeks at all levels are notorious for not paying their taxes. Successive governments tried to levy new taxes to make up for taxes that Greeks simply refused to pay. They tried to crack down on select groups of tax cheats, going variously after the small fry or a few trophy rich. But to no avail. Greeks simply don’t like to pay their taxes. In that respect, they’re the same as the rest of humanity. They’re just better at it. And it wouldn’t even occur to Greeks to buy Greek government bonds, though the government needs to sell bonds desperately to exit the debt crisis, move the economy forward, and finance the government’s profligate ways, sandwiched between capital flight and tax evasion. So for years, the theme has been to shanghai taxpayers in other countries to pick up the tap, mostly those in Germany (on the hook for the lion’s share), but also in France (second in line), as well as other Eurozone countries, along with taxpayers in all countries that participate in the IMF, including our underpaid and overtaxed Americans. None of them have been asked, but all of them have been roped into paying and guaranteeing what the Greeks themselves simply refuse to pay. So Greece – the government, not the people – is still bankrupt even though it already gave the remaining private-sector bondholders a high-and-tight but “voluntary” haircut in 2012. About 77% of Greek government debt is now held by taxpayers of other countries through various institutions. But only a minuscule amount of Greek government debt is actually held in Greece. Japan is in much, much worse fiscal shape. It has been borrowing nearly half of its entire budget, for years. Its gross national debt is headed for the ignominious level of 250% of GDP, far above Greece’s 150% or so. But there is no debt crisis in Japan. Japanese institutions and individuals have always bought Japanese government debt and own almost all of it. Only a sliver of about 5% is owned by foreigners. It would never occur to the Japanese government to go begging to Germany or anywhere else for a bailout. Whatever fiscal fiasco the Japanese are facing, they will deal with it themselves. Abenomics is now defining who exactly gets to bear that cost. But it won’t be the Germans, the French, and the hapless Americans. It will be the Japanese. Instead of stewing in their own misery, Greeks need to repatriate their money into Greek banks, all of their money. They need to clean out their bank accounts in Switzerland, Luxembourg, and London, and deposit this money into Greek banks. Hundreds of billions of euros. That would immediately solve the bank-run crisis. They need to pay taxes on this money. And they need to pay their taxes for the last 20 years, all of their taxes, including penalties. They need to do so pronto, and with a smile. This is about Greece after all, the country they’re so proud of, and that needs them in this hour of duress. Knowing this, they’ll gladly stop cheating on their taxes from now on, at all levels, from the fruit seller on the street or the doctor that takes cash for her services or even the oligarch. Budget crisis solved! Greeks need to sell their homes in Berlin and London and elsewhere, and they need to liquidate their investments in other countries and repatriate this wealth and build homes and factories and shopping malls and internet companies in Greece. They need to spend some of this money in Greece on consumer goods. They need to splurge on Greek food and booze. They need to invest this money in companies that design and build cool motorcycles in Greece, install solar panels on every roof, invent the next iPhone or rather a still-to-be-envisioned gadget…. And they need to pay their workers properly. Economic crisis solved. And they need to stand in line and jostle for position to buy 100-year Greek government bonds that the new government would be all too happy to issue once there are enough buyers lined up to bring yields down to 2% or so. And these Greek buyers should do so with a patriotic, proud smile; they’re investing in their beloved Greece for the long run. The proceeds from these massive bond sales should then be used to redeem all government debt that public institutions in other countries now hold, thus taking their taxpayers, including Americans, off the hook. The government then needs to pay its arrears to suppliers, healthcare providers, to every business it owes money, and it needs to pay its current bills with lightening speed. This would allow those businesses to pay their suppliers, and it would set in motion a tsunami of money getting handed from one business to the next. It would stop bankruptcies in their tracks. Debt crisis solved! It would be a proud moment in Greek history. The Greeks would know that they’d done it on their own! Greece would pull out of its funk in no time. But if Greece still can’t pull out of its funk, or if some corrupt government or banking cabal or oligarchs siphoned the money back out of the country for their own purposes, or if it’s wasted on boondoggle projects in murky deals worked out between cronies, the government then needs to convert the euros remaining in Greece into drachmas over a holiday weekend and start printing more drachmas to fund its ways, like Japan prints yen. Debt crisis solved once again. And if the Greek people don’t fall for this scheme? Well, um, that begs the question: why should taxpayers in other countries then be stupid enough to fall for it? Something the new Syriza government should contemplate strenuously. And the ECB? This would be hilarious if it weren’t so serious

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