This morning I awoke to see this story on the front page of the New York Times.
Basically, this is all due to Greece’s desire to gain inclusion into the EU. Membership requires achieving certain macroeconomic targets like budget deficits, rate of inflation, social welfare spending. They are basically the same kinds of economic targets the IMF sets for countries that need big development loans.
Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
So Goldman and a few other big banks approached Greece and gave them an equity line of credit to pay off their credit card debt — only instead of putting up the house as collateral Greece put up large revenue generating public works projects like toll roads and airports.
And thus Greece was able to mock-up their economic stats and trick the rest of the EU into thinking they were undertaking the measures that were necessary to guarantee its admission.
Will Brussels take action? And if so, what are they going to do?