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02 February, 2018

The Greek experiment

Could Greece's situation be characterized as a huge economic-social-political "experiment"? And if so, who are those who conduct it?

by system failure

Greece is entering one more year of an unprecedented economic recession and still, no optimistic signs can be seen in the horizon. When the financial crisis erupted in 2010, there were already many people who spoke about an experiment that was taking place, for the first time in a region of a developed economic zone.

Could Greece's situation be characterized as a huge economic-social-political "experiment"? And if so, who are those who conduct it?

Part 1 - Events right before the eruption of the crisis

In the mid-October of 2009, Goldman Sachs suggested to Greece a new financial product which would ease, at great extent, the huge borrowing needs of the country for the rest of 2009 and 2010 since some older bonds, of huge value, were expiring during that period.

However, Goldman's proposal was not accepted by the Greek side. A few days later, Fitch downgrades Greece from A to A-, leading the country out of the top rating category. At the same time, stocks of the National Bank of Greece were sold massively in the NY stock market, as well as, subsequently, to the Athens stock market leading general index to a significant fall. At the same time, the price of Greek bonds was falling, the price of Greek CDS and interest was rising, as well as the cost of lending for Greece.

During the first days of November, a team of Goldman Sachs arrived in Athens to persuade the Greek side change its mind and close a new deal of financial lending, according to which the Bank of China would be involved in lending Greece, gaining some share in the National Bank of Greece and in the Greek Organization of Railroads, as a return.

While the negotiations were in process, the stock price of National Bank of Greece was rising in NY and Athens stock markets. At the same time, the pressure on Greek bonds and CDS stopped. Eventually, negotiations were not successful, as the Greek side rejected Goldman's proposal for good.

Nearly the next day of this rejection, massive stock selling of the National Bank of Greece was recorded again in NY stock market, as well as stocks of the big Greek banks Alpha and Eurobank, and finally, stocks of the whole Greek banking sector. Prices of the Greek bonds rapidly dropped while Greek CDS and loan interest were rising rapidly, bringing Greece closer to default, as it was more and more difficult to re-fund her debt.

On December 12, Fitch downgrades Greece further, rating the country with BBB+, while announced that further downgrades are possible. S&P with Moodys followed, downgrading Greece during December. The result was a massive selling of Greek bonds and skyrocketing of country's lending cost.

This means that, for at least 10 years there was no problem with interest, despite that everyone knew the real deficit figure, but the problem suddenly appeared in 2009 when, "accidentally", the Greek government rejected Goldman Sachs' proposal for a new "financial product". Within a short time, rating agencies downgraded Greece skyrocketing her lending cost.

In other words, as long as Greece was playing the game of Goldman Sachs, giving economic benefits inside the Greek territory, there was no problem with lending. When the new government stopped giving such benefits, probably because no one knew where would lead in the future, international banksters-speculators mobilized every mean that they had (rating agencies, media etc.), in order to show who is the boss and that there is no way for the country to avoid default, except of playing with their rules.

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