Greece's 'Odious' Debt Greece's 'Odious5 Debt The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community by Jason Manolopoulos A ANTHEM PRESS LONDON NEW YORJC DELHI Anthem Press An imprint of Wimbledon Publishing Company www anthempress com This edition first published in UK and USA 2011 by ANTHEM PRESS 75-76 Blackfriars Road, London SE1 8HA, UK or PO Box 9779, London SW19 7ZG, UK and 244 Madison Ave #116, New York, NY 10016, USA Copyright ©Jason Manolopoulos 2011 The author asserts the moral right to be identified as the author of this work All rights reserved Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Manolopoulos, Jason Greece's 'odious' debt: the looting of the Hellenic republic by the euro, the political elite and the investment community / by Jason Manolopoulos p cm Includes bibliographical references and index ISBN 978-0-85728-771-7 (pbk.: alk paper) Financial crises-Greece Debts, External-Greece Euro-Greece Finance-Greece Greece-Economic policy-21 st century European Union I Tide HB3807.5.M36 2011 330.9495'076-dc22 2011012810 ISBN-13: 978 85728 771 (Pbk) ISBN-10: 85728 771 (Pbk) This tide is also available as an eBook To my parents CONTENTS ix List of Figures and Tables xi Preface Chapter From Buenos Aires to Athens Chapter Getting Lucky 13 Chapter The Euro: Hard Sell, or Mis-sell? 33 Chapter Western Branding, Eastern Legacy: A Country on a Fault Line 59 Chapter The Looting of Greece: Scandals, Corruption and a Monstrous Public Sector 81 Chapter Getting Unlucky - It All Begins to Unravel 109 Chapter The Euro in Practice 131 Chapter Liquidity Boom 163 Chapter The Entertainers 185 Chapter 10 A Temporary Bail-Out? A Crisis Made Worse by Satisficing 211 Chapter 11 The Man in the Arena 243 Notes 265 Index 279 LIST OF FIGURES AND TABLES FIGURES Mid-1990s Price Spikes in Wheat, Corn and Soyabeans 15 Figure 2.2 Greek Bank Credit to Households 24 Figure 3.1 Map: GDP per Inhabitant in PPS as Percentage of EU-27 Average (2004) 36 Figure 2.1 Figure 6.1 Turkey Graph 110 Figure 7.1 Holders of Greek Government Debt 137 Figure 7.2 Germany versus 'PUGS', 10-year Yield Spread 140 Figure 7.3 House Prices in Greece, Spain, Italy and Ireland 143 Figure 7.4 Greek Housing Credit Outstanding 144 Figure 7.5 Unit Labour Cost Developments 1999-2010 146 Figure 7.6 German Balance of Trade 147 Figure 9.1 Greece, Portugal, Spain and Germany 5-year Sovereign CDS Spreads 206 Figure 10.1 European Bonds Spreads 2010 241 TABLES Table 2.1 Table 2.2 Key Economic Indicators in Early Years of Currency Peg: Argentina 1991-1995 14 Key Economic Indicators in Early Years of Membership of the Euro 14 25 Richard Dobbs and Michael Spence, 'The era of cheap capital draws to a close', McKinsey Quarterly, February 2011 Online at: http://www.mckinseyquarterly com/Economic_Studies/Productivity_Performance/The_era_of_cheap_ capital_draws_to_a_close_2741?gp=l (accessed March 2011) Chapter 9: The Entertainers Michael Mauboussin, More thanyou know: Finding Financial Wisdom in Unconventional Places (New York: Columbia University Press, 2008), and Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (London: Allen Lane, 2007) 'Reform of rating agencies poses dilemma', Financial Times, 10 June 2010 Angela Monaghan, 'Pimco attacks ratings agencies over Greek crisis', Daily Telegraph, May 2010 'Credit Rating Agencies: Developments and Policy Issues', European Central Bank monthly bulletin, May 2009 Online: http:Awww.ecb.europa.eu/pub/ pdf/other/art3_mb200905_pp 107-117en.pdf (accessed 10 March 2011) Howard Marks, 'Now it's all bad?', Oaktree Capital memo to clients, September 2007 Robert Cialdini, Influence: Science and Practice (4th ed.) (Boston: Allyn & Bacon, 2001) There are concise summaries in James Montier, The Little Book of Behavioral Investing (Hoboken, NJ: John Wiley & Sons, 2010) Bent Flyvbjerg, Making Social Science Matter (Cambridge: Cambridge University Press, 2001) Quoted in Peter L Bernstein, Against the Gods: The Remarkable Story of Risk (New York: John Wiley, 1996) 10 'Soros Speaks About Debt Crisis', Bloomberg, 14 June 2010 11 'IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004-2007', Independent Evaluation Office of the International Monetary Fund, 10 January 2011 Chapter 10: A Temporary Bail-Out? A Crisis Made Worse by Satisficing D Lachman, 'Greece Looks Set to G o the Way of Argentina,', Financial Times, 12 January 2010 N Roubini and A Das, 'Medicine for Europe's Sinking South', Financial Times, February 2010 Wilhelm Hankel, Wilhelm Nolling, Karl Albrecht Schachtschneider and Joachim Starbatty, 'A Euro Exit is the Only Way Out for Greece', Financial Times, 26 March 2010 Quoted in 'Soros Says Greek "Death Spiral" Risk Remains After Aid Package', Bloomberg, 12 April 2010 'Greece Seeks to Sell China Banks €25 Billion Bonds', Dow Jones Newswire, 27 November 2009 'China Shouldn't Rescue Greece by Buying Debt, Yu Says', Bloomberg, 28 January 2010 Pierre-Henri Thomas, 'La Grece, notre Argentine a Nous', Le Soir, April 2010 'Papandreou Prefers European Solution', Financial Times, 18 March 2010 Nouriel Roubini, 'Crisis will Spread without a Plan B', Financial Times, 29 April 2010 10 'Zapatero alega que Espana esta en condiciones de prestar dinero a Atenas', El Pais, 26 March 2010 11 'US Investors Cool on Greek Debt Sale Plans', Financial Times, April 2010 12 'Jose Luis Zapatero: Sarkozy amenazo salirse del euro', El Pais, 14 May 2010 13 'On the Secret Committee to Save the Euro, a Dangerous Divide', Wall Street Journal, 26 September 2010 14 'ECB reveals €16.5 billion bond purchases', CNBC, 18 May 2010 15 L a intervencion de Cajasur lleva al Ibex a caer mas que la majoria de las Bolsas europeas', El Pais, 24 May 2010 16 W Munchau, 'Europe risks failing the real test on banks', Financial Times, July 2010 17 'Staff Report on Request for Stand-by Arrangement', IMF report on Greece approved by Poul M Thomsen and Martin Muhleisen, May 2010 Chapter 11: The Man in the Arena John Rawls, 'Justice as Fairness', Philosophical Review 67, (1958) C Meghir, D Vayanos and N Vettas, 'The Economic Crisis in Greece: A Time of Reform and Opportunity', August 2010 Summary published by the Financial Times, 23 August 2010: 'Greek reforms can yet stave off default' Poul M Tomsen, 'Greece Program on Track, but Challenges Ahead Interview Published', Kathimerini, August 2010 C Reinhart and K Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009) Alexander Nahun Sack, Les Effets des Transformations des Etats sur Leurs Dettes Publiques et Autres Obligations Financieres: Traite Juridique et Financier (Paris: Recue Sirey, 1927) Ibid Simon Johnson, 'Economic Crisis and the Crisis in Economics', speech prepared for the presidential address to the Association for Comparative Economics, San Francisco, January 2009 Ray Dalio, 'A Template for Understanding What's Going On', updated version June 2010 Ron Paul, 'Fiat Paper Money', 12 September 2003 Available online at the Ron Paul archive: http://www.lewrockwell.com/paul/paull25.html (accessed 17 March 2011) 10 James Robertson, 'Money from Nothing', New Economy Magazine, summer 2009 11 Andrew Haldane, 'The Debt Hangover', speech to Professional Liverpool dinner, 27 January 2010 Online at: http://www.bankofengland.co.uk/publications/ speeches/2010/speech422.pdf (accessed February 2011) 12 Simon Johnson, 'Quiet Coup', Atlantic Magazine, May 2009 13 See 'Taxing spoils of the renting sector', Reuters blog, 22 April 2010 14 Johnson, 'The Economic Crisis and the Crisis in Economics' 15 Albert Edwards, 'Theft! Were the US and U K central banks complicit in robbing the middle classes?', Societe Generate, 21 January 2010 16 Simon Schama, 'The world teeters on the brink of a new age of rage', Financial Times, 22 May 2010 17 'Is sovereign default "unnecessary, undesirable and unlikely" for all advanced economies?', Global Economics View, 16 September 2010 18 'Is sovereign default "unnecessary, undesirable and unlikely" for all advanced economies?', Global Economics View, citing also E Schneider and D Enste, 'Shadow Economies and Corruption All Over the World: Revised Estimates for 120 Countries', Economics e-journal, October 2009 19 'Germany and France examine "two-tier" euro', Daily Telegraph, 19 June 2010 INDEX A Bravo New World (Goldman Sachs) 17 A D H D markets 167 Albrecht-Schachtschneider, Karl 44 Alexander, Danny 153 Alfonsin, Raul Almunia, Joaquin 151, 152, 153, 219, 220 Alogoskoufis, George 95 anchoring 203 And The Money Kept Rolling In (and Out) (Blustein) 18 Angelides, Phil 186 Anglo Irish Bank 180, 181, 237 anti-corruption law 82 antihellenic attitude 62 Argentina: corruption 8; default 1, 116, 127; dollar peg 2, 109; economy growth 14; exports 122; vs Greece 148; and IMF 117; lessons to learn from 27; over-valued exchange rate 179; public debt to GDP ratio 113; trade balance 111 arms race 71 arms sales 72 Asia 14, 50, 152, 260 Asia Minor 62-3 assimilation 206-7 attachment to prior beliefs 201 austerity measures 10, 87, 99, 128, 131,230, 233, 239, 240, 241, 247, 259, 263 bail-outs 123, 187, 214, 217, 236 bandwagon effect 166 Bank of America Merrill Lynch 198-9 Bank of Spain 237 bank size 254 banking legislation 182 banks: central 38, 52, 129, 157, 236, 244, 253, 254; European 75, 154, 163, 213; French 147, 154, 237, 249; German 75, 146; investment 18, 19, 20, 23, 56, 125, 154, 178, 181, 183, 189, 192, 193, 204,216, 244, 253, 257, 259, 261; North American 155, 180; regional 106, 237, 238 Barosso,Jose Manuel 212 bath tub curve 155 Beattie, Alan 229 Bell, David 158 Beloyannis, Nikos 68 benchmarking 165-6 Benelux countries 40, 177, 240, 263 Benhaim, Mickael 205 Bennett, Mike 92-3 Bentolila, Samuel 134 Bernanke, Ben 112 Bernstein, Peter 158 Bignone, Reynaldo 10 Birdsall, Nancy 183 The Birth of the Euro (Issing) 44 black swan events 111, 112, 119 blindaje (shield) 212 blog(s) 176 Bloom, David 236 Blustein, Paul 18 BNP Paribas 202 bond ratings 188, 224 bonds 169 bonds (AA) 188 bonds (AAA) 186, 188 bonds (B) 224 bonds (BBB) 169, 188, 189, 196, 225 bonds (five-year) 190, 216 bonds, sovereign: see sovereign bonds borrowing 17, 150 Bretton Woods 37, 78, 254 British taxation 65 Broome, Benjamin 82 Brown, Gordon 172 Bruderle, Rainer 218 bubbles 170; see also dotcom bubble Buenos Aires, Argentina 1,3, 117, 120, 126, 171,233 Buffett, Warren 174 Bulgaria 23, 26, 131,249 Bundesbank 36 business clusters 11 business relocation 23 buyer's remorse 158 Byron, George Gordon 61 Byron illusion 60 Cabezas, Jose Luis cabotage 92 Caicedo, Felipe Valencia 183 Caja Castilla la Mancha 237 cajas (savings banks) 237 Cajasur 237 Campbell's Law 54 CAP (common agricultural policy) 90 capital-in-flow 183 carry trades 166 cars 24 catching-up process 51 Cavallo, Domingo 4, 22, 125, 149 Ceausescu, Nikolai 249 central banks 236 certainty effect 202 ceteris paribus fallacy 168, 177, 209 Chinn, Menzie 151 Christodoulakis, N 219 Christodoulou, Petros 218 Christoforakos, Michael 98 Churchill Winston 63 Cialdini, Robert 196 civil service census 86 civil war 10, 65, 66-8, 78, 81, 126 clientelism 89 closed shops 94-5, 115 cognitive bias 125, 209 cognitive dissonance 148-9, 196 collateralised debt obligations (CDOs) 155 collective amnesia 157 collusive denial 169, 171, 172, 206 communists 67, 68 competitive devaluations 146 confidence multipliers 167 confirmation bias 4, 17, 20, 124, 126, 209 conglomerates 106 Connolly, Bernard 38, 45 consensus bias 124, 126 constitutional reform 245 convergence 46, 54, 140, 165-6 convergence criteria 52, 54, 141 Convertibility Plan 117 Corbett, Richard 212 corporate income tax 248 corralito (bank account withdrawal limit) 127 corruption - , 1 Corruptions Perception Index 91 cost of debt warnings 213 counter-cyclical borrowing 260 country business model 251 country risk 120 coups d'etat 6, 68, 70 credit rating 254 credit rating agencies: see rating agencies cronyism 81, 82-4, 94, 103, 107, 179 currency: Asian 152, 260; drachma 78, 140, 157, 214, 260; regional 263; see also euro; fiat currencies; single currency currency peg 26, 260; see also dollar peg currency snake 37, 42, 263 Cyprus 62, 64, 71, 77, 97, 104, 249 Dagong Global Credit Rating 186 Davutolu, Ahmet 72 de la Rua, Fernando 125, 127 de la Torre, Augusto 183 de Palacio, Loyola 150 DePuy scandal 105 de Silguy, Yves Thibault 212 De Wever, Bart 240 debt: see odious debt; public debt; sovereign debt; sovereign debt crisis debt haircut 251 debt metaphors 124 decision regret 158 default 76 EFSF (European Financial Stability Facility) 187, 188 E O T (Greek Tourist Organisation) 99-100 E R M (exchange rate mechanism): see exchange rate mechanism (ERM) ersatz Kaiser 36 EU accession 10, 78 euphemisms 211, 244 euro 43, 58, 261-2 Euro subprime scandal 155-6 European Financial Stability Facility deficit spending 260 D E K O 95 Delors, Jaques 46 denial 124 (EFSF) 187 European Project 31, 35, 37, 38, 45, denial and PR 215-16 Der Spiegel 2\2 deregulation 112, 133, 178, 182, 253, 254, 256, 258 devaluations 145 deveirme (child collection) 64 dictatorship 69 direct investment, foreign: see foreign direct investment (FDI) dockers union 107 doctors 106 dollar peg 2, 109 dollarisation 128 Dombrovskis, Valdis 86 dotcom bubble 144, 165, 166, 170, 173, 192 Dragoumis, Mark 83-4 Dubai 192, 193 due diligence 171 Duisenberg, Wim 46, 58 early retirement and pensions 87 ECB (European Central Bank) 54, 120, 132, 140, 145, 149, 188, 196,213, 225, 228, 235-6, 239 Ecofin (Economic and Financial Affairs Council) 57, 136, 211, 217, 228 efficient market hypothesis 173, 175 46, 110, 149, 240 European single currency 13, 219, 240 European welfare states 259 eurozone 263 exchange rate mechanism (ERM) 38, 42, 78, 143,214, 228 exchange rate (risk) 133, 206, 262 exchange rate stabilisation exchange rate systems 53, 117 ex-post justification 201 external influence 65-6 faith in market efficiency 209 fakelaki (bribe) 91, 247 Fallaci, Oriana 69 farmers 8, 15, 89, 90 Fassino, Piero 49 Ferrostaal Daimler 99 fiat currencies 19, 254, 255 Financial Times 238 fiscal responsibility 157, 178, 179, 182, 253 fiscal rules 135-6 Fitzpatrick, Sean 181 flexible labour markets 133, 142 flippers 190 Flyvbjerg, Bent 207-8 forecasts 30 foreign direct investment (FDI) 133 framing 198, 203 Frankel, Jeffrey 151 free trade 35, 50, 147, 178, 179 Friedman, Milton 152 future gazing 243 FYROM (former Yugoslav Republic of Macedonia) 131 GDP fallacy 258 GDP growth 29, 112, 143, 176, 203, 247, 258 Geithner, Timothy 27 Georgakis, Kostas 70 Gerekou, Angela 106 German sovereign default 261 Germany: exports 146; national currency 158; trade surplus 147 Giscard d'Estaing, Valery 38 Glass-Steagall (Act 1933) 20, 256 Gobinau, Arthur 65 Gold Standard 4, 50 'Goldilocks' economy 253 Gonzalez, Felipe 151 Gonzalez-Paramo, Jose Manuel 135-6 Goodhart, Charles 53 Goodhart's law 53 Great Moderation 112, 209, 244 Greece: vs Argentina 148; Asia Minor catastrophe 62-3; border tensions 71; borrowing levels 163; civil war 66-7; convergence criteria compliance 55; corruption 8; cronyism 82; culture 59; Cyprus 1974 64; debt restructuring 248-9; defence spending 71; doctors 106; economy and culture 178-9; economy growth 16; entitlement 62; EU membership 77-8; exports 122; geography and geopolitics 75-6; government debt 137; Hellenic Peronism 9; history of 59-61; housing prices 144; and IMF 119-20, 124, 157-8, 179, 192, 223, 225, 227,228, 234, 244, 247; kleptocracy 97, 108; Ottoman legacy 64; overvalued exchange rate 179; public debt problem 114; public debt to GDP ratio 114; public sector deficit statistics 154; real economy 125-6; S&P downgrade 190; scandals 81; spending boom 31; statism 84; structural problems in economy 171; subsidies 90; tax avoidance 103; tax reform 248; vs Turkey 63, 71-2; World War II 63; see also scandals Greek democratic model 66 Greek economy 138 Greek IRS 106 Greek policy proposals: constitutional reform 245; corruption reform 245; immunity treatment cessation 245; judicial system reform 246; public sector reform 244-5; tax reform 246; VAT increase 247-8 Greenspan, Alan 19, 166, 172 Grigoropoulos, Alexandro 128 Gross, Bill 187 groupthink 121, 175, 201, 209, 212, 244 Haldane, Andrew 255 Hankel, Wilhelm 44, 229 haratzi (Islamic tax) 64 Hellenic Peronism 9, 78 hellenism 71 herd behaviour 20, 49, 160, 165, 166, 170, 174, 175,212,215, 243 high risk warnings 213-14 hindsight views 159-61 historical assumptions 187 'history repeats' argument 198 home ownership 24 Honecker, Erich 69 Honohan, Patrick 181 Hope, Kerin 83 hospitals 25, 96-7, 107, 244 housing bubbles 21, 145 HSBC 192-3 Hubbard, Glen 125 hubris 126, 157 hubris and schadenfreude 150, 157 hyperactivity 173, 174 hyperinflation Italy 34, 35, 45, 58, 134, 135, 136, 140, 142, 144, 146, 154, 167, 199, 227, 232 Iceland 216 illegal construction 101 illusion of control 52, 124, 178, 222, 226 illusion of control fallacy 148 IMF (International Monetary Fund): and Argentina 2, 27-31, 117, 124, 159, 179; Argentina default 2; errors/failings 25, 30, 121, 159, 209-10, 264; and Greece 119-20, 124, 157-8, 179, 192, 223, 225, 227, 228, 234, 244, 247; and reforms/conditions 13, 23, 201, 238, 239, 244, 245, 247 IMF financing 225 IMF risk assessment 238-9 inflation 4, 13, 14, 22, 39, 78, 109, 117, 131, 140, 145, 167, 182, 248, 255, 264\ see also hyperinflation; low inflation inflation rates 22, 23, 52, 142-3 informal economy 261 institutional dynamics 165 internal migration 68 International Monetary Fund (IMF): see IMF (International Monetary Fund) investment banks 192 investors behaviour 18, 119, 156, jizya (Islamic tax) 64 jobs for life 86 Joffe, Josef 45, 148 Johnson, Simon 180, 182, 252, 256 JP Morgan 204 Juncker, Jean-Claude 220, 232 159, 160, 164-76, 180, 186-9, 191-3, 196-7, 206, 228, 236, 254, 257, 264 Ioannides, Dimitrios 70 Iraq 72 Ireland 37, 44, 45, 53, 126, 128, 131, 144, 167, 180, 183, 194, 198, 199, 200, 205,212, 237,241, 242, 250, 252, 263 Ireland (Fianna Fail) 126, 241 Ireland (Sinn Fein) 241 irrational exhuberance and procyclical rhetoric 19 Issing, Otmar 41, 44, 50-1, 136, 150, 176, 263 Kaplan, Robert 61 Karamanlis, Konstantinos 71 Karamanlis, Kostas 77, 96 Karchimakis, Michael 101 Kathimerini website 86 Kaufmann, Daniel 92 ketchup economics 172, 193 Keynes, John Maynard 170 Kirchner, Nestor 127 kleptocracy 97, 108 Klinz, Wolf 149 Knight, Frank 208 Kohl, Helmut 47, 136 Kok Report (2004)51 Koo, Richard 144, 171 Koskotas, Giorgio 101 Koskotas affair 100-1 Kostantakopoulos, Vassilis 94—5 Krugman, Paul 19, 175 labour costs 146 labour market flexibility 133, 142 labour market reform 6, 231, 240, 263 labour mobility 133, 137 Lachman, Desmond 168, 214 Lagarde, Christine 135, 221, 232 Lake Kopais 81, 102 Landesbanken 237 Latvia 86, 90 law: see constitution; Glass-Steagall (Act 1933); statute of limitations Lenihan, Brian 181 Lessonsfrom the Crisis in Argentina (IMF) 27 liberalisation (of capital accounts) 117, 178, 253 Liendo, Horacio 4, 50 liquidity boom 153, 163-5, 169 Lloyd George, David 63 long-term vs short-term policy 253 low inflation 29, 30, 153, 159, 172 Lucas Critique 54 Maastricht Treaty 43, 51, 145, 234 Madoff, Bernie 11 Major, John 43 Makarios, Archbishop 70 A Man (Fallaci) 69 Marks, Harold 164, 191 martial law 67 Mavridis, Prodromos 97 McKinnon, Ronald 38 measurable uncertainty 208 megacanje (mega-exchange) 57, 125,257 Meghir, Costas 114, 247 Menem, Carlos 4, 6, 9, 21, 23, 117 mental myopia 203 mergers and acquisitions 133 Merkel, Angela 220, 221, 227, 231, 232-3 Mersch, Yves 235 metapolitefsi (regime change) 71,77 Mexico 23 Michaelian, Nikos 24 military coup 68 military dictatorship 126 Mills, Philippe 236 mind guards 244 Mitterand, Francois 45 mizfl (kickbacks) 91 M K 95 modernisation 70 Molano, Walter 22, 116, 129 monetary union 37, 132, 145 Montier, James 167, 173, 175 Moody's 186, 190 moral hazard 222 Muleisen, Martin 238 Mulford, David 125 multiconstitutional involvement 250-1 Munchau, Wolfgang 152, 227, 238 Mundell, Robert 38, 40, 150, 151 narrative fallacy 25, 30 narrow logic 194, 253 narrow range bias 197 national budget approval 56 nepotism 89 New Democracy party 71,77, 85, 89, 90, 107,230 New York Times 154 Nixon, Richard 11 no margin of error 187 no-bail-out principle 234 NoUing, Wilhelm 44, 214 Nomura 197 Northern Rock 237 Nowotny, Ewald 220 numeracy bias 194, 196, 203 odious debt 248, 249-50 O E C D reports 6, 87, 88, 133 oil price shocks 37, 78, 175 oligarchical business structure 11 oligarchs 106 Olympics 2004 26 Onassis, Aristotle 107 O'Neill, Paul 125 optimal currency area (OCA) 38-9, 40,41, 132-3 optimal currency area (OCA) theory 133 optimism bias 226, 238 optimum single currency area 263 Ordered Bank Restructuring Fund (FROB) 237 Osborne, George 153 ostrich effect bias 197 ostrich syndrome 124 Ottoman empire 59, 61, 63, 64-6, 71, 103, 139 'out' countries 49, 147, 187, 263 overconfidence bias 17, 20, 51, 112, 124, 144, 148, 150, 155, 159, 160, 174, 176, 187, 201,218, 240 overlending 256 oversimplification bias 198 Paine, Thomas 61 Palach Jan 70 Palmer, John 46, 56 Palmerston, Lord (Henry Temple) 66 Panagopoulis, Kostas 104 Panagoulis, Alexandras 69 Pangalos, Theodoros 63, 83, 204 Papaconstantinou, George 104, 216 Papandreou, Andreas 8, 89, 90, 100 Papandreou, George 69, 73, 85, 216, 222, 229 Papandreou, George, Senior 77, 78, 100-1 Pappas, Nicholaos 70 Pareto, Vilfredo 41 Pareto Principle 41 PASOK government 8, 56, 77, 78, 100, 113 past extrapolation 187 Patten, Chris 48 Paul, Ron 255 Penn, Simon 204 pensions for dead people 88-9 Peron, Juan Domingo Peronism impacts Petas, Peter 125 Petsos, George 101 philhellenic attitude 62, 71 Phillipon, Thomas 256 Piga, Gustavo 56-7 Pisani-Ferryjean 152, 220 Plaskovitis, Ilias 104 Ploumpidis, Nikos 68 Pohl, Karl Otto 236 policy proposals 243 Ponzischemes 20, 108, 111, 170, 180, 213 Porter, Michael 11-12 Portugal 35, 45, 53, 122, 134, 141, 142, 157, 190, 199, 205, 239, 262 Posen, Adam 152, 220 precision bias 202 prediction errors 153 predictions 185 price transparency 47, 133 price-to-price feedback 167 Prince, Chuck 165, 170 privatisation programme problem of induction 4, 30, 111, 119, 166, 187 procyclical biases 119 procyclical rhetoric 21, 26 Prodi, Romano 56 Project Euro 42 prospect theory 166 pseudo certainty 49 public corruption and public debt 91-2 public debt 8, 27, 28, 30, 52, 55, 85, 91, 109, 113, 114, 118, 135, 137, 200,214,218, 226, 237, 239 Public Debt Management Agency 218 public opinion 239-40 public sector jobs 84—5 quantitative easing 183, 184, 256 Rajan, Raghuram 175 Rajoy, Mariano 226 Rakintzis, Leandros 84, 102 range aversion bias 202 rating agencies 165, 186, 188, 228 Rawls, John 245 Reagan, Ronald 245 real GDP growth 143 recency bias (effect) 197 recession 28, 48, 85, 122, 131, 134, 141, 145, 152, 163, 173, 185, 209, 223, 234, 252, 255, 263 recession, global 109, 205 red tape 94—5 reflexivity 208 regulated professions 94—5 Reinhart, Carmen 183, 249 Reinhart, Vincent 183 relativity 171 renting 256 rent-seeking behaviour 8, 129, 181, 253, 256, 257, 259 Reshef, Ariell 256 restructuring 76 retirement provisions 88 Ricardian equivalence theory 260 risk: contagion 200; credit 119, 220, 254; currency 140; economic 238; exchange 206; political 77, 107, 159, 198, 239, 240, 261, 262; pricing 256; sovereign 236, 238; stability 235; systemic 77, 163,210, 238, 252 risk to banks 237-8 Robertson, James 255 Rogoff, Kenneth 249 Romania 26, 123, 249 Roosevelt, Theodore 243, 258 Roubini, Nouriel 175, 214, 224 rousfeti (political favors) 82 Rueff, Jacques 37 ruling class impunity 10 Russell, Bertrand 111 single currency: implementation 13, 52, 53-4; origins 33-5, 37-45, 59, 71; politics 46-9, 83, 151-2, 158, 159, 163, 172,212, 222, 231; problems/difficulties 47, 52, 53, 108, 113, 121, 141, 143, 149, 187,217, 221,244, 262-3; see also convergence; exchange rate mechanism (ERM); Maastricht Treaty; optimal currency area (OCA); Stability and Growth Pact single-piece-of-(good) evidence Sack, Alexander Nahun 249 Salgado, Elena 237 Samaras, Antonis 89 Santer, Jacques 49 Saporosi, Gerardo 7, 29, 127 Sarkozy, Nicolas 35, 73, 227, 231, 232, 263 (approach) 196 social peace 8, 68, 78 Societe Generale 195 soi (clan) 77,81 Soros, George 208, 214 sovereign bonds 137, 230 sovereign debt 154, 156, 163, 174, 175, 194,212,213,217,218, 226, 239, 244, 253, 257, 263, 264 sovereign debt crisis 107, 113, 130, satisficing 211, 215 scandals: Ferrostaal and Daimler 99; Greek Tourist Organisation (EOT) 99; hospitals 96-7; JP Morgan bond scandal 96; Olympics 2004 95-6; other 101-2; PASOK and Bank of Greece 100—1; Siemens case 97-8 Schadenfreude 157 Schaeffier, Frank 63 Schama, Simon 258 Schauble, Wolfgang 190, 221 Schlarmann, Josef 63 Schmidt, Helmut 38 Schroeder, Gerhard 136 Schuman, Robert 34, 37 Schuman Declaration (1950) 33-4, 49 Securities and Exchange Commission (SEC) 186 securitisation 112, 155, 210, 244 Semmelweis reflex 201 Shelley, Percy Bysshe 60 Shiller, Robert 168 shipping 16, 26, 41, 75, 122, 251 short-termism and business cycles 172 Siekaczek, Reinhard 97 Siemens scandal case 246 175, 239, 253 sovereign debt default 261 sovereign default 199, 261 Spain 33, 45, 53, 68, 120, 122, 134, 144, 146, 167, 190, 194, 199, 200,216, 230, 232, 237, 240, 241,262 special purpose vehicles (SPVs) 187, 234, 235 speculators 223 stability 176 Stability and Growth Pact 53, 135 stable prices 244 Stalin, Josef 63, 67 Standard & Poor's 224 Starbatty, Joachim 44, 229 Stark, Juergen 235 state functions 65 statism 89 status quo bias 124, 196, 201 Statute of Limitations 246 Stiglitz, Joseph 183 stimulus effect 260 Stockholm International Peace Research Institute 73 Strauss-Kahn, Dominique 221 Summers, Larry 172 sure thing effect 202 Sweden 33, 47, 54, 55, 91, 134, 143, 150, 160, 240, 263 Syria 72 Taleb, Nassim Nicholas 111, 149 Tanzi, Vito - , 17 tax auditing 247 tax avoidance 103 tax code 248 tax evasion 103, 104, 115, 246 tax increases 248, 260 tax payment 82 tax reform 182, 246, 248 Teijerio, Mario 17 Tequila Crisis 117 Tetlock, Philip 201 Tett, Gillian 126 Thatcher, Margaret 43 'This Time is Different' (Reinhart and Rogoff) 249 Thomas, Pierre-Henri 219 Thomsen, Linda 98 Thomsen, Poul 238 Tilford, Simon 160, 212, 215 Tito, Josip Broz 67 too big to fail policy 259 too connected to fail policy 259 tourism 16, 26, 41, 92, 94, 99, 100, 106, 122, 251 tourists 3, 4, 16, 25, 43, 92, 93, 95, 99, 122, 131,204 trade and investment 133-4 trade deficit 141 train metaphor 49-50, 141, 143, 148-9, 212, 240, 242 transfer pricing 97 Treaty of Rome (1957) 34 Trichet, Jean-Claude 145, 218, 219, 227, 235, 236 Truman, Harry S 67 Truman Doctrine 67 Tsitouridis, Sawas 96 Tsovolas, Dimitris 101 tunnel vision 203 tunnelling 49, 178 Turkey 71-2 turkey graph 110, 112 UBS 204 U K 33, 37, 43, 47,64, 104, 126, 134, 143, 145, 153, 156, 186, 219, 237,240, 255, 263 uncertainty aversion 203 unmeasurable uncertainty 208 Van Rompuy, Herman 159, 226 VAT 53, 94, 103, 247 Vayanos, Dimitri 114, 247 veil of ignorance 245 Velos mutiny 70 Vettas, Nikos 114, 247 Volcker, Paul 184, 233 voleutis (cosiness) 81, 84 Voskopoulos, Tolis 106 wars: see civil war; World War I; World War II Washington Consensus 178, 183, 252, 253 waste 94—5 Weber, Axel 235 welfare state 64, 128, 259, 261 Wellink, Nout 235 Werner Report (1970) 49 Westerwelle, Guido 190 Wezeman, Simon 75 whistleblowers 175 Wilde, Alan 205 wishful thinking 153, 199 World Bank 178, 181, 182 World War I 68 World War II 10, 33, 35, 51, 61, 62, 67, 68, 262 Yabran, Alfredo yield pickup 166 Yu Yongding 216 Zapaterojose Luis 134, 226, 231, 232, 241 Zhou Enlai 59, 63 ACKNOWLEDGEMENTS To my parents, for their unconditional love and support, for being charismatic role models and for giving me a passion for books To Achilles Risvas, my business partner, for his patience whilst this book was being written and all the invigorating debates and market discussions To my close friends, who provided immense support and help by providing invaluable feedback and sound advice whilst reading draft manuscripts, brainstorming on cover designs, assisting in editing and collecting valuable data: Apostolos Mimikos, Christos Baltatzis, George Nowak, Kostas Togas, Nikos Passaris, Phillip Whiteley, Stephen Pinder and Yiannis Demopoulos To my academic and market peer reviewers, whose insightful and sharp comments assisted in making important improvements Finally, to Tej Sood and Janka Romero at Anthem Press, for their brilliant and smooth collaboration and for believing in me and my first book .. .Greece's 'Odious' Debt Greece's 'Odious5 Debt The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community by Jason Manolopoulos A ANTHEM PRESS... from the British Library Library of Congress Cataloging in Publication Data Manolopoulos, Jason Greece's 'odious' debt: the looting of the Hellenic republic by the euro, the political elite and the. .. Industries could not re-invest at the rate of the depreciation of their assets, and quiedy were liquidated The policy of convertibility of the 1990s finished off those who were left The country is very