Greece, whose fault is it anyway?

Developments in Greece are now happening fast, and with a risk of contagion across the financial system troubling. It could affect all of us more than we think.

There are many statements being made in support of both sides. Some of these, especially in the comments sections appear particularly vitriolic, even accusatory of an entire nation or group of countries. Blame is being quickly apportioned.

At this point it is worth taking a step back to consider how we got here, and look more closely at each stakeholder perspective.

    Creditors – financial institutions : The creditors leant Greece money, on the basis it would be repaid with interest. This generated substational revenue which in turn would have been distributed to stakeholders (including shareholders). They benefited.
    Debtors – Greece :
    The debtors borrowed the money, knowing it needed to be re-paid with interest. They used this to build infrastructure, spend on the country. It created jobs and this trickled down through the economy. The people in Greece were better off. They benefited.
    Creditor nations and governments :
    The additional money in people’s pocket in Greece now enabled some of them to buy luxury goods. Many of these luxury goods were purchased with cash, from outside Greece. This created jobs, incomes and cash flow in these markets. They benefited.

As long as the wheels turned and the balance sheet expanded, everyone was happy, everyone benefited in some way (at least short medium term). I am not saying these funds were distributed evenly, a different topic, but each of these groups benefited in some way.

This is the reason we are here after all, it was in no-ones interest to say stop. It is not until something breaks, the cycle collapses and we suddenly have a problem.

Such is the nature of lending/borrowing money. Generally it is in good faith and appears sensible at the time. In life, events happen and all of a sudden there is a problem that needs to be worked out. Yes, with hindsight different decisions should have been taken but it is important to remember that for the past we have perfect vision, yet at the time we are always peering into the fog of the future. It is much more difficult to see clearly and any prediction does carry an element of risk.

Arguably the debt should not have been transferred from private to public institutions, but we are now here, Greece has defaulted and the next phase of negotiations needs to proceed. Greece wants forgiveness of the debt, the creditors want to be paid in full and have the agreed obligations met. A compromise needs to be urgently negotiated, with any consequences fully understood. (Yanis Varoufakis, the ex finance minister, interestingly is an expert in game theory, explaining some of the positioning to date).

The next few days will be filled with plenty of high level discussions between high powered delegates, and plenty of nervous watching for the rest of us. But let’s spare a thought for the individuals caught up in this on the ground.

There are many good people, who are not the decision makers, did not necessarily agree with the decisions at the time and are just hard working folk caught by the events. It is difficult.

Before quickly apportioning blame let’s reflect on the wider perspective. Most situations are not clear cut and understanding complexities helps us all make more informed decisions going forward.

Lets hope for everyone the negotiations can be quickly and smoothly worked out, the impact is minimal and we can return to our lives.

Photo Credit : Christophe Meneboeuf

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