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Why is Greece negotiating over debt when it could be dictating?

COMMENTARY It's time for the Greek government to remember the words of the great leader Pericles who wrote, "If you owe the bank 1,000 drachmas, the bank owns you. If you owe the bank a million drachmas, you own the bank."* It's time for Greece's government to stop taking orders from its creditors and start giving them instead.

As you may recall, Greece is so broke it can barely afford to pay attention. This is what kicked off the euro crisis that feels like its been going on since Alexander the Great was in office. The Greek government is only still in business because of a series of "loans" from the IMF, the European Central Bank and the European Commission, a k a "The Troika."

The Troika has been giving money to Athens -- which has no chance of ever paying it back -- because if Greece defaults, it will take down a whole bunch of EU nations with it. In return for its money, the Troika has been demanding the government institute a slate of austerity measures. These measures are allegedly aimed at shrinking the government's debt to 120 percent of GDP by 2020. The only thing they have really done is spurred the contraction of the Greek economy and gotten a lot more Greeks interested in protesting -- not that that's all that hard to do.

Last week Germany (Motto: "We're not broke. Yet.") suggested putting one of its bankers in charge of the Greek budget. For some reason this did not go over well with the Greeks. (By the way, April will mark the 71st anniversary of the start of the German occupation of Greece during World War II.)

The Troika (and the rest of the world, really) should tread lightly lest Athens decide to call their bluff. The Troika can't afford what happens if Greece goes belly up, and they know it. This is how the Troika has gotten private-sector Greek bondholders to accept a 70 percent loss on their debt.

Here's how Finance Minister Evangelos Venizelos put it,

"There is a very serious discussion based on new facts. We are talking about a [private sector involvement] much greater than the original. We are talking about a haircut on the net present value exceeding 70 percent."

Those "new facts" are the same as the facts have been all along in this situation: The private sector isn't going to get money back under any circumstance, and if it doesn't agree to go along with this voluntarily, it is going to lose a lot more money when the economy falls apart. (Go here for an explanation of why this is so.)

Clearly Athens has to know it holds the trump card. The big question is why hasn't it played it? The main reason is fear that its terrible economic situation could get even worse. Considering the nation's unemployment rate and the fact that one-year Greek bonds are now offering a yield of more than 500 percent, that reason won't last much longer.

*No he didn't. However what is known today as the Golden Age of Pericles ended when he got busted for embezzlement, so he probably thought it.

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