Becoming a Companion of the British Empire for ruining the Greek economy

This 18 March 2014 video is called Childhood hunger in Greece.

An honour for a swindler

Friday 16th January 2015

SOLOMON HUGHES exposes the man behind the bankers’ Greek bailout stitch-up

SINCE the 2008 financial crisis, the supply of knighthoods and other honours to bankers has dried up. Before the crisis, a director of HSBC or RBS could look forward to a knighthood.

An executive from the big banks could expect to get the next honour down and be made a companion of the British empire, or CBE.

The continuing ban on honours for bankers hasn’t been officially declared, but is very obvious to those of us who inspect the honours lists. In fact the honours ban seems to be one of the few real sanctions on bankers.

Almost no bankers have gone to prison, despite conspiracies and frauds like Libor. “Reform” of the banking system was stalled after lobbying by bankers neutered the Vickers commission.

The banks avoided the financial pain they poured on the rest of us, as government “bailouts” mostly bailed out the financial system, and let the rest of the economy bump along the bottom. And the bonuses still keep flowing into banker’s pockets.

However, in the 2015 New Years Honours, one banker’s pal got a CBE, which tells us a lot about the way the Establishment clings on to a failing financial model.

The CBE went to Philip Wood, of law firm Allen & Overy. He is a lawyer, not a banker, but the British legal system is one of the key supports for the bankers.

Wood got his honour for services to “financial law.” He is Allen & Overy’s “special global counsel” and his biggest recent contribution to financial law was representing the financial firms who held Greek government bonds in their 2012 renegotiation of this debt. It looks like Wood was honoured for defending the financial firms who are squeezing Greece.

Wood is an intelligent man and the 2012 Greek debt deal isn’t just some gung-ho “give us the money” operation.

In fact the bondholders took a big “haircut,” losing up to 70 per cent of the value of their bonds. But the deal, while containing those losses, has some very big gains for the bondholders. Their gains are part of what keeps all of Europe stuck in stagnation.

The bondholders are big Greek and European banks — including our own RBS and HSBC — who lent the Greek state around €200 billion (£155bn) in the good times. However, the whole financial system was fooling Greece, just like it was fooling the rest of us.

All these debts were profitable for the banks, but unsustainable for the people. When the bubble burst, it turned out the Greek state couldn’t repay the debts. There was a choice about who suffers — bankers or people. Every year since then the answer has been that the people suffer.

In 2012 it looked like Greece had finally gone broke. With its economy still struggling, both the “private” debts to Wood’s bondholders and the “public” debts to the International Monetary Fund and European Union looked simply unsustainable. So the “troika” of EU leaders agreed a new €73bn (£65bn) “bailout.”

The point is, that as with previous bailouts, the EU are not bailing out the Greek people. They are bailing out the people who lent money to the Greek state.

The majority of the bailout cash doesn’t go to run hospitals in Athens — it goes straight to the banks and financial institutions who lent the money to Greece.

The money went to those who caused the crisis in the first place. It isn’t the Greeks who get bailed out, it is the banks. The EU are doing the bailouts to keep the financial system afloat.

And here Wood’s deal for the private bondholders gets clever. First, the deal included giving the private bondholders a quick €30bn (£23bn) sweetener payment up front, to make them feel less jumpy.

In effect, the EU was giving stabilisation money to Greece, which then passed it on to private bondholders. The European “state” was bailing out private lenders, again.

Second, the replacement bonds shift from Greek to British law. No future Greek government can restructure the bonds further, they are defended by the British courts. So if there is any further restructuring of the debt, it will only hit public sector loans, not private loans from these banks. Yet again, the bailout transfers private into public debt.

In 2009 Wood wrote a paper about the nationalisation of the banks. He described nationalisation as “plunder and looting,” and celebrated how the “real bite” of law was as good as the gunboats of the past for defending big investors.

Wood’s paper condemned “populist” governments like Bolivia for their nationalisations, and celebrated the way “international treaties” can now defend corporations against governments.

In 2012 he put those ideas into practice, and now he has been honoured for defending the investors from the Greeks.

Maintaining Greek debt in this way is what the banks want, but it is killing Greece and dragging Europe down with it. Greece’s economy can’t recover unless it can renegotiate the debt — cancelling some and putting others way off into the future.

Syriza, the left-wing Greek party on the verge of winning the upcoming election, favours this plan. It also has supporters in Establishment circles.

Wolfgang Muenchau of the Financial Times has written some recent, important pieces on how keeping Greece under its debt burdens won’t work, and that economic recovery can only come through relieving debt in Greece, and Spain, Portugal and Italy as well.

But the bondholder deal is one obstacle in this way. I have found that the honours system is one of the best guides to the psyche of the ruling class — so it looks like debt wins out over recovery in the subconscious of the British Establishment.

Oddly enough, Wood himself — who despite his full-on class war attack on nationalisation is an intelligent man — recognises the dangers.

Asked about the Greek bonds he so cleverly rescued, Wood said that this was the first time a developed nation had gone bust.

Was it, he wondered, just a one-off, or was it the “first tolling of the bell for the model itself?”