April 2010 | Vol. 24 No.4
As Global Finance was going to press, the prime minister of Greece, George Papandreou, issued a plea to lenders to cut the interest rates his country is having to pay. In explaining the Greek government’s predicament, though, Papandreou succinctly identified a problem that faces debtors at all levels, from consumers with maxed-out credit cards to homeowners struggling under crippling mortgage rates to corporations confronting a wall of maturing loans. “If we keep paying these very high rates,” Papandreou observed, “we cannot achieve the deficit reduction we need.”
It’s almost a truism that potentially unstable debtors have to pay a premium to borrow money—and it makes perfect sense in a world where lenders must receive a fair price for the risk they are taking. But it’s also—as so many people who borrow money on credit cards or bank overdrafts are finding out—a vicious circle.
Papandreou’s carefully worded plea, though, was directed not just at the banks and other lenders who are forcing the country to offer ever bigger incentives to buy Greece’s debt. He went on to say: “We are asking our people—wage earners, pensioners—to take a cut in order to cut the deficit, and that could be lost in a few moments of speculation on the world market. With a few [keystrokes] they can take all that effort we are making and just put it in their pockets.”
With remarkable clarity, Papandreou has put a human face on one of the heartbreaking realities of the laissez-faire world of global finance. No matter how hard a country like Greece tries to get its financial house in order, there is a merciless army of investors—increasingly and disparagingly dubbed “speculators”—who will see that country’s misfortune only as an opportunity to make some serious cash.
By identifying the real people whose sacrifices may serve only to top up some distant stranger’s bank balance, Papandreou reminds us that we are all responsible for our own actions. If those investors took the time to picture themselves taking a fistful of euros from a real Greek pensioner’s pocket and putting it into their own, they might think twice about their efforts to capitalize on Greece’s distress. And so they should.
Until next month.