...Greece's debt to GDP was 110% in mid 2009, so if the problems were known internally, they were actually known by everyone, including Papandreou, prior to that. Why? Because Greece's debt to GDP has been at 100-105% for over two decades now. No surprise that it moved slightly up during a global economic crisis.

I thought it much too convenient that Papandreou blamed the previous gov't. of course they were at fault--for a lot of corruption. But so was the Simitis gov't prior to that.

The charge that Greece misrepresented its books to Eurostat--and therefore investors--was also largely a fraud. Why? Read the January 8, 2010 report on Greece that's available from Eurostat right on the front page. Greece gave bad statistics to Eurostat yearly. Because Greece's government ministers were lax in rounding up the necessary information--presumably in order to maintain their interests in the ministries. But this doesn't mean accurate data was not reported at the end of the year. Indeed, Eurostat sent teams of accountants to Greece--something the report describes with much perturbation--and after a lot of work, they came up with accurate numbers for Greece. At the end of every year. Eurostat continues to do this to this day. So while the Greek gov't was horrid with numbers, it is NOT accurate to say that investors and the EU were not apprised of the state of Greek debt. And if the Eurostat numbers were wrong during the entire decade, then they are doubly wrong now, because the revisions showed a jump from an average around 100% from 2000-2009 to 115% in 2010.

In other words, investors should not scream fraud. Indeed, EUROSTAT and PIMCO has issued warnings about the state of Greek debt all through the decade. PIMCO hasn't bought Greece since 2006.

So much for the theory. A visit to the Acropolis offers an example of what is really happening. There are more museum guards here now, a consequence of the Greek interpretation of consolidation.

Consolidation, Greek Style

Here's how it works: OSE, the national railroad, was expected to eliminate its annual deficit of €1-2 billion by slashing about 1,800 of its 5,800 jobs. But, as in other government-owned businesses, the employees were not let go but transferred to new jobs instead -- albeit with reduced pay.

Greece's partners in the euro zone are gradually losing patience with Prime Minister Papandreou and his team. A year after receiving €110 billion in international financial aid commitments, Greece has hopelessly failed to reach the agreed austerity goals. Its lenders are now questioning the government's ability to reform, the economy has declined even further than feared, and important tax revenues have failed to materialize.

The Spiegel piece is naked narrative-setting for the U-turn in the Troika position. And the thrust is "unemployment, unemployment, umeployment". Throw the bums on the street. See how well that will work.

Economics is politics by other means

With a public and private debt at around 260% of GDP (Greek private debt is relatively low at an average of 110% compared to other old-EU countries), and a spread of 200 basis points, you have to pay a surcharge around 5% of your GDP compared to Germany.

Think about those numbers and the facts that 1) debt is used to prop up growth rates; 2) when the private sector retrenches, the public sector funds the shortfall with its deficit. Clearly no sensible monetary union can be built on constraining public debt but not private debt as long as the private sector enjoys an implicit guarantee from the public sector.

Economics is politics by other means

No, that wouldn't be nice. See what creating the ECB has wrought.

Economics is politics by other means

"Would it go too far if we envisaged . . . giving euro area authorities a much deeper and authoritative, say in the formation of the country's economic policies if these go harmfully astray?" asked Mr Trichet, suggesting "a direct influence, well over and above the reinforced surveillance that is presently envisaged?"

...

The central banker's boldest suggestion was a "new concept" for the euro zone that envisioned cases of "compulsory" intervention from EU leaders and the ECB in "major fiscal spending items and elements essential for the country's competitiveness".

...

"Confronting the challenges of the future requires strengthening the institutions of economic union - the `E' in EMU," he said. "Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?"

In Mr Trichet's view, this EU finance ministry need not administer a budget but monitor directly fiscal and competitiveness policies. This ministry could ensure closer integration of financial services across the EU and sit on boards of international financial institutions.