Greece's 'Odious' Debt

Manolopoulos, a hedge fund manager of Greek origin, wrote this during the Greek crisis as an analysis of how the debt was accumulated and who was responsible.

His argument distributes blame widely. On the Greek side he covers the clientelist political system in which both major parties expanded public employment and pensions to reward supporters, the tax evasion that left revenue far below what the spending required, the statistical misreporting that concealed the deficit's true size, and the absence of any constituency for reform.

On the creditor side he argues that European banks and investors lent to Greece at spreads close to German rates for a decade, which was a judgement that a Greek default was nearly impossible, and that this judgement was their own. He argues that the convergence trade, in which investors bought peripheral bonds expecting spreads to compress, was a speculative position that happened to fund a government that should not have been able to borrow.

On the institutional side he covers the euro's construction, the acceptance of Greece into the currency on figures that were known to be doubtful, and the absence of any mechanism for handling a member state's insolvency.

His treatment of the crisis response argues that the 2010 programme protected French and German banks by replacing private claims with official ones, and that the resulting official debt was harder to restructure.

The title's reference to odious debt invokes a legal doctrine about debts incurred by illegitimate regimes against a population's interest, which does not straightforwardly apply to a democratic Greece, and Manolopoulos uses it more loosely than the doctrine permits. The book was published in 2011 and the subsequent restructuring and programmes are outside it. Its distribution of responsibility across borrowers, lenders and institutions is its most useful feature.