[MGSA-L] Op-Ed Contributor Bankers at the Gates

June Samaras june.samaras at gmail.com
Mon May 28 15:05:57 PDT 2012


Op-Ed Contributor
Bankers at the Gates
By PETER FRANKOPAN
Published: May 24, 2012

FEW Greeks have a good word to say about the European banking system
these days. They believe it’s the real reason for their current
crisis, having pushed easy money on their politicians and now
demanding a pound of financial flesh.

It was the same story 800 years ago. The men of the Fourth Crusade,
who had originally set off to fight for Christianity in the Holy Land,
found themselves instead ransacking Constantinople, the capital of the
Greek-speaking Byzantine Empire, because of enormous debts that had
been racked up in the West.

The way Europe has behaved over the current Greek crisis is scarcely
less shameful than the way those crusaders behaved all those centuries
ago. If nothing else, that dark spot on the West’s historical record
should be a warning to the bankers and politicians who would rather
watch Greece fall apart than take responsibility for their own
profligacy.

Greece may be on Europe’s periphery today, but in the 12th century
Constantinople was the gateway to a lucrative trade in spices, silks
and luxury goods coming from the east. This trade had made fortunes
for men across Europe — as the economies of Greece, Spain, Portugal
and Italy have done over the last two decades.

Traders from places like Venice, Genoa and Pisa in the late 12th
century managed to win for themselves the sort of advantages and
loopholes in Constantinople that bright young fund managers would kill
for today: they negotiated positions that allowed them to undercut
local traders, alongside smart commercial treaties that let them
minimize or even sidestep their taxes. As with modern Greece, this led
to a flow of cheap foreign capital into the markets.

Around 1200, though, things went sour. A sharp contraction of trade in
the Byzantine Empire was exacerbated by wild overspending by Venice,
the medieval equivalent of a European central bank.

Almost overnight there was a switch from the easy money, where
everyone was a winner, to the dark arts of debt collecting. As with
Athens since the financial crisis took hold, it became clear that no
one would take responsibility for lending too much, for basing
forecasts on only best-case scenarios.

Someone would have to cover the losses, and Venetian merchants were
adamant that it would not be them. Constantinople and the
Greek-speaking empire, riven by internal divisions, was the obvious
mark.

Eventually, one of the rival factions in Constantinople offered a deal
with Venice: in exchange for covering the Most Serene Republic’s
losses, the faction would receive Venetian military muscle to secure
its claim on the Byzantine throne. Venice jumped at the deal.

But Constantinople had vastly underestimated the size of its new debt
obligations — and overestimated the stabilizing effect of Venetian
arms. Financial obligations mounted abroad, while political paralysis
deepened at home.

Everyone from the pope to the kings of Europe knew about the pressure
building against Constantinople. One Western delegation after another
told the Greeks to get their act together — or, to put it more
bluntly, to pay up. The crusaders, under the sway of Venice, lay siege
to the city.

Eventually, the Westerners had enough of the procrastination. Seizing
their chance, the knights stormed Constantinople. What happened next
was a disgrace: the prize assets of the empire were looted at will,
seized as collateral by a mob that behaved with no concern for the
city’s inhabitants, its culture or its history.

According to one account, prostitutes danced on the altar of St.
Sophia, the most beautiful church in the whole of Christendom.
Palaces, gardens and holy places were ransacked, with treasures taken
off by the cartload. The great collections of relics held in the
imperial capital were seized by the Westerners to adorn cathedrals and
churches across Western Europe; to this day four bronze horses, stolen
from the hippodrome of Constantinople, stand atop the Cathedral of St.
Mark in Venice.

Judging the Greeks fiscally and politically incompetent, the
conquerors appointed a regent. Baldwin of Flanders, crowned emperor of
Constantinople in 1204, was a classic I.M.F.-style appointee: a safe
pair of hands, someone with whom other Western leaders could do
business.

Meanwhile, the noblemen leading the Crusade, many of whom had brought
ruin in the first place with their reckless promises, took control of
whole areas of the city and empire for themselves — a classic case of
getting in at rock bottom. (So keep an eye on those bankers and their
villas in the Aegean; you don’t need to be a historian to know it is a
buyers’ market.) The new Latin Empire of Constantinople lasted just 50
years before the Greeks returned to power.

The story is the same as then: cheap money brings handsome rewards but
guarantees crisis, while the pain falls solely on the Greeks.
Constantinople and Athens may have become addicted to easy money, but
the West was their dealer.

Peter Frankopan is the director of the Center for Byzantine Research
at Oxford and the author of “The First Crusade: The Call From the
East.”


-- 
June Samaras
2020 Old Station Rd
Streetsville,Ontario
Canada L5M 2V1
Tel : 905-542-1877
E-mail : june.samaras at gmail.com



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