Friday, April 30, 2010

Greece: a nation of irresponsible freeloaders

In January, I wrote about Greece, the Trojan horse in the eurozone. Of course, the problem has been getting more serious in the 3 months that followed so it may be a good idea to revisit the topic.

Their socialist governments have been piling a massive debt. Nowadays, a typical employee of the Greek public sector only deserves 60% of what he or she earns. In other words, the salaries have to drop by 40%.



The Greeks have been living completely unrealistic, unsustainable lives for quite some time. The debt they have accumulated ca no longer be "naturally repaid". The interest rates required by the markets, together with the expected decrease of the GDP, make it ever more unlikely that Greece can get rid of the debt. Without an "unnatural intervention", they're clearly on their final steps towards bankruptcy.




The intervention is being prepared. I wonder: if the rating agencies figure out that Greece will be receiving EUR 50 billion every year so that they can never go bankrupt, because the EU will continue to be scared by this possibility, will this finding improve the creditworthiness of Greece as defined by the rating agencies' scores? :-)

The Greek products and services became largely uncompetitive. If they were still using their own currency, the drachmas, the currency could be devalued and much of the debt and competitiveness problems would be gone. However, the only nearly equivalent act they can do today, when they're sharing the euro, is to lower the salaries by dozens of percent which is difficult in democracy.

It's particularly difficult in Greece, a nation that has already realized the gloomy scenario from a famous quote by Benjamin Franklin:
When the people find that they can vote themselves money, that will herald the end of the republic.
That's exactly what they've been doing for decades. By Franklin's timing conventions, the Greek republic is already over. We still have to formally wait when it's over in the real world.

While the socialists have been responsible for most of the growing problems politically, it's unfortunately the bulk of their population which is the genuine problem today. 51% of the Greeks plan to protest against austerity measures in the streets: expect huge crowds tomorrow (May Day) and a possible strike on Wednesday. That's a pretty bad reaction to something that is clearly needed and that will surely arrive soon, either peacefully or less peacefully.

And there can be worse reactions in the future: communists may win a majority in the future elections. They openly declare their desire to improve the living standards of their electorate by an arbitrary amount, using the borrowed money, regardless of the productivity of their nation. In democracy that has been broken in the way that Franklin anticipated, you can never be sure about the austerity measures.

The Greek socialist government may be acting somewhat more responsibly than the citizens right now because they are aware of the abyss that Greece is marching towards. However, that can't change the fact that the socialists are largely responsible for the developments politically. They have been promising the people what they shouldn't have. They were educating the people to be uncompetitive and lazy whiners who wait for the government to feed them because that's the kind of people that is likely to vote for the socialists and communists. And sadly, that's what the majority of Greece has become.

While Greece may receive something like 50 billion euros within a month, it won't really solve the problem. Unless huge reforms take place, it's clear that the same problem will emerge next year, and the year after that, and so on. Sooner or later, there will have to be a "real resolution" of the problem. And I am afraid that if the Greeks are shown that they may simply get the extra money from the EU and the IMF without doing their homework, they will be even less likely to do their homework next year.

So I think that the EU and the IMF should be much tougher. If the Greeks are unable or unwilling to dramatically change their public sector and/or offer a couple of islands and/or cities to the creditors and/or sell a part of the population as slaves (a solution they should be familiar with), the creditors should try to protect their interests. I am irritated to see that nothing of the sort is happening.

There exists no reason to be compassionate about the Greeks themselves. Their living standards are twice as good as what they deserve. They're doing just fine - and when you read their newspapers, you learn that they pretty much ignore the crisis. What crisis?

So the Greek problem is really not a problem for the Greek citizens: it's a problem for the creditors. In fact, I think that Greece should be left to officially go bankrupt and the EU and the International Monetary Fund should actually pay some money to the holders of the Greek debt so that the problems are not spreading to other countries. The clear advantage of this solution is that only one big payment will have to be done.

However, measures designed to get some money back from Greece should be adopted, too. For example, the EU may impose a new 15% tax for all imports to Greece. This tax would be directly used to pay the debt.

It's mostly expected that a bailout will be agreed upon during the weekend, or soon afterwards. Of course, most German taxpayers - that are collectively the largest payer in this transaction - are dissatisfied. And so are some politicians. Robert Fico, the prime minister of the newest eurozone member, namely our brothers in Slovakia, said the following today:
No final decision has been made, no bailout has been provided yet... and unless the eurozone sees that Greece is doing a very strict homework itself, there won't be any discussion with Greece.
Fico is not necessarily my favorite politician but I agree with his attitude. Too bad that his voice may be ignored as a curiosity because Slovakia is pretty much financially irrelevant. But needless to say, Fico's opinion is shared across Slovakia: it's crazy for the relatively poorer Slovaks to pay money to Greeks who enjoy a more abundant lifestyle, and to delay something that can't be avoided, anyway.

The bailout that is being negotiated is actually a huge sacrifice by the other (mostly) European countries. So it's not unnatural to assume that they may expect something in exchange. It's crazy for the European politicians to be competing who is more eager to pay tens of billions of euros to the Greeks. They should primarily represent the interests of the taxpayers in their own countries - and it's not hard to understand why German and other taxpayers don't want to pay billions "just for fun".

Czech President Václav Klaus who argues that the eurozone - and the EU in general - is the primary cause of the Greek problems (and I am sure that pretty much everyone must identify him as a prophet by now) says that because Germany likes to take the greatest credit for some advantages of the European integration, including the increasing German influence in the EU, it must also pay much of the costs.

Needless to say, I am also irritated by the politically correct German politicians - and not only politicians - who pretend that their naive ideology is "always positive" and who only want to have advantages.

But when it comes to hypothetical German-Greek disputes, I am simply standing on the German taxpayers' side. I do think that (especially) Germany has paid enough for its influence etc. and it can't be expected to pay everything to everyone, forever, without expecting anything in exchange. And after all, there's a lot of PC ideology in Greece, too: they're just using it in a different way.

3 comments:

  1. Can I republish your story on anorak.co.uk?

    ReplyDelete
  2. Of course you can. It will be an honor. Have a good night, LM

    ReplyDelete
  3. I totally agree, it is crazy for Slovaks to pay a lot money to Greeks. We can't see any change in Athens, just strikes and bigger and bigger financial chaos. At least three people have been killed after a protester hurled a petrol bomb at a bank in central Athens..... In Hungary and in another Eastern-European countries we also made our very strict reforms without strikes and wars.

    Anyway I hope Greece will survive

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