1.The economic ignorance that, fortunately for certain groups, prevails even among the educated, cannot save Greece or a titillating “who is next” from the quickly changing headlines. Here again, we have a generally ignored country propelled to the top of the totem pole of attention. Although one likes to talk about Athens, this economic earthquake might only prove to be the beginning of the parade to follow. Several countries, all with failing public finances that hope to remain undiscovered, are lurking in the shadow cast by the spot lights that are now focused on the Greeks.
2. It might in the near future be a subject of astonishment that the focus is directed to the specific case of Greece. Thereby, the timely discussion of an entire category of comparable cases that are about to unfold, is down played. Some proposed solutions to save Greece are, due to this blending out, spared full scrutiny and, possibly, dismissal as unworkable. The point is that bailing our Athens might be makeable since it only represents 2% of the EU’s economy. However, this approach should not be scrutinized as an oddity, but as the first visible wreck of a highway chain collision that is still hidden by thick fog. In this case, the solution pales in the light of the total calamity. The piled up wreckage beyond the Greek horizon includes the crushed mass of Portugal, Spain, and there are further wrecks in the making.
3. A consideration that all will understand blunts the proposed bailout’s Wunderwaffe. The analogy is found in the national context. It pertains to the inability to extend welfare to all those that decide to demand it. Welfare as a solution works as long as a mass is asked to support a few unfortunates. On that basis, welfare can perform as intended and is part of a potential solution. At the same time, not even the most correctly thinking governing party can raise the standard of living of its people by fashionably extending aid to everybody. Such cases created by national governments are piling up. These have been trusting that the EU can enable their voters to live above their means. If the wreckages are added up, the resulting need to “rescue” all seems impossible. The total effect of misguided national policies are about to end in a demonstration of welfareism’s limitations. The reaction of collapsing stock markets to the news about the settlement confirms the allegation.
4. Even in public, albeit not from official sources, one hears that Greece should not have been accepted to the €-club. This sounds like “the rain is over, I can open my dry umbrella,” unless we include the comparable precipitation of the cases still in the pipeline. In part, however, the problem has not only been that the club had ignored its own criteria for entry and also Athens’s manipulation of its data that seemed to have the blessing of eurocracy. After her membership, Greece and others operate(d) like a badly run boarding school. “Do what you want, just do not force us to notice it” appears to have been the operating principle. Greece’s is the first of the balloons to burst. However, she is not the only case that involves a practice that allows the violation of EU rules while extending the advantages of membership. Accordingly, any future rescue deal in exchange for reforms might, when applied, follow the pattern of “do what you wish just do not make us notice”. Whatever rationalization is agreed upon does not guarantee that it can be implemented or that there is an intention to do so fully. The explanation lies in a tradition of slippery governance and in the natural resistance of a society addicted to something for nothing. Meanwhile, one can commiserate the private investors that have, trusting EU controls, sunk their savings into Greek – and comparable – government bonds.
5. The original spin put on the rescue package had been rather transparent. Allegedly, Europe was not propping up Greece by gifts. The association’s statutes forbade that. So a back-yard entrance was found through the participation of the IMF. Not the €-zone alone gave but also the IMF. Early on, the market demanded about 7% interest for lenders. Athens is to get money for 5%. With this, Brussels-Europe formally respects its own proscription of subventions. In case you accept that this credit is not a support payment then hardly anything will fulfill the criterion. Meanwhile, skeptics will have reason to conclude that, as in other cases, the EU does not stick to its own rules. As this is written, the free market that uses its own money – unlike governments that spend yours – expects compensation for growing risks. That pushes the going rate to around 20%.
6. How could Greece fall into this ditch? The matter is of note as the story transcends any country’s importance: comparable cases are waiting behind the corner to be outed. Mosaic pieces that fit into other pictures, are numerous. They suggest that Greece is not the victim of the unforeseeable anger of her many conspiring Gods. The trap is man-made. As such, it reflects an ideology that is rooted in a voodoo perspective of economics and reflects a potty view of reality.
Here a sample of policies that led to the crash. After fifteen years of contribution, a person could retire at 110% of his salary. Retirement was possible at the youthful age of fifty. The unmarried or divorced daughters of deceased public servants received a pension. Salaries were paid for a fourteen-month year. Civil servants had protected jobs and at least one person out of four had such coveted status. These people received significant bonuses. Such as for the ability to use a computer, or for the command of a foreign language. The writer’s favorite is a bonus for appearing at work on time. Bloated bureaucracy shows ingenuity to keep people on the payroll. The best job was on a commission that administered a lake that dried out in the 1930s.
Typically, state-jobs did more than to keep folks with connections employed. Jobs without functions do more than to cause unnecessary expenditures. Threading bureaucratic water makes out of a useless person a hindrance for those that would produce if only the regulations to keep the controllers busy would let them. A rating reveals the practical result of this. A study estimating bureaucratic hindrances on enterpise rated Greece to be the 109th of the world. Just behind Ethiopia. Small wonder that the black economy’s share of the GDP is estimated to hover around 28%. Let me drop the issue by noting that these tidbits might be extreme without being unique. Therefore, there is a reservoir of hemorrhaging patients crowding the emergency room.
7. Greece’s acknowledged debt is 113 % of GDP. One wonders, will she be able to pay installments that are due: does she wish to do so? At any rate, projected repayment assumes a churning economy. The correction will let the air out of Greece’s tires. When Athens joined, out of courtesy, it got a high Drachma-€ rate. Thus, the Greeks could buy cheap but produced dear. Thereafter, the strong unions that now protect their sinecures by rioting, prevented realistic income adjustments. Local spenders and their foreign creditors believed the fallacy that no €-land will be dropped. Others trusted the EU’s controls. Comparable credulity prevents people from discovering that not 110 billion € but that more than 300 billion might be needed. Now, with others skirting trouble, there is not enough help to go around. The case hide sunpleasant facts. One is that the truth under the fantasy-laden statistics has been no secret. Even worse is that Greece is not the only country that wraps reality in falsified statistics. Greece’s entrance into the €-zone was known to be based on economic data inspired by courteously wishful thinking. Therefore, the surprise now appears to be artificial. Knowingly, EU countries have let cosmetically improved presentations to stand. Not only in the case of Greece! This points to problems embedded in the €. Not having a state to protect it, the artificial “money” of incompatibly diverse constituents lures leeches. They exploit suckers that are unaware of risks of their government’s participation. As things stand, Athens will be funded with a sum that is 32 times its quota of the fund foreseen for temporary problems of solvency. This for a collateral expressed in sovereign debt certificates that are, in terms of EU rules, worthless. Essentially the € exists because the Germans pay and the others get. What wisdom this attests to the countries that refused the join the € -Zone!
8. Duly, the crisis has provoked a question by those who look beyond the moment. Have we, are we learning from the predicament? To the extent that we fail to admit that the (global) crisis’ cause is a political intervention (loans to those who could not repay them) we will miss the proper conclusions. The argument runs like this. To begin with, politics had a market distorting input. Then the crisis matured. From an American housing-credit crisis, it muted into a general infection of the economy that paralyzed entire industries and even countries that are remote from the original epicenter. Government intervention saved the global economy from default. Nevertheless, the lesson is that state intervention is dangerous, as governments do not seek economic returns but aim at electoral returns.
9. The Greek debt and the insolvency of discredited sovereign borrowers do not demand an invention as a remedy for after the plague. Wanted is action prior to the infection. It is as in the case with US – and European – immigration. The talk about new laws serves to postpone action. Meanwhile, the fitting response is available. Just apply existing regulations. The contemporary state that bows to every interest group and, in doing so, violates its own rules, must be reminded to enforce its own existing decrees.