The beneficiaries of allocated handouts are always surprised when they are presented with the donor’s final bill.
As so often, the title infers its own answer. Like the fog of San Francisco, such bad news rolls in daily. The ritual might have made the global citizen crisis resistant. Numbed by incessant blows, it is understandable if the reaction begins with “I do not care” and ends with “I am no Greek”. In this case, not paying attention while assuming that the distance confers protection, does not amount to immunity even if the matter is shut out. To get typhus you do not need to be aware of infectious diseases.
If one peels off the outer layers of the “Greek crisis”, one discovers a bankruptcy that politics endeavors to keep from slipping out of its shell. Regardless of that, the failure at the end of the palliatives that intend to gain time is hardly avoidable as it is after twelve. Scrutiny reveals that the malady under the microscope is not singularly a “Greek issue” for the virus also thrives elsewhere. Greece seems hard to save: those that follow Athens’s path will pose an even larger problem.
Going beyond the above, large forces loom behind the surface of default. Their message is that good governance and prosperity are interdependent conditions.
There is an effort to rescue the banks of important countries that invested in high-yield sovereign bonds. Amend “high-yield” with “high risk” in the pursuit of tempting profits. Naively, these lenders ignored the risks while they disregarded the badly hidden deficit of wobbly systems. These used the funds to pay the interest on their debt and to bribe their clients by covering their consumption. The funds were not invested to create value by meeting market demands. Allowing servicing a growing debt instead of valid economic goals to generate returns has been foolish.
In the final analysis, the cause of the crisis is not be in the field of economics but is cowering in the thorny bushes of politics. What we discover by wading into that undergrowth are practices that amount to deception. Furthermore, we identify politically motivated lenders that overlooked the Potemkin villages of falsified statistics, which covered up devastated landscapes. The upshot discredited rating agencies, the “North’s” central banks, the economic policies of several states and a major currency.
There is one, frequently deployed tactic, to liquidate the debt that profligate states have accumulated with the connivance of the international political class. The magic term is “confiscation”. Call it what you like, the bribed clients’ property, derived from handouts given for political support, must be taken back. The tactics that lead to this goal are a question of detail. Only one aspect of this is surprising. Those that think themselves to be the permanent beneficiaries of allocations are stunned when their benefactor presents them with the final bill.
As things stand, Greece has an admitted debt of about € 340 billion. 110 billion has already been transfused. Another installment is to follow. One wonders, what sustains the ailment. Could it be that, by opening the doors of the stable, enough pestilential stink escaped to demand real disinfection. It appears that, feeding the money-shredding apparatus that has the country in its grip, costs more than our crypto-Socialists care to admit. Parasitic systems are pricey.
Public institutions manned by honest personnel that provide good governance, are a pre-condition of recovery. Such persons become a rarity due to the incitements to misuse power. State jobs –day-care centers for party soldiers - serve as bribes for support. To meet the demand for sheltered space, bureaucracies expand while they are given more to regulate. Thereby, the costs for lubricating the put-putting regulatory machine rise. The strangulating controls hinder the work of the creative. Regardless of whether the official wrapping is “socialism” or not, the systemic overregulation pays for superfluous services. The set-up also encourages bureaucrats to feel that they own the office and that, therefore, they may exploit its power for their benefit.
Corruption is the result and it is hard to cure once people assume that the state operates an “All You Can Eat” establishment. Those privileged to be head of the queue have a right to pile as much on their plate as they can grab. This converts the abuse of “corruption” into an earned right. Therefore, this comportment, because it is not perceived as the aberration, proves difficult to root out. Part of the hindrance is that the personal standards and the public morality of individuals diverge. Honest persons that are committed to their fellows –such as their family- lack scruples when they act in the service of the community of which they are citizens. Perhaps a recent news item treated as an oddity will lend 3-D quality to the big story. To raise the efficiency of the regulatory spider web that holds the Greek fly captive, the government resorted to a tool that betrays failure. Office holders were promised a bonus for not showing up for work late. Yes, you read correctly. No pay reduction for being late was threatened but a bonus was promised for being on time.
“Europe” has told the Hellenes that “no cuts no money”. Time will tell how serious this is. However, as the violent protest actions demonstrate, the “cuts” destabilize the government as they violate its contract with its clients. Rescue demands a stable government and a socially accepted recovery program. Papandreou winning a confidence vote is widely praised. The assumption that this implies effective action to follow reflects “Nordic” thinking. If the proposed measures can be made into law, they will need to be applied. (The vote on June 29 went in favor of Papandreou.) Traditional cushioning by “acting as though” will be tempting. No policy will work unless society bears its consequences. Doubts arise in the light of the violence that protests the diet. Feeding the cow that one used to milk will prove to be a hard to learn skill.
The attempt to manage a collapse so that few will notice it is not a uniquely Greek story. Several elements of the above are copies of what is going on close to home. The proliferation of offices that are designed to feed the occupation force of the regulators are probably easy to identify in your neighborhood, too. Spending borrowed money and debt paid back by new credits, is more the rule than the exception. The crisis fed an inclination to investigate and that has pulled the shroud off much naked fat. Among the candidates for the reassessment of their creditworthiness is the USA. In case that that carrier slips into the role of a diving U-Boot, there will be no one left to throw cast iron rescue rings to the drowning.
With all that in mind, the topic here is only on the surface an economic one. As so often, the problem is political. Anyhow, the demerits of the € are mainly political. Everybody knows how that currency –and the US$- could be stabilized. However, politics determine how the cure is packaged while it also limits the applied measures. This is especially true in the case of the € which, unlike other currencies, is not a national legal tender. Being the expression of a political will –or illusion- the Euro also lacks a national economy that it monetizes. Those creditors, themselves running deficits, that “save” the ailing by printing money to prop up defaulters stranded on floats in the sea of red, do not follow an economic agenda. The pursued program is a political one. Its core intent is to demonstrate that the continued right of our leaders to lead remains intact.