Greece: Allnight Dance Fadeout

Greece hasn’t done what it said it would do, fiscally, for at least a year and a half. Germany’s next to last move was to buy back bonds from its own banks to avoid default. Presumably Germany as the bondholder can then determine when to make the default call, while at the same time providing new cash to its own banks, rather than to Greece. This caused complaints that Germany and other countries weren’t providing additional funding through the European Union Stabilization Fund. So now Germany and the others are prepared to do just that, with the argument being that if they don’t, their banks might fail. This causes me to wonder how much Greek debt was acquired on the original buyback: the debt coming due immediately, leaving the rest for the banks to deal with later?

The Greek government then finally introduces legislation to terminate (or retire?) 30,000 civil servants. This being a country where one in three is employed by the government, with questions as to how much of this 1/3 of the total workforce, that portion that is government-funded, is actually working, or working to a reasonable productive capacity. These are the ones demonstrating on the streets. The ones who were outraged to have to address retiring at 63, rather than 61, at a time when other countries have no such early retirement age, and many such countries are viewing 70 as a fiscally-responsible retirement age, in terms of available government resources.

Greece now says that it won’t meet its deficit targets, and wants the bailout money anyway. The civil servants continue to demonstrate, barricading government buildings. Greece has been known for years as a country where tax collection was inefficient, if not effectively non-existent. The ultimate tax cut nation. Now the payback, major time.

Makes me wonder what is going on in Third World countries, where national insolvency appears to be a fact of foreign aid life.

We assume that cities, provinces and nations cannot go bankrupt. These assumptions have little basis in fact, in terms of municipalities, and perhaps it is time to accept the bankruptcy reality in relation to provinces and nations. When a person is bankrupt, he or she no longer has control over personal finances. When a business is in receivership, it also no longer has control over corporate finances. Why should it be any different with nations? On what possible basis can it be argued that Greece has a right to control its own fiscal destiny at this time? Logically, the creditor nations take over the finances of Greece and simply fire the civil servants who simply don’t get it. Assets are sold for the purpose of satisfying creditor claims. One difference with national bankruptcy, as opposed to corporate bankruptcy, is that you can’t simply fire the general population. There remain ongoing humanitarian obligations towards their welfare. On the other hand, the cold reality in Greece is that the days of one in three being employed by government are over, and the pensions so cherished by those who have produced so little now being essentially cancelled, since there is no Greek government money to pay for them.

The larger question of the wisdom of a European Union also looms large. Great Britain being shown to be the fortunate one, having not adopted the Euro, while having to address Ireland as a related financial basket case, though at least one where, unlike Greece, the people accept that the high times are over. Maybe has something to do with the fact that more than two thirds of the Irish population was not employed by government.

And what about Portugal? Spain? Italy? If Greece is not shut down, now and hard, does this not elevate the expectations of others of a larger money wash?

With respect to Greece, the allnight fiscal dance is over. Should have been over months ago, at a minimum. Time to hobble home in some hazy dawn, with shredded clothes and the smell of stale perfume.

Postscript, October 5, 2011: All of this was so predictable, exemplified by some prescient commentary by Mona Charen in May of 2010.

Postscript, October 5, 2011: News today that a general strike by civil servants in Greece, protesting the 30,000 to be cut/laid off/suspended, ends up shutting down the country. They really, really don’t get it. Time to show them what a real shutdown means.

About brucelarochelle
This entry was posted in European Union, Financial Institutions - International, Germany, Greece, International Financial Crisis. Bookmark the permalink.

1 Response to Greece: Allnight Dance Fadeout

  1. Maybe countries should have the same bankruptcy laws applied to them as companies or individuals. Maybe Greece should be taken over like one takes over the assets of a bankrupt company. Or maybe profitable divisions, or intellectual property, should be sold like at Nortel to cover the debt. I bet Turkey would like to buy some of northern Greece. Russia might like to buy Crete, to have a base for its Mediterranean navy. German tourists love to holiday in Athens – maybe they should receive Attica, instead of writing off the bad loans.

    And I wonder about the “humanitarian” obligations to the individual Greeks? They have been living on these loans and voting themselves huge benefits for years, without the means to pay for them. Even hairdressers are classified as special need workers, with early retirement benefits, because they work with dangerous chemicals, presumably like hair spray.

    I understand there are over 1 million government workers in Greece. 30,000 is just window dressing.

    The EU situation really calls into question the euro single currency. Greece needs the drachma so it can devalue and set a monetary policy to encourage economic growth. And so does Portugal, Ireland, and Spain. And what about Italy, and maybe even France. None of these countries are able to afford their socialist paradises anymore, and Germany is tired of paying, and too small to pay for them all. And I would be utterly opposed to any bailout money coming from Canada. By the way, the USA is just about in the same boat.

    When the US is sold for assets and the Russians are buying back Alaska for pennies on the dollar, I hope Canada buys a piece of east coast Florida, or maybe Santa Monica, Malibu, and West LA so we can have a bit of Canada with good winter weather. That’s a purchase I could live with.

    One of my colleagues asked me one day last summer if I wasn’t glad I was a hardworking Canadian, rather than one of these layabout Greeks. I said that if I never had to pay taxes, got to retire on full defined benefits pension at 55 or 60, and it was all paid for by the Germans, I would take the Greek.

    One problem in Greece is that the well off ones lie about their income and don’t pay their taxes. The Greek government solution was to get a helicopter to fly around Athens suburbs looking for swimming pools to cross reference against taxpayers claiming to have no income. This sparked Greek entrepreneurship. A company was formed to create and sell pool camoflage covers, so the pools couldn’t be spotted from the air. And these people are now rioting! The whole country should just be cut off. Give the bailout money to the Euro banks and not a penny (ever again) to the Greeks.

    But then what about the other PIIGS? And the F’ing PIIGS, given France is going too. Maybe we should sell them all to the Russians and Chinese – whomever has the money.

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