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.