Crisis? What Crisis?
Crisis is a testing situation, an abrupt change, an upset of balance. A Crisis can be of a political, economic, military, societal, or even a personal nature. The crisis everyone talks about these days is an Economic crisis, generally speaking, but not one of a uniform cause and nature. In the US it is a crisis of liquidity in the system, triggered by the subprime mortgage loans mess and accentuated by the cash problems of the financial sector. Wall Street and the Banks were the culprits, yet many received generous assistance by the Government. So did GENERAL MOTORS and others saved via the TARP, a program put in place to stave off bankruptcies and job losses. The program seems to be working. It halted the “skid” of the economy. In Ireland it was the banks, one in particular, loaded with “toxic” financial products threatening their collapse. In both the US and Ireland it was the private sector that destabilized their economies.
Greece is a different story. Greek Banks wisely avoided the financial plays of their European and American colleagues and invested, instead in their expansion to countries where they saw opportunities, Poland, the Balkans, Turkey. The Greek private sector was doing fine. The Public sector was not. Bloated, unproductive, corrupt to the bone, a burden to the country and a hedge to economic progress. It brought the country to its knees as it became impossible to maintain it, because the government lacked the means. Greece has had Budget deficits for most of the last thirty six years. They were financed by the EU Grants and by borrowing and borrowing and borrowing. The Greek public debt servicing was the biggest single expense of every Greek Budget of the last ten years. The borrowing started increasing disproportionately to the National Income about twenty five years ago. The funds borrowed were not invested productively, so that they would create wealth. They were, instead, spent buying popularity for the ruling party. The unions demanded and Governments granted, wealth spread and its multiplier effect created more wealth and a sense of euphoria. Costs of everything went up. Greece became heaven for illegal immigrants, who substituted Greeks in menial work. Unfortunately, Greek Governments did nothing to increase the healthy inflow of funds to the treasury, they just kept borrowing. Then the bubble burst. Greek debt was considered excessive and the cost of further borrowing became excessive, factually impossible as no plan to rein in debt and ensure continuity of economic progress was presented to the International Financial Markets. To compound the problem a new Government took over, October 2009, promising raises, thus winning the elections and, when challenged with the question of wherewithal, suggesting that funds are available. It took the new government three months to decide that there was a problem and no way around it. It lost valuable time. The irony was that it was fully appraised by the Bank of Greece long before it came to power … totally unprepared, without a plan. It had, presumably hoped that it would continue borrowing and it still could if it had acted swiftly weeks after it came to power, but it did not until it had become prohibitively expensive. Fortunately, for the Greeks, the “prime” minister of Greece attended the international “get together” in Davos where a journalist literally chased him in the corridors of the hotel with the persistent question of when will Greece go into bankruptcy, how bad a “haircut” will its lenders get. That shook him. Reality rudely awoke him. He returned to Greece shaken and began assessing the situation. He came out in to the open with the facts. Greece was like the TITANIC (sinking) and he was running a very corrupt country that had lived beyond its means for decades. He did his best to scare the markets. The cost of borrowing quadrupled. Greece as a member of the Eurozone was saved by its cohorts and the IMF. It received the biggest financial assistance in history, in exchange for its economic sovereignty, which is not a bad thing considering that what Greece is obliged to do, under the terms of the memorandum signed, is to shape up … to start acting responsibly.
Nothing happened to Greece. Of course the morons (the species abounds in the Greek political system) blame the memorandum for the ills of today, but the memorandum was the result not the cause of the country’s woes. In the course of the twenty one years of socialist Governments an anti-business climate came to be, with profit becoming a dirty word. No aspirations for innovation, for enterprise, were nurtured. Instead every one pursued the comfort and security of public sector employment. The Unions, with the benevolence of the Governments, pushed wages up, encouraging Greek manufacturing to migrate to the Balkans were, in the former communist countries, the business climate was better and wages lower. Inevitably unemployment started increasing in Greece. The conservative Governments in the fifteen years of their regime did nothing to alter the situation. Populism had become something of a social contract that no Government dared to breach. For its sake everything became tolerable, even permissible. Tax evasion, fraud, bribery, legalization of illegal construction, legalization of the usurpation of land- of beaches-of forest areas, became possible. Closed professions, black money, corruption, became norms. Slipping under the laws, rules, regulations, was smart (and rewarding). Greasing the palms of politicians and the political parties was “business”. Having the rules bent to one’s favor was a mark of prominence. Even in the field of education test subjects had been sold to thus enable the “beneficiaries” to prepare accordingly. Effortless enrichment received “applause”. Even the statistics of the Greek fiscal realities were false, with the blessings of the Governments. The political sport became one of exchange of accusations, no constructive debate. Contempt of laws was without consequence, for many. The media glorified the un-natural, presented everything in “yellow”. Governments held the media hostage with their advertising budgets and the purposeful delay in the allocation of frequencies. The amoral ways of the grown ups set the standards of behavior for the youth of Greece. The occupation of schools by “striking” pupils with ostensible demands was condoned. The destruction of buildings and equipment in Universities by “protesters” became routine –never mind the burden to the tax payers- it was all in the name of “rights”. Everybody has “rights” in Greece. Obligations are for the others.
Politicians used the EU grants and excessive borrowing to serve their pursuits as if “tomorrow” would never come. But it came. There was no crisis in Greece. Only the inevitable end of a delirium. Are the Greeks any the wiser for it???