A major problem with our global system of finance is one of contagion: the way bad debt has been sliced, diced, repackaged and turned into a weird form of financial sausage – all ground up and blended together – means that the entire system seems to have a single point of failure. All fo the fuss over the PIGS in Europe – Portugal, Italy, Greece and Spain – is that the level of bad debt and government insolvency there is such that if one country goes down, the run it will cause might very well cause any of the others to go down, also. At the moment, Greece is on the brink. The country is flat broke, and desperately needs the Eurozone to bail it out. The good news is that Greece is small enough to bail out. Should it take aknee and Italy follow suit, however, the EU is looking at financial armageddon, as Italy is too big to save.
You can see it in the world financial markets – with every day there is good or bad news coming out of Greece that some hope remains for their financial salvation, the markets respond accordingly. It has been putting the Western financial world on the edge of a collective nervous breakdown to see Greek crowds riot over the merest mention of government austerity, especially since Greece’s financial problems are, in large part, due to profligate government spending. (Strangely, this did not stop the New York Post from suggesting their problems also came from government over-regulation of business. I imagine they threw that in there so they could keep open future comparisons to Greece when criticizing political candidates financial policies here in the states. That would be a Post thing to do.)
Several days ago, it looked like a deal had finally been made between Greece and the Eurozone where Greece would agree to some pretty severe austerity measures in return for a bailout package that included a huge cash infusion and debt write-down, all largely funded by Germany and France. The markets jumped on the news, and it looked like finally, the madness had come to an end. And then, Greece’s Prime Minister surprised everybody when he suggested he would bring the matter to a public referendum, giving the very same Greek people whose unrealistic financial expectations got the country into the mess in the first place, the final say on the terms of its own bailout.
The markets again convulsed at the news, and you could practically hear Merkel and Sarkozy slapping their foreheads. This again? You can hardly blame investors and financial managers here in the States for having a collective sense of fatigue over the Greek drama going on. At the moment, the referendum itself is uncertain. France and Germany did, after all, remind Greece that it was trying to renegotiate the terms of a non-negotiable bailout package. And while Greece’s assertion that its people had the right to have some say in their financial future is a sympathetc one, it is also both selfish and unrealistic.
I recall reading about Greece’s spending habits before the crisis. We are talking about a country where getting a government job is a matter of course, and where hairdressers expect to be able to retire on a full pension well before 65 because they work with hazardous chemicals. When you have a citizenry that expects things like that, then it is clear that public spending, unionization and an entitlement culture has gone amok. The simple truth is this: Greece has been spending far more than it has been making for too long, and it has simply gone over a financial cliff. This is a time when Greece’s leaders must recognize that and make the hard decision to cut spending, even if their constituents are unwilling to do so. Increasingly, it looks like nobody in Greece is willing to own up to the country’s fiscal realities, and the more it does so, the more it pushes everybody else closer to a financial chasm.
How sad it is that a country that has been the birthplace of democracy, the battlefield of the 300 Spartans and the font for so much of Western culture is now becoming its avatar of its worst economic weakness. Greece likes to think of itself int he same manner of superheroics that were captred by Hollywood in the movie 300, but with every passing day, we are seeing the stark difference between fantasy and reality. We all had higher expectations for Greece in this time of horrible financial uncertainty. It would be nice indeed if Greece started living up to them. For if they do not, we are all in for some acute pain, and soon.