Greece Heads To Elections, Economy May Head Off Cliff
Tom Janssen, The Netherlands
It looks now like Greece will hold new elections in June andd that the “spend whatever we need to spend” coalition will win,even though most responsible politicians from mainstream left to mainstream right recognize this is a bad move.
We may think that such elections don’t matter to us but they do.
The Greek economy is already in chaos and if this continues then there is no way they can avoid defaulting on their debt. This will lead to economic chaos in Greece which is likely to spread to Europe and then around the world.
I’ll have a more detailed post up this week exploring all the details of this (to the degree that my feeble brain can explore) but it is going to be a real mess folks.
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The issue of Greece’s fate is indeed a dire one. Many blame the predicament faced by them and other European nations, as solely the result of reckless spending and borrowing, although I think it goes a bit deeper than that.
During the economic boom of the 90s American banking institutions actively participated in selling a plethora of high risk loans involving a financial commodity called, “derivatives.” And, Countries like Greece were rather quickly doubling their debt (or more) by taking on loans with interest rates of up to 16%. Obviously if many European nations had considered their business dealings with American banks to involve high, or unmanageable risk, they would not have agreed to borrow so much, or, allowing their debt to balloon to extreme levels. Yet, when all is said and done, large financial institutions were rarely held responsible for breaking the law because the actual transactions they initiated, were legal–if not also, slick and devious. In short, these corporations profited from their ability to get around the law, in ever more, creative ways. For example, many of the European transactions were done without the requirement to make the terms public, or, even who they were made with. this makes adequate regulation very unlikely.
While austerity measures are endorsed by most businessmen and politicians, they are a risky maneuver, and quite often may actually worsen the financial situation that they are intended to alleviate. This happens because (if I understand correctly) public employee jobs are cut, and wages are diminished while taxes increase.People then have less money to spend, save or invest, and are less able to contribute to the tax base. Even so, if Greece rebels against austerity at this point, it would almost certainly mean total default and exile from the European Union–making it virtually impossible to get out from under their debt, or, rescue their economy.
Sure, nations like Greece engaged in reckless spending and borrowing, but I think the large financial institutions which made such economic recklessness so alluring, deserve a large part of the blame. Consequently, Greece is now forced to throw a hail mary pass and hope against hope that there is some other way to end their financial nightmare. But the sad truth is that most economists are not at all optimistic that there is any other alternative.
Like the people who were forced to eat the bodies of dead passengers when their plane went down in a remote region that most likely would make discovery and rescue a matter of an extended passage of time, Greeks are now rebelling against severe austerity even though there are very few reasons to expect that this will improve their situation.
I think it is valid to blame much of America’s and Europe’s predicament on the Culture of Greed that thrives on risky transactions that make money for a few, wile endangering the financial health of many, many other’s
There is an excellent documentary about this culture of greed on the PBS.org website that has been aired several times on the educational channels. It is a four part series titled, “Money, power, and Wall street,” and can be viewed in entirety online.
Look forward to your next post, Patrick.
I love Greece and the Greek people, but have some doubts about the fiscal responsibility of the Greeks.
I remember from previous travel and stays in Greece (in the early 90s) observing a multitude of unfinished homes and buildings, especially in the suburbs and countryside — second floor perpetually “under construction,” protruding rebar, etc.– and was told that as long as the home or building is not finished, the owners do not have to pay property taxes. I don’t know if it’s still this way, or how factual and widespread this is/was.