How did a marginal, misgoverned little nation push all of Europe to the brink?
The European Union proudly claims to be more than the sum of its 27 parts, with a collective wealth and influence that gives it elephant status in the global zoo. Its common currency, the euro, used by 17 of its governments (but not, importantly, Britain), ranks second only to the dollar as a reserve currency. But it only took a hungry Greek mouse running up the elephant’s trunk to send the beast into an intensifying panic.
The ghastly mess generated by the follies of Greece has spooked markets worldwide. If it continues to be mishandled, it could derail Western growth.
How on earth could the watchdogs in Brussels have allowed Greece, a mere bit-part player, to get near the point of rocking the world economy on its hinges?
By letting politics trump economics, that’s how. Repeatedly, and for 30 years, the Greeks have played Europe like a harp. June’s European Union summit illustrated the chaos perfectly: a last-minute deal with Athens to raise the Greek income-tax threshold and increase levies on heating oil was hailed as a breakthrough even though everyone involved knows that this will buy, at best, a few months’ respite from Greece’s creditors. Thus are deck chairs rearranged, as the Greek pleasure yacht (classified, of course, as a fishing boat to escape taxes) sinks below the waves. The markets duly marked up the five-year probability of a Greek default to 80 percent.
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See Also:
Greek MPs vote through cuts laws
Dangers lurk beyond Greek vote
Notes:
It all sounds good right now. Greece has passed a second piece of legislation today that will ensure default will be pushed off for a few more months but here’s the problem as I see it. Greek citizens are very upset with their government and when Greeks get upset we all know what happens next. The black market will expand, tax evasion will become even more rampant than it is now and those politicians that voted to surrender to the EU — well, they’re gone in the next election.
The reason I say this is because the government does not appear to have the support of the electorate and without it all the rules in the world imposed by the EU won’t make any difference at all because the people won’t obey and more to the point the Greek government does not have the physical means to force them to.
Those “bjillions” of euro’s the EU is about to pour into Greece in a futile effort to try and save itself?
Already “gone with the wind“.
You can take it to the bank (but not a Greek one if you’re smart).
Will this soon happen in America with cuts, (if the two parties ever come together with a plan) and lack of jobs? Some financial experts predict that America will slip back into recession, possibly by years end.
Don’t know, UV. America is a “work in progress” but from what I’m getting on TV and the net “big business” is getting ready for a huge takeoff after Obama is gone in 2012 (and he will be).
He is a political whore so expensive NOBODY can afford him. Right now all the important players are sitting back waiting for “magic time” (old cop term) and it will come.
Europe should wash their collective, socialist hands of the Greeks. They really think this rioting and protesting is going to change the facts on the economy and debt. More that delusional – downright denial. Why should someone in Germany or Scotland pay for the Greek problem? I would say the “Greek Gods” are not so godlike. Cheers.
Re: “Europe should wash their collective, socialist hands of the Greeks.”
They can’t Fern. Greece has them by their collective socialist “short and curlies” as do the other PIIGS. They keep Greece afloat or they all go down (I’m betting they will).
Yes they will all go down, but Germany + France will do okay, Britan has its own problems that can be corrected with the EU stupidity. It is just a matter of of time until it folds.
Its just not a Greek problem as they say Spain, Portugal, Ireland, Iceland and possibly England are in the same poor economic state. Are they too big to fail, a term we have heard on this side of the pond?.
Jack’s point that…Greece has them by their collective socialist “short and curlies” needs to be given some thought as to the parallel closer to home. The glue in the EU mess is the Euro. The access to the Euro enabled socialist extremist countries like Greece to use this currency as cover for insane social programmes. But there are similar examples in Canada and the USA.
Quebec has access to the Loonie thus its otherwise inane socialism would collapse. Ditto California and several other states have access to the US $.
The question is when Texas will get tired of sending money to Washington to send back to California to prop up the decades of fiscal insanity there.
When will Alberta get tired of doing the same for Quebec and does Hudak even know that equalization payments sucked out of the Ontario economy are like Germany having to prop up Greece? When does the merry go round stop?
Re: “When does the merry go round stop?”
Excellent point, sir. You permitted your mind to “expand” and took my comment to the next level. I’ve often advised young police officers to do exactly this thing when working on a case but the concept is much larger as I am certain you already know.
I agree with you but I see no solution in the west to bailing out the miscreants in our midst unless of course we do away with “equalization”. I can’t see that happening anytime soon. I may be wrong.
As long as all federal parties continue to kiss up to Paybec, the ROC will continue to foot their socialist bill. I believe its just over $8 billion per year. Nice work if you can get it. What we need in Ottawa is a real conservative government with balls.
UV what “we the Canadian people” need is guts and gumption and determination to make the polticians realize they are our employees.
We run things, not the government, they work for us and do our bidding. We don’t need nannys …that’s what progressives want or want to be. But it’s our money. We need to shout “enough”
We need Hudak to say “enough” and stop whining that we’re a “have not Province” simply because of McGuinty. Because that is not the whole story. We need the $ 8 billion to say here in Ontario…even McGuinty used to voice that opinion, then he turned into a wuse on it because the voters tuned out and didn’t help him. We’ll only hold onto our democracy by being informed.
In the end, the only solution is that the voter had better figure out who and what is screwing us. Because simply repeating over and over that “What we need in Ottawa is a real conservative government” is as utopian as the progressives searching for the perfect process , the perfect party, the perfect electoral system ; instead of actually getting off their duffs and demanding that our politicians start to take specific action to prevent us from becoming Greeks.
“Bingo!!!”
Meanwhile , speaking of Greeks…don’t drop the soap….LOL
QUOTE, nomdeblog : ” UV what “we the Canadian people” need is guts and gumption and determination to make the politicians realize they are our employees.
We run things, not the government, they work for us and do our bidding. We don’t need nannys …that’s what progressives want or want to be. But it’s our money. We need to shout “enough”
Very true but as Greece is showing us now is that a population spoiled by entitlements can be the problem as they refuse to follow the lead of the Politicians once and if the Politicians ” finally get it ” !
If ” The People ” are sane they can stop the Politicians, but if ” The People ” are insane the Politicians can’t stop ” The People ” running off the cliff like lemmings.
The government has us exactly where they want us, addicted to programs. Fuss too much about debt and the program cuts come. It’s okay to cut some other peoples programs but don’t cut any that will affect me is the attitude so many have. And just remember the billions in RRSP deposits that are untaxed. The government could suddenly tax them or if things were really desperate, outright seize the monetary wealth of all citizens. It has been done before, could happen again. This ride isn’t even near to the start, let alone the finish. Fasten tight folks. Exciting times ahead. The solution will be what they have been working on since WW2. That is one world government.
mid island mike
I surmise that Mrs. Righter’s treatment of Greece, in her article “Greece is the way we are feeling” published this week in Newsweek was intended to lead the reader that “to save the euro, the euro zone may have to shrink to a small core of financially sound members”. In her verdict, she is clueless, or deliberately misrepresentative of a few inconvenient facts and realities.
For example, she states that Ireland’s problems are dramatically-greater than Greece’s public debt crisis. Ireland has, at its core, a banking crisis which leads to a crisis in the confidence of its ability to lend and to administer private and public funds. In contrast, Greece’s problem is its public debt. Greece’s major banks are well-capitalised and well-managed. The lack of confidence by world markets is not in its banking system, but on the public debt mirrored by the record levels of Greek State treasure instruments. She is comparing apples with oranges.
In contrast to her fait-accompli, Greece’s public debt crisis will not derail growth in the West. Growth depends on private capital and accommodative markets. The data show that growth slowdown in the west is due to a loss in confidence by consumer spending, unemployment and the pernicious practice of outsourcing growth-creating jobs to places like China. The US crisis of 2008 was not created by Greek state instruments and Greek public debt but by the unregulated and greedy practices of Wall Street bankers and hedge funds and their friends in the UK and the EU. The lack of regulation of untransparent commodity, equity and bond markets (crossing networks, black pools, OTC exchanges, private markets and the ever cancerous CDS) served and will serve the next crisis. The UK is both a source and a potential victim of this crisis. Greece is insignificant.
Instead of condemning Greece as the cause and not as a consequence of EU structural defects from the start, she should note that Brussels was and continues to be a source of the problem. Greece, unready and pushed by greed imported from Wall Street and London, entered an arena in which the deck was stacked. One can think of Greece at the time of the eurozone entry as an adolescent unfit for the first date hiring a prostitute. But at the same time, how many of the European adolescents were in fact ready to consummate the relationship outlined in Maastricht. Hindsight reveals none. No member met the Maastricht treaty. All used financial alchemy and book-cooking to put on a snazzy show, while their ID cards identifying them as minors were hidden deep inside their underwear. Even as the politically-strong German and French adolescents bullied the remainder to be inline with the terms they did not meet, they also hobbled the EU with their own political and financial interests. I agree with Mrs. Righter on one thing: that Thatcher was wise enough to not enter the EU. Whether is was her or her advisors, that decision served the UK well. She saw that, absent political union, financial and fiscal union was impossible. Indeed, the German-French competition has polarized the EU since its inception.
Mrs. Righter should note that as the current crisis erupted, it was not Greece that was the problem, but the stupid and misguided personal ego of Merkel to remain in power at the expense of a rational solution to what, her more sane advisers were telling her (in 2008). The creation of a Eurobond was a solution, however, her small mind was unable to leave alone the concept that German bonds should always be more strong than anything else in the Union.
Greece’s crisis also stems from her alliances. For example, the sacrifices Greece paid for the support of NATO while its major players (US and UK) connived behind her back in support of a belligerent Turkey (the illustrious Lord Hannay included) only fueled otherwise-unnecessary waste. Is she aware of the billions Greece wasted and continues to waste because allies such as Britain pushed it to maintain expenditures in military hardware and contracts pushing Greece into the top 5 of military spending in the world until perhaps the last 5 years? A tiny nation spending almost the same amount as Saudi Arabia. Imagine that! Who pushed it? The same folks who wanted a crisis maintained between Greece and Turkey…
Mrs Righter states that “Greece’s public debt then stood at €300 billion. A year later it is €340 billion (160 percent of GDP) and climbing”. Let’s place this argument into context, say Greece vs. the UK. The UK’s own government sources (May 2011 ONS report) state that when all the UK government financial interventions are factored in, the Debt to GDP ratio is at 151.1%. Not far away from Greece’s 160. How about the macro study by the McKinsey Global Institute, presented to economists at the Davos World Economic Forum this Febrary and its analysis of the UK finances and underlying crisis and crisis-in-the making which will act on world markets more than Greece or Portugal or Ireland combined? The report found that the UK is world’s worst offender for private and public debt in comparison to GDP after Japan. These are government figures. Further, the UK’s true national debt is now £3,617 billion ($5,930 billion) or £138,359 ($226,807) per household, according to the latest figures (April 2011) from the Centre for Policy Studies, a center-right think tank. CPS also lays out the true public sector UK debt is a shocking 240 percent of GDP (The CPS has collated its figures, which include official net debt, public pensions, Private Finance Initiative liabilities and even network rail liabilities, and the total liabilities of the banks which have been rescued. which are hidden liabilities not visible in official figures.)
Mrs. Righter states that American banks are exposed to Greek debt. In fact, the direct exposure of US banks to Greek debt is insignificant. What is unreported is that US banks are in fact exposed not to Greek debt but to $32.7bn of credit guarantees (most likely CDS protection) on Greece (reported by the BIS). And who has taken out the CDS? French, German and UK banks and hedge funds. In other words, the same folks who gave Greece the rope will reap the benefits from the burial.
Last, Mrs. Righter should consider the Eurostat data which show that Greece is anything but what she tries to disingenuously portray. Perhaps 20 years ago the characterization in this article and the portrayal of Greeks may have possessed some accuracy. Since 2000, this has changed. Mrs. Righter should make herself aware of the Eurostat data the next time she bashes Greece and compare them with, say, UK realities.
Thank you for your attention.
That’s a very helpful analysis Safis.
The MSM won’t do that kind of investigative analysis, because it would require hard work digging for facts. Most of the MSM isn’t anywhere close to the factual gathering level of the National Enquirer.
But there are so many facts and variables that the more you dig, the more you discover and then it gets even harder with more careful digging required, a bit like archeology. For example with your statement “The US crisis of 2008 was not created by Greek state instruments and Greek public debt but by the unregulated and greedy practices of Wall Street bankers and hedge funds and their friends in the UK and the EU.” …..that ignores the other part of the equation.
As with too many unfunded promises to voters in Greece, in the USA, Fannie and Freddie were in fact the precipitators of the 2008 crisis. Since Jimmy Carter’s days these behemoths have increasingly intervened into the mortgage market and much of these mortgage securities became worthless. It wasn’t that it was “unregulated”; it was that the government excessively intervened into market risk. Then to compound the problems, the same perps behind Fannie and Freddie, Dodd and Frank, were then allowed by Obama to put together Financial Reform. The foxes are in the henhouse.
Sure, Greece is just a symptom of the Euro sclerosis and a precursor for the entire West because like Greece it could never collect enough taxes to pay for unfunded entitlements in a demographic sink hole. The dilemma of cause and effect then becomes: if the government gets too “greedy” with tax collection and goes after too much in taxes (the USA already has the highest corporate tax in the world at 40%) then you kill jobs and those “greedy” companies outsource and unemployment rises and the downward spiral gets worse.
But again Safis, your weighing in is, on the whole, very helpful.
Thanks to both of you for taking the time to enlighten the un-enlightened. Speaking for myself of course.
Not just for yourself BTDT. I’ve learned something today also thanks to Safis and “Nom”. It’s helped to clarify my thoughts.
I woke up to a pleasant surprise this morning but to expand all minds here I caught this a short time ago and it is “worrisome” because I’ve been pointing to the situation for years. My view is that if the EU goes down (and I feel they will) China will soon follow because they depend largely on western cash flow to support their economy. I’ve said this many times and I mean it. Turn off the tap to western markets and China will go bankrupt. That much is clear even to the peasants. More so when you stop to consider that China has caused this economic upheaval as, in their unseemly haste, they proceeded to steal (and continue to do so) western jobs.
In effect they have literally killed their golden goose in their selfish pursuit of personal enrichment and that thought is worthy of several long-winded column’s in our major newspapers all on it’s own.
My Point: They have destroyed their market or are very close to doing so because nobody in the west can continue to buy their goods. Millions are unemployed and broke, losing their homes and on “pogy” — NOT PAYING ANY TAXES — never mind buying Chinese goods.
My view — without that market China will be back to “square one” very shortly and I can’t see it going any other way as they, in their turn, go “broke” as a result of their all consuming greed. What happens then is anyone’s guess and I see black clouds on the horizon as that elemental truth strikes home.
Expand your minds folks and try to see the “big picture”. I am.
Thank you “both” for your input so far and tell me I’m wrong. I need to hear it.
As an “aside” I should probably rename this site “Cassandra’s Newswatch”. There are times when I feel I’m predicting the future and I’m far from comfortable with that thought.