A brief post tonight on the unfolding debt drama in Greece. I’m sure the financial press has ably documented mechanics related to credit tranches and hypothecation. Though, as always, the most fundamental aspects are the ones considered unmentionable. Simply put, Greece can not natively maintain its overhead. Its standard of living is in excess of its capacity. That is not to imply extravagance, only a beyond-the-means situation. It is a country that wants to drink Sam Adams but can only afford Horse Piss. What goes politely unstated is that Greeks are not Germans.
Though in attempts to maintain pretense, they have accrued a handsome debt resulting from consistent deficits of income to expenditure. You may be aware of a much larger country with even more striking accounts in the red. Though in that case, dollars can be conjured from incantations for any irritating debt service requirements. Greece is not similarly at liberty, with euros created by the European Central Bank and not its own insolvent financial institutions. And Germans look unfavorably on debasing their currency to accomodate perceived Greek profligacy. So they simply extend Greece additional loans to pay back their earlier loans. But what does that help? You obviously don’t understand banking.
Yet here is Greece’s problem: the country has a swollen civil service and huge pension obligations. Its creditors want both slashed, in addition to tax increases and labor cuts. Higher taxes, eviscerated retirements, and fewer lower paying government jobs–that’s austerity. It sounds ignoble, but the Greek government has an alternative: keep giving us money, and we’ll keep spending it. You would be correct to assume creditors are unimpressed.
And that is the impasse. Greeks want to live the lifestyle of their German and Scandinavian fellows, all of whom have well compensated bureaucrats and pensioners. But someone has to pay for those luxuries, and Greeks can’t. Thus the question becomes do Northern Europeans pretend that Greeks are Somalis and agree to provide for their every creature comfort? If not then Greece must choose to pay or go.
Greek submission to creditor demands would consign they and their posterity to debt slavery. If they renounce austerity, they will default (the first to the IMF having already occurred) and subsequently be jettisoned from the union (including the euro). This leaving the government to begin paying recipients in devalued drachmas. TANSTAAFL is coming to dinner.
Many are predicting that a “yes” vote (stay and pay) in the upcoming referendum will bring down the Syriza (an acronym meaning Coalition of the Radical Left) government. And might the Greek radical right succeed them in such a scenario?
No, because the leadership of Golden Dawn was summarily imprisoned.
For being in the same political party as a man who killed a rapper.
Obama is in the same political party as many men who have killed rappers.
Let’s get back to discussing credit tranches.
While interesting for its intrigue, the issue is much larger than one small migrant-swarmed country. Many predict an exit would portend an eventual unraveling of the entire union project. And that prospect should bring a peaceful easy feeling to every European who longs to live in a sovereign state–perhaps even one that controls its borders. So I’ll be hoping for a big fat Greek fuck-you to its creditors. Austerity is coming either way, may as well greet him on feet rather than knees.