Whenever a country as ancient and proud as Greece is about to go bankrupt, it's a big deal, and an impossibly complicated one. The fact that the final nail in the coffin appears about to be driven by a referendum is the ultimate irony for a nation that gave the world Democracy.
I have more than a casual interest in Greece. I invest money for a living and the Greek government bonds that are about to become worthless are found scattered throughout many American mutual funds. Many of the talking heads in the financial media have talked about little else but the dangers of contagion, the notion that a sovereign default by one nation may spread like chicken pox in a Mississippi elementary school. So, I have tried my best to understand this Greek tragedy. I have read all I can find from every newspaper, magazine and think tank. After nearly two months of reading, I am no closer to the truth than I was before. What a hot mess.
This is a country that fought a bloody and acrimonious civil war after WWII, with the government eventually prevailing over the Communists in 1949. The official end of hostilities didn't happen until the formal accord was signed in the 1980's. Any discussion of Greek finances can't be made without an understanding of just how divided the country is, much of the division lingering from that civil war. Before joining the European Union in 2001, Greece was in horrible financial straights after the decade of the 1990's which saw them run insanely high budget deficits every year. Membership in the EU brought access to cheap loans and an economic revival from 2001-2007. But eventually loans, cheap or not, have to be serviced, and when the economic crisis of 2008 came calling, Greece was hit especially hard. It has been on life support ever since, and now the creditors have had enough.
It's quite hard to pick out one thing to blame for Greece's troubles. It's more like a combination of many bad habits coming together at the worst possible time. Over the last twenty years public sector job growth has far outpaced the private sector, which I suppose is inevitable when you have a government which is asked by Greek citizens to do so many things. But when a huge number of your citizens work for the government, then the public sector unions become key to every politicians' success. Accordingly, they get most everything they want, from generous leave, to insanely rich pensions. Luckily for Greek politicians, the people being counted on to pay for these pensions have yet to be born and consequently can't vote. You would think that a nation so enamored with the welfare state would be willing to actually, you know...pay their taxes. But no...the Greek black market is the only part of the Greek economy that is thriving. Off the books, cash transactions are ubiquitous in a country starved for revenue.
Greece has everything that Bernie Sanders loves, high taxes on the rich( which don't get paid), a huge and omnipresent government involved in every sphere of daily life, universal health care, powerful unions, a relatively small military, with soldiers who have seen their pay cut by 40%. No one in the country seems much interested in making a profit or building anything. Thus freed from the American preoccupation with mammon, the Greek citizenry is free to enjoy long paid holidays, and retirement with a generous pension while in their 40's. For those unlucky enough still to be in the work force, they can look forward to receiving 14 monthly pay checks, the two extra "months" a clever scheme dreamed up by the government to keep overall monthly wages lower since the ridiculously generous pensions are based on monthly pay. Workers can also receive bonuses for simply showing up to work...on time. These are the working conditions under which Greeks labor...after five years of grim austerity. This and baklava? What a country!
So today they go to the polls to vote for more austerity, or to stiff their creditors and leave the EU, the consequences of which even its proponents don't fully understand.
The lesson for us would seem to be...don't be like Greece. A good question to ask every Presidential candidate next year might be, " What policies will you put in place to insure that the United States never becomes Greece?"
