It’s like watching a train wreck in slow motion.
Greek politicians buy votes for decades by creating lots of unnecessary public
sector jobs and promising inflated pensions (retirement at 50 with pension at
100% of final salary!). Greek taxpayers
regularly evade taxes. Corruption is endemic. Then Greece gets into the Euro by
cooking its books so it looks healthier than it is. Not surprisingly, Greece
gets into serious financial trouble living beyond its means, to the tune of
about €360 billion Euros of debt, and depends on the rest of the EU, principally
Germany, to bail it out. The EU and the
IMF do that, to the tune of €80 billion
Euros thus far, on condition that Greece
attack some of its fiscal profligacy by trimming down the bloated bureaucracy
and inflated pensions.
Geek voters can’t take the pain, so they vote in a far-left
government that repudiates the reforms.
The EU, not surprisingly, isn’t inclined to pour good money (another €8
billion Euros) after bad, especially since it is obvious they are never going to
get paid back, which leads to the current impasse.
Probably the Greek government will refuse to budge, because
they would promptly get voted out of office if they backed down on their
election pledges. Probably the EU and
the IMF will refuse to pony up more loan money they know they will never get
back. Probably Greece will eventually default, and probably have to leave the
Euro. Hardly a disaster, because Greece
probably wouldn’t have been accepted into the Euro zone in the first place if
people had known the true state of their finances.
This of course is the fundamental flaw in the
current EU in the first place – monetary union without fiscal union. It’s like putting everyone in the family on a
single credit card, with no controls over who spends how much.
Of course some cities (like Chicago) in the US have
pulled the same game, and are in exactly the same sort of trouble.
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