In terms of the overall EU economy Greece is very small beer indeed. This is why the Eurocrats were happy to keep throwing our money at the Greek lifestyle in order to keep the EU “project” on the rails. Now we have reached the third bailout, Greece is in default and the mountain of debt is so huge that it will never, ever be paid back. And still the Greek politicians think that they have us over a barrel and are demanding more. Despite reneging on every agreement they have ever had with the EU they expect us to acquiesce. Let’s hope we don’t.
This blog has several articles on this topic that were typically prescient (the General Election was another triumph).
So let’s take a look at some extracts (click on highlighted text to go to article).
The folly that is the Euro. Published 7 April 2011.
“In Greece the whole country had been living well beyond its means for decades, so they weren’t allowed into the Euro when they first applied. So they fiddled the figures and reapplied and, amazingly, were let in. Whereupon they set about an orgy of socialist spending on borrowed money. Amazingly they got away with this for nearly a decade before reality struck home and their credit line dried up. Now the Greek government and people have to try and live within their means (ha, ha, as if) and to start to pay off their staggeringly immense debt (no chance) whilst restructuring their economy so it actually creates wealth instead of just absorbing it in a socialist nightmare (also no chance).”
The train crash that is Greece. Published 11 May 2011.
“This is a country where paying tax is optional and where living the good life paid for by other is the accepted norm. IMHO there is no way they were ever going to reform sufficiently to live within their means, never mind ever being able to pay back the immense debts they have built up with their profligacy. Everything they do seems geared up to getting more of other people’s money to spend.”
“It seems obvious that the Greeks want their debts to somehow disappear, that a default is preferred to the almost impossible task of firstly balancing their books and then starting the immensely long slog of paying back the gigantic sums they have borrowed.”
The Greeks really are revolting. 15 June 2011.
“So the people of Greece are enjoying their strikes and their demonstrations just as they enjoyed the good life when they were spending very many billions of other people’s money. If they behave like this when they are just asked to move towards living within their means what will happen when they are actually required to pay some of the money back? Yep, you guessed it. They just aren’t going to.
Anyone who lends any person or any institution in Greece any money is deluded if they think they have any prospect of seeing any of it again. It just isn’t going to happen. This is not a normal northern European country and it is very silly indeed to treat them like one. You cannot even believe the Greek government’s figures, they have a long history of making them up to suit themselves.
All that is happening right now is that they are trying to grab as much of everyone else’s money as they can so that they can carry on regardless. The Greek people are simply not going to stop spending more than they earn and they certainly aren’t going to pay the income taxes that they should.”
Just how doomed is the Euro? Published 21 June 2011.
“So the European Union is considering the terms for lending Greece yet another massive tranche of money. The most that they can possibly succeed in doing is to delay the date when Greece defaults. All you have to do is look at the maths.
The Greeks are just like the British Labour party, they will foolishly spend other people’s money till they reach the limit of finding people stupid enough to lend to them. According to Greek figures (which have a long history of saying what the listener wants to hear) their sovereign debt is 340 billion Euros. Currently they are asking for a 12 billion Euro top up. With a population of 11 million their current stated debt works out at 31,000 Euros for every man woman and child in the country. But you can add to that a mountain of off balance sheet debt, the borrowings of their many nationalised businesses, commercial debt including billions to their shipping industry, private debt and tens of billions worth of derivative contracts.
I would be very surprised indeed if the real total debt was less than 100,000 Euros per capita before property (mortgage) borrowing. With a retirement age of just 58 years and a life expectancy of 80 it is easy to see that the working population is about half the total population. So the debt becomes 200,000 Euros for everyone in the working population. But over 14% of that labour force are unemployed. Then we look at a GDP per capita of $28,000 (and declining rapidly) and you can see that it is impossible for them to even pay the interest on what they owe. Greece is just one big Ponzi scheme.”
The Euro dominoes are lining up nicely. 17 July 2011.
“We now know that Greece is definitely going to default on its government debt. Firstly because the task of servicing and paying back their loans is financially impossible. Secondly because the Greek people don’t see why they should pay back the money they have borrowed and spent when the rich Germans can pay it off for them. The Greeks don’t like to pay taxes and they expect to retire on a big government paid pension when they are 50, why should they be expected to give up the good life that the rest of Europe has paid for since 1981?
When the default happens the debt will be written down by, say, 50%. In which case the Greeks would eventually be expected to pay back half what they have borrowed and the lenders will take the loss on the other half. If the write down isn’t big enough the Greeks still won’t pay the loans back, so the write down needs to be significant.”
Sarkozy and Merkel fail again. Published 19 August 2011.
“Greece will inevitably fail and already the world’s banks are writing down the value of the Greek bonds they hold. The question is what will the contagion be when Greece goes, how much of a domino effect will we see?”
Conclusion: If all this was so crystal clear 4 years ago why wasn’t the problem solved then? Throwing money at Greece is not the answer, no matter how much the Eurocrats are keen to do so. This whole situation is the result of the utterly discredited creed of socialism. Spending other people’s money on “services” and “social justice” whilst failing to nurture the capitalism necessary to pay for everything. Listening to Keynsian “economists” like Krugman who, in the real world, are always wrong.