So the Greeks have voted 61.3% “No”, 38.7% “Yes” in a referendum that has rejected the third Troika bail out of the Greek economy. Obviously these voters expect Angela Merkel et al to do a quick U turn, but that really isn’t going to happen. The Greeks can vote for free money all they want, that doesn’t mean they are going to get it. Why should Wolfgang, toiling away on the Volkswagen production line in Wolfsburg, pay for Dimitri’s free lunch?
The irony here is that the previous Greek government, under Antonis Samaras, had got the government deficit under control and had gone into surplus before interest payments. It has only taken 6 months for the utterly incompetent leftists of SYRIZA to undo all the good work, make everything far worse and to lose the trust of the world. This train wreck wasn’t even in slow motion.
So what went wrong? The answer is that the only way Samaras could reduce deficits was by imposing austerity, under the instructions of the Troika. Now you might notice that Great Britain has managed to reduce its deficit whilst growing the economy, what is so different about Greece? Firstly Greece does not have the genius George Osborne to manage their finances. Secondly Greece is riddled with corruption, corporatism and cronyism and nobody has even begun to try to do anything about these. Thirdly the Greek state still own huge sectors of the economy and have continuously reneged on promises to the Troika to sell stuff off. This state sector, obviously, is massively inefficient and utterly useless at providing its services.
The Greek people got fed up as their economy contracted by 25% so they voted in SYRIZA, who promised to fix everything. Now we see the consequences.
The immediate problem in Greece is that there is no cash in the banks, so the economy can’t work. More cash for the banks doesn’t come from the Troika, it comes from the European Central Bank, and they are very unlikely to give away billions of Euros a week that they have no chance of ever seeing back.
Alarmist media are saying that the Greeks are all going to starve. This is not likely because most Greeks have access to subsistence horticulture which is currently delivering a bountiful crop, also they tend to have large reserves of seasonal crops such as olives and wine. They have little of the high density, gardenless, housing that has been forced on the British people, so are able to make their own food.
A main engine for the Greek economy is tourism and they are just gearing up now for peak season. Tens of thousands of visitors are cancelling and you can see why. Will the ferries and shuttle flights run, will the airports even be open, will it be possible to buy anything, will there be any food for the tourists? This is a disaster.
Another major problem, other than Greece, for the EU is contagion. In Cyprus, Italy, Spain, Portugal etc. This can take many forms. Firstly a voter revolt, the electorate choosing to copy Greece and vote in an incompetent, lunatic lefty government. Secondly it could be governments demanding equal treatment, if Greece gets favourable terms and lots of free money then why shouldn’t they. Thirdly it may take the form of utter delusion with the Euro, the EU and all its institutions. The wheels really could fall off. But they probably won’t as everyone fudges and compromises.
Obviously the eurocrats will say that the Greek vote proves that Europe wants and needs even closer federalism, that it is just a milestone along the route to a superstate. When any cogent human can see that it is saying the opposite, federalism does not work, Greeks are not the same as Germans and never will be.
So what is going to happen next? Greece could leave the Euro. Or not. It could even leave the EU. Or not. The EU could come to the rescue. Or Not. Greece could descend into anarchy (they are pretty close at the best of times). Or not. Nobody knows. Alexis Tsipras really does not have the faintest idea what he is doing and couldn’t organise a trip to the pub, never mind an ongoing national economic disaster. Angela Merkel’s patience and tolerance have been stretched beyond the limit and Germany is right behind her. France is in really big trouble as the biggest lender. French banks and the French banking system are on the brink.
Meanwhile in London we thank John Major for getting us the Maastricht opt outs that kept us out of the Euro. And both sides of the debate for the upcoming in/out referendum now have new ammunition. Farage is already gloating this morning. The British people must be getting more skeptical and David Cameron is now in a far better position for his negotiations.
One of the great evils of socialism is collectivism, they don’t believe that individual people own anything and that the state owns everything. So, in order to pay for themselves, the Greek government are rumoured to be about to force a “haircut” of up to 30% on every bank account in the country. What capitalists would call theft. They have already frozen access to every safe deposit box and could well sequester the contents. Remember this if you are ever thinking of voting Labour, it is how their political philosophy works.
What everybody on all sides seems to be missing out on is finding a route to getting the Greek people working again, to getting the economy functioning. This is vastly more important than managing the debt. So everyone is concentrating on the wrong thing. In a previous article I showed how Greece could solve all its problems and rapidly become rich. It isn’t rocket science, just proven economic methods.
The biggest beneficiary of this whole debacle has to be the USA. Currently they are moving politically towards the evil that is socialism. They are worshiping false prophets such as Krugman and Stiglitz whose ideas bring disaster to all who listen. Perhaps seeing how socialism has trashed Greece will lead Americans back to the true faith of Hayek, Laffer, Friedman et al, whose ideas once made America rich.