Spending Their Way to Solvency [updated 02/14]

Greece is in trouble. Big trouble. Their government is a few euros away from default and anyone who’s got a couple old drachmas left to rub together is clinging onto them for dear life.

In a last-ditch effort to stay afloat, the Greek government has announced a euphemistically-labeled “austerity plan,” which includes the usual pay freezes, pension “reforms,” and tax hikes. Greeks aren’t having any of it. No, they want their entitlements, and they want them now. And if they don’t get it, some argue, it’s the fault of “international speculators and European central bankers” who, for reasons unknown,”engineered” the crisis. To force the bankrupt government to shell out, they’ve decided to strike.

The unions regard the austerity programme as a declaration of war against the working and middle classes…

“It’s a war against workers and we will answer with war, with constant struggles until this policy is overturned,” said Christos Katsiotis, a union member affiliated to the Communist Party, at the Athens rally.

Comrade Katsiotis, unfortunately, doesn’t seem to have a very firm grasp of the genesis of the problem. Nor, it seems, do the farmers who have been protesting for weeks for higher subsidies.

While it’s convenient to blame the aforementioned “speculators” for all of Greece’s woes, a BBC profile on Portugal, Ireland, Greece, and Spain — the worst debtors in Europe — makes clear that that isn’t entirely the case:

Greece benefited from joining the euro in 2001. But the Greek government went on something of a spending spree and public spending soared.

Now, it is suffering from its huge spending – and widespread tax evasion – as it finds itself unable to cope with its huge debt loads and meet EU deficit rules. Greece’s deficit is, at 12.7%, more than four times higher than European rules allow. [emphasis added]

So the government decided to spend all sorts of money it didn’t have and, when it came time to pay the piper, they came up short. But someone has to pay, right? But who? Why, someone else, of course! In this case, the citizens of the European Union.

Unsurprisingly, not everyone is exactly thrilled to be picking up the tab for the Greek government’s financial irresponsibility

Why are Germans so reluctant to assist? After all, Germany embraced the European project, the whole idea of a European Union. Whatever happened to solidarity? What is wrong with bailing out a fellow member state in need?

From the point of view of the German public, everything.

First, it is a question of principle. Germans are generally frugal, they are used to living within their means. Many here ask: Why should they have to bail out a country like Greece, which has been so profligate and racked up massive debt?


Berlin believes the onus is on Greece to put its house in order, cut costs and slash debt.

The thing is, everyone likes to pick on fiscal conservatives for their putative “hatred of the poor,” their ostensible “racism,” or their supposed heartlessness. But the simple fact of the matter is that spending staggering sums of taxpayer dollars, present and future, whether it be on health care, farm subsidies, “Cash for Clunkers,” or bailing out banks and airlines, has real life consequences.

Sometimes, as the Europeans who sometimes like to sniff at the barbarism of American society are finding out, that means picking up the tab for an entire country, one whose government decided that it could spend as much as it liked because it could count on its neighbors to foot the bill if anything went wrong.


It seems that, after going on their little “spending spree” and bankrupting their country the Greek government not only expected the EU to bail them out, but they expected them to hop to it:

Greek Prime Minister George Papandreou has criticised the European Union’s response to the country’s financial crisis as timid and too slow.

Mr Papandreou told cabinet members at a televised meeting in Athens that the EU lacked coordination and undermined Greece’s credibility.


Greece’s deficit is, at 12.7%, more than four times higher than eurozone rules allow.

Evidently it wasn’t Greece’s staggering deficit that “undermined Greece’s credibility” so much as the European Union’s failure to buy up all of their debt and bail them out fast enough.


2 Responses to “Spending Their Way to Solvency [updated 02/14]”

  1. 1 cholm725
    February 15, 2010 at 6:19 pm

    Sounds like California.

  2. 2 Vincent
    February 15, 2010 at 11:17 pm


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