Posts Tagged ‘Greece troubles’

A Taste of What’s to Come: Greeks Riot Over Loss of Entitlements, Social Programs

May 11, 2010

Excellent read from Vasko Kohlmayer in the American Thinker on how the US, with our out-of-control-spending and record deficits courtesy of Obama, Pelosi, and Reid, may soon go the way of Greece.

What’s happening in Greece is this: The Greek people are angry because their government pledged to make cuts in social spending.

It is not that the Greek government is inherently stingy. Quite to the contrary, the Greek government has been one of the most generous when it comes to paying for social goodies…so much so that for years it spent far more than it could really afford. Fox News correctly observed that “Greece lived for years beyond its means, borrowing money and spilling red ink to finance excessive government spending, offer socialized health care and provide lavish wages for federal workers.”

Things, however, came to a head last year when the country’s budget deficit reached 13 percent of GDP and its national debt ballooned to 113 percent of GDP. Faced with these figures, investors lost faith in the government’s ability to service its debts. To compensate for the risk of further lending, creditors began to demand high interest rates on Greek bonds. With the source of cheap funding dried up and unable to raise enough cash, the Greek government found itself on the brink of default.

Broke and humiliated, the Greek government applied for aid to other members of the Eurozone. Not willing to let the whole monetary regime go into seizures, they promised a bailout of 110 billion euros. But the funds would be disbursed only if the Greeks agreed to bring spending under control. Not having any choice, the country’s officials agreed to a package of austerity measures. Then all hell broke loose. According to the Wall Street Journal,

[H]ooded protesters smashed the front window of Marfin Bank in central Athens and hurled a Molotov cocktail inside. The three victims died from asphyxiation from smoke inhalation, the Athens coroner’s office said. Four others were seriously injured there, fire department officials said.

It is something of a paradox that the Greek people still demand money even though their government is flat-out broke. Even the blind among them should be able to see that the state simply does not have the funds to meet the citizens’ demands. The country has only debts that it cannot pay. After years of profligate spending, Greece has gone bankrupt.

Perhaps the most disturbing aspect in all this, from our point of view, is the fact that America’s finances are almost as bad as those of Greece. Lest you think it an exaggeration, consider these numbers. Last year our budget deficit reached a record peacetime high of 9.9 percent of GDP. Despite the fact that this was supposed to be a one-off contingency necessitated by the crisis of 2008, federal spending is accelerating.

In the proposed Budget for Fiscal Year 2011, the Obama administration projected that this year’s deficit will reach 10.6 percent of GDP. This may come as a surprise, since the mainstream media have largely chosen not to publicize this disturbing fact. You can, however, easily see it for yourself by clicking on this link. It will take you to the budget’s summary tables. The first table is labeled S-1 and called “Budget Totals.” There you can see the figure in the third row of the table’s lower section. Also note that the table is tucked away toward the end of the long document (page 146 out of 179). So much for the promised transparency.

The situation is equally dire when it comes to our public debt. The present size of the American economy is just above $14 trillion. As of this writing, the total public debt of the federal government is nearly $13 trillion. This means that it currently constitutes more than 90 percent of GDP. Worse yet, the federal budget is poised to expand steeply in the months and years ahead. In a report the International Monetary Fund prepared last month, the agency estimated that the U.S. debt would jump to 110 percent of GDP by 2015. In light of this, the IMF issued an urgent call on the U.S. government to “move beyond health-care reform to restrain its yawning fiscal deficit.”

Stark as the IMF estimates are, the figures are understated. Given our current pace of borrowing, it now seems likely that our national debt will breach the critical 100 percent milestone early next year. The 110-percent mark will be then reached by the close of 2013 at the latest. And this does not factor in increased spending on health care, which will occur as a result of the recently passed health care reform bill.

It is important that we keep in mind that these numbers refer only to the outstanding public debt of the American federal government, which is only one part of the government’s total obligations. A far greater portion of our national debt is made up of unfunded liabilities inherent in entitlement programs, which, according to the Dallas Federal Reserve, amount to some $104 trillion. 

When we consider all these numbers, we will quickly realize that our government’s balance sheet looks rather similar to, if not worse than, that of Greece. In any case, it is patently obvious that like the Greek state, the American federal government will not be able to make good on its obligations.


Welfare State in a Death Spiral

May 11, 2010

From Rick Moran in the American Thinker:

Wise old Robert Samuelson in the Washington Post on the real crisis facing Europe; it’s not Greek debt but the overpromises of the welfare state:

Euro coins and notes were introduced in 2002. The currency clearly hasn’t lived up to its promises. It was supposed to lubricate faster economic growth by eliminating the cost and confusion of constantly converting between national currencies. More important, it would promote political unity. With a common currency, people would feel “European.” Their identities as Germans, Italians and Spaniards would gradually blend into a continental identity.

None of this has happened. Economic growth in the countries using the currency averaged 2.1 percent annually from 1992 to 2001 and 1.7 percent from 2002 to 2008. Multiple currencies were never a big obstacle to growth; high taxes, pervasive regulations and generous subsidies were. As for political unity, the euro is now dividing Europeans. The Greeks are rioting. The countries making $145 billion in loans to Greece — particularly Germany — resent the costs of the rescue. A single currency could no more subsume national identities than drinking Coke could make people American. If other euro countries (Portugal, Spain, Italy) suffer Greece’s fate — lose market confidence and can’t borrow at plausible rates — there would be a wider crisis.

But the central cause is not the euro, even if it has meant Greece can’t depreciate its own currency to ease the economic pain. Budget deficits and debt are the real problems; they stem from all the welfare benefits (unemployment insurance, old-age assistance, health insurance) provided by modern governments.

Greece: The Latest Casualty of Liberalism

February 28, 2010

Excellent piece from Mark Steyn in the National Review on Greece’s troubles and how the U.S. heading in the same direction due to Liberalism, the current Congress, and The One (without a clue).

While Barack Obama was making his latest pitch for a brand-new, even-more-unsustainable entitlement at the health-care “summit,” thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split-screen — because they’re part of the same story. It’s just that Greece is a little further along in the plot: They’re at the point where the canoe is about to plunge over the falls. America is farther upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen.

What’s happening in the developed world today isn’t so very hard to understand: The 20th-century Bismarckian welfare state has run out of people to stick it to. In America, the feckless, insatiable boobs in Washington, Sacramento, Albany, and elsewhere are screwing over our kids and grandkids. In Europe, they’ve reached the next stage in social-democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1 — or just over two kids per couple. Greece has a fertility rate of about 1.3: Ten grandparents have six kids have four grandkids — ie, the family tree is upside down. Demographers call 1.3 “lowest-low” fertility — the point from which no society has ever recovered. And, compared to Spain and Italy, Greece has the least worst fertility rate in Mediterranean Europe.

So you can’t borrow against the future because, in the most basic sense, you don’t have one. Greeks in the public sector retire at 58, which sounds great. But, when ten grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don’t have to go to Greece to experience Greek-style retirement: The Athenian “public service” of California has been metaphorically face down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book America Alone, I put the then–Social Security debate in a bit of perspective: On 2005 figures, projected public-pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent: in other words, head for the hills, Armageddon outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn’t going to have a 2040 — not without a massive shot of Reality Juice.

Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: “A government big enough to give you everything you want is big enough to take away everything you have.” Which is true enough. But there’s an intermediate stage: A government big enough to give you everything you want isn’t big enough to get you to give any of it back. That’s the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people’s response is: Nuts to that. Public-sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months’ work: For many of them, the work day ends at 2:30 p.m. And, when they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

View the entire article here.