Greek Financial Crisis in three minutes
As I’m politically interested, I enthusiastically followed the Greek government-debt crisis in the newspaper, television and on social media platforms. I recognized how hard it is to find one’s way through this jungle-like mess of information about this topical issue.
Call it review, wrap-up, summary, abstract or even more sophisticated “résumé”. What I’ll deliver you, are the most important aspects about this political, economical and social issue. In 3 minutes, you will look through this topic more, than reading numerous and numerous of articles, blogs or similar information sources. It will help you in an easy way to link information and to make your own reflection about this theme. Let’s start with the EU…
The EU (European Union) is nothing else than a political interest group, who tries to enable a corporate grow of its member states. To push on the corporate progress effectively and efficiently the EU has numerous rules, institutions and applied practices. When Greece joined the EU, they had to proof their suitability. Unfortunately the data delivered from the Statistical Office (ESYE) were inaccurate. Because of their larger than assumed national debt, they didn’t actually fulfill the admission criteria and therefore should never have joined the Union. The accession is based on a fallacy.
Nevertheless they now had the chance to print Euros. Although their economy was a lot weaker, they barrowed a lot of money. By mischance they didn’t spend the money right. Instead of investing in new jobs and long term economic growth they were very wasteful with “their” money and:
- Increased the wages in public sector up to 15%
- Spend disproportionate amounts of money in the military
- had declining investments
- allowed an above-average shadow economy (25–40% of GDP) and low taxes
- paid for rents for dead people (phantom pensioners)
- had about 20% of the working population on the government pay role
- suffered problems with corruption.
To sum up they had larger spending than revenues.
In the following years their political approach changed from liberal-conservative over social democratic back to liberal-conservative and back again to the current social orientation. It is obvious that these profound political reorientations prevented any progress and lead to short-term problem-solving approaches. We can observe that socialism lead to corruption and raising level of government debt.
As the debt problem grew, the EU, ECB and IMF agreed on six aid packages in the amount of 237.3 Mr Euro. However Greece saw itself confronted with a worsening credit rating (Fitch’s BBB+ to CC) due their economical issues. As a consequence credits became more and more expensive and difficult to get. The socialist regime didn’t agree on the measures demanded from the EU. So the support from the EU was also in danger. They were close to national bankruptcy.
Think about yourself. Would you pay taxes for strangers and lend them money while they are not willing to control their money problems — I wouldn’t, it’s no promising. That’s exactly the problem with the EU. Their members are too different and share to less values, history and common goals. They don’t see themselves as a nation and kindred spirits. They are strangers. And the motivation to support strangers with almost 250 Mrd. tax money is low. However Greece finally agreed on the introduction of measures and consequently will be supported by the EU further on.
What will be the future of the EU and Greece — more united or will their relationship be pulled apart? I will update you on my twitter account @George_Holmberg.
