Greece Is Screwed
I went to Greece one time. I flew over the Greek Islands, and in Athens I visited the wonderful Parthenon on Acropolis Hill. This was in the 1970's and at the time Greece was a poor, third world country. Now in 2010 protestors are dying in Greece. There is a massive uproar among workers and the middle class because people don't want any “belt tightening.” The Greeks have been living way far beyond their means for a long time. They are true pros at living on borrowed money and OPM (other people's money). The Greeks have no desire to be poor again. Tax evasion is a Greek national pastime.
Imagine that Greece simply defaulted on all of their government debt. They didn't pay interest or principal. Just gave the big Greek middle finger to all the people, pension funds, banks, and countries who have bought their debt. The Greek national government would still be running an 8.5% budget deficit! This situation is looking more hopeless all the time. These guys lied to get into the European Common Market, and they have been adding onto and hiding their debt just like Enron every since. Just like alcoholics or drug addicts.
I forecast that Greece will repudiate their government debts, and that they will leave the Euro zone. Whether this departure will be voluntary or not is almost irrelevant. But once they set the example the floodgates will be open for the other PIGS like Portugal, Ireland, Spain, and maybe even Italy. Belgium isn't really that far behind.
Their only option is a severe currency devaluation, which they can't do when they are still using the Euro. This is one of the really valuable options which both Britain and America have. Devaluation is not nice or polite, but it can be useful.
It isn't cool to kick someone while they are down, but: Greece is the same country that has been demanding the Elgin Marbles back from the British Museum. Forgetting of course that the Greek government already sold these precious marble statues to the Brits one time. They are much safer in London sitting to the left as you walk into the British Museum...right near the Rosetta Stone. These dishonest Greeks would probably just take out a second or third mortgage on the Elgin Marbles if they did get them back.
What a horrible mess. There have even been genuine suggestions that the Greeks begin selling off their islands. This is much like a young person graduating from college with a useless degree like philosophy or political science (my major), owing $100,000 for student loans and another $100,000 to various Visa and Master Card accounts. Just plain screwed. Big time.
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LINK: http://krugman.blogs.nytimes.com/2010/05/05/greek-end-game/
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