European “leaders” are going to kick Greece’s can down the road again. They are working on negotiations to hand over another 130 billion euros (about $170 billion) in bailout money. According to this article, they are giving Greece until next week to find an extra 325 million euros ($430 million) in savings. Is that a typo? They only have to find an additional 325 million euros, a fraction of a percent of the 130 billion in bailout money?
This whole Greece situation is a joke (although certainly not for people living there). The European ministers are handing over more money to an insolvent government. They are making European taxpayers and holders of the euro poorer. They are essentially flushing this money down a toilet.
I am really tired of the word “austerity”. These politicians and media pundits over use the word and they abuse it. For many, their idea of austerity is small cuts in government spending, coupled with large tax hikes. Then they have the temerity to insist that austerity just isn’t working.
If Greece cut government spending and balanced its budget, then no bailouts would be necessary. The problem is that they keep spending money that they don’t have. The Greek government has made more promises than can be kept.
Greece could default on 100% of its debt tomorrow. In fact, it should do this. But the European “leaders” do not want this to happen, so they send more bailout money. If Greece did a 100% default, then the government there would still be in major trouble. It is not just the interest payments on the debt that are difficult to pay. Again, it is all of the promises that have been made in the form of pensions and other welfare benefits.
The same situation would be true in the United States, except the U.S. government has its own central bank. The Fed can always buy government debt, even if there are no private lenders available. But if the U.S. government did not have the Fed and nobody wanted to lend money at low interest rates, then there would be a default on the debt and we would finally see massive cuts in spending. The U.S. government is running yearly deficits that are close to $1.5 trillion. If there could be no borrowing, then the government would be forced to cut spending by the amount of the yearly deficit.
The situation in Greece is horrible. There is extremely high unemployment. The crime has gone up. There are people struggling to meet their basic needs. Many rich people are fleeing the country, and who can blame them?
Greece is an extreme example of a democratic welfare state. As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people’s money. Greece has run out of money. The many years of over consumption and underproduction has finally caught up with the people there. All of these people who thought they could retire at 50 on a sweet government pension are now starting to realize that they will have to work again. The people that are not accepting this fate will face much worse. I can imagine that there is severe depression in Greece right now and I don’t mean with the economy. I mean that the mood of the people is very down.
If Greece wants to solve a lot of its problems quickly, then the government needs to default on all of its debt. It then needs to default on all of its promises to the Greek citizens. All pensions and welfare must end immediately. If they want to throw a bone to those over the age of 80, perhaps that could be afforded. Everything else must be cut dramatically and immediately. Regulations must be repealed. Taxes must be lowered dramatically. The government should set up something economically that resembles Dubai, Singapore, or Hong Kong. If this were done, the economy would be on the road to recovery within a couple of years and you would see great gains in wealth and productivity shortly after.
The government of Greece is only going to free up the economy if it is demanded by the people. The Greek people have been majorly abused. They should not be bailed out any longer. They must admit that their welfare state policies have been a total failure. They must turn to economic liberty if they ever hope to have a decent standard of living again.