Not exactly a tragedy
Everybody talks about Greece, and considers it the major problem for Europe today. The fact is, however, that Greece is not the problem. The problem is the incompetence and hard headedness of the people in charge of both the governments and the banks. All the countries in the Eurozone are bankrupt, and even if Greece did not exist, another one would have been the first to go down. Here are some of the mistakes that have been made so far.
First of all, Greece should never have been considered for membership of the euro. It is a poor country, with a history of inflation and defaults, kept afloat only by foreign money. In the 180 years that Modern Greece has existed, the Greek Government has defaulted five times. In other words, in a great part of its recent history, Greece has been in a state of default. Nevertheless, the European leaders chose to include Greece in the Euro. Indeed, even when it came out that the Greek financial figures had been falsified, Mrs Merkel still insisted on accepting Greece in the euro. Of course, once the Greeks were allowed to put their hands into the cookie jar, they were not shy, and a flood of Greek bonds hit the market. Now, any sensible banker would have realised that a Greek bond does not have the same value as a German bond. Yet there was very little difference in the interest rates for euro bonds, and European bankers piled into Greek bonds.
Once the real financial situation in Greece came to light in 2009, there was only one solution – Greece must default. Greece’s foreign debt was such that it would be impossible under any conceivable set of circumstances to work its way out of it. As the American philosopher Will Rogers once said, ‘when you see that you are in a hole, stop digging’. But Mrs Merkel, Sarkozy etc. insisted on holding on to their political dreams, rather than to financial reality. Accordingly, they poured tens of billions into the black hole that Greece had become. As for the Greek politicians, although most of them knew, or should have known, that default was the only solution, no one wanted to be the one to say so. So they tried to pretend that Greece might be saved. Of course, at the same time, they knew perfectly well that their voters would not accept these terms, so while pretending to accept the terms, they kept delaying them, and watering them down. Certainly the reaction of Greek voters was violent, and even if the politicians had wanted to carry out the euro terms, they would not have been able to. However, they did not want to carry them out. I have mentioned before in this column that to be in line with other European countries, Greece should have about 90,000 civil servants, but that in fact they have 790,000 civil servants. That means that there are 700,000 people on the government payroll who do nothing. The reason this has happened is because successive Socialist governments, particularly during the period 1980 to 2000 when the older Papandreou was Prime Minister, put tens of thousands of people on the payroll, simply because they were Socialists voters. These people would, of course, always vote Socialist, so in effect the rest of Greece is asked to subsidise 700,000 Socialist voters. Now, no government in Greece is about to sack 700,000 people under any circumstances. Indeed, although the Greek problems have gone on for almost two years, not a single civil servant has been sacked.
Instead of learning by this experience and taking their medicine, Merkozy piled in again with more money. In view of the attitude of the German voters, however, this bail-out must surely be the last. Greek politicians are in the same situation. Papandreou promised cuts which he could not deliver, so he had to go. A new Coalition Government will take his place, and will fail just as miserably as he has. Eventually Greece will default, but not until everyone is persuaded that it is the only possibility, and an enormous amount of additional money has been lost.
It is amusing that the things one hears about Greece in the West are usually the opposite of what is in fact true. For example, one of the things we hear continually is that Greeks do not pay their taxes. Well, there is a good reason why they do not pay their income taxes, which is that they carry a very heavy tax load. Total tax income in Greece is more than 40% of GDP. That is one of the highest percentages in Europe. Yet many Eurocrats tried to pretend that the crisis is the fault of Greece. They try to conceal the fact that every country in Europe is in deep financial trouble, and even Germany itself is not in strong financial shape. At the moment, we are seeing Italy teetering on the edge of default, and it may well be that Greece will not be the first to default. That would be ironic.
Perhaps the most amusing thing that has happened in the past few weeks is that Mr Papandreou was publicly accused on the floor of the Greek Parliament by another MP of having bought an enormous number of credit swaps on Greek bonds as soon as he became Prime Minister, and that these swaps, which are now worth a fortune, have been transferred to his family. If this were true, it would be treason. But, of course, there is no proof. Personally, I would not be surprised at Papandreou committing an act of treason, but frankly I do not think he is clever enough to understand about credit default swaps. We will see.
Childish notions
In a recent column in The Times of Tanya Byron’s, there was a sentence that sums up many of the problems of England today (£). The sentence is, ‘no child is born bad’. With great respect for the good doctor, that sentence flies in the face of both logic and experience. Every person in the world is born with different qualities. Some people are born intelligent, others stupid; some are born courageous, others cowardly; some are born energetic, others lazy. The idea that every single person in the world is born “good” is childish. Apart from logic, we have thousands of years of experience, which are full of bad people. Did Stalin murder 60 million people because his mother did not understand him?
The problem in England is that the English are not comfortable with the concept of evil, so they try to pretend it does not exist. That is why they have never been good at dealing with Communism. It is also the reason why our society is so soft on criminals. No progress will be made until, and unless, we grasp the fact that many people are born bad, and must be dealt with accordingly.
An American lawyer who is now in the financial world, Demetri Marchessini lives in London.