May 16, 2010

Greece Just Made It Personal

It's one of the ultimate acts of denial of responsibility of all time. Bloomberg is reporting that Greece is considering legal action against U.S. banks for possible contributory effect to the Greek financial crisis.  This after the European Union and the International Monetary Fund agreed to lend Greece $1 trillion to avert the crisis.  That might seem a little ungrateful, especially since the IMF money comes in some measure from the United States. Does Greece have a claim?  Ultimately, who is responsible for the failures of the Greek economy?
Apparently some in Greece feel the responsibility lies elsewhere;
Papandreou said the decision on whether to go after U.S. banks will be made after a Greek parliamentary investigation into the cause of the crisis.

“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.”
But consider the following points.
Since [1981] the socialists have won a majority of Greek elections, and the communists have come third in all but one of the elections in that time. In other words, Greece is used to being governed with the principles of big government and socialism. The current Prime Minister, George Papandreaou might consider how his father, Andreas, when he was Prime Minister, ran enormous budget deficits in the 1980s when he was PM. Greece has been living beyond its means for a very long time.
Greece's annual budget deficit is 13.6% of it's GDP.  That means every 7.4 years they add one entire years economy to their national debt.  By contrast, the European Union requires that member's deficit to GDP percentage be below 3% of GDP. Greec's national debt, it's total amount owing is over 100% and in fact is expected to reach 120% of GDP by the end of fiscal 2010.  In other words the country has been teetering on the verge of bankruptcy.  This is not the result of credit default swaps, it's the result of budget deficits, that unions in Greece are clearly willing to violently defend in riots.

In 2009 Greece had the European Union's second lowest index of economic freedom, and ranked 81st worldwide. The Greek underground economy accounts for an OECD estimated 30% of economic activity in the country in part because of a 21% Value Added Tax.  The country runs a relatively generous social security system, and pays generous bonuses to public sector employees.  These are not the fault of credit swaps or U.S. banks.

When a borrow keeps borrowing to the point of fiscal collapse, the lender is at fault only insofar as they continued to lend.  At some point, when they have decided that they can no longer continue to lend because the risk for them outweighs the potential return, they are in essence risking cutting their losses.  But they are not to blame.  Lenders simply have had enough for footing the bill for Greece's socialist extravagances.  But socialists place no blame on any socialist actions.  It's always the fault of the Western capitalists or the Greek elite who, they neglect to note, are either the socialist governments or those in bed with them.  Instead, not surprisingly they called for a renewed effort at socialism.
The attacks of the EU cannot be stopped by national protests and pressure on national governments. They require a political offensive by the European working class, aimed at the socialist reorganization of society. It is not the profits of the financial and industrial corporations—which determine the policies of Brussels—but the social needs of society that must form the basis of economic life. The European Union of the banks and corporations must be replaced by the United Socialist States of Europe.
Then again, the far left see it as a class war and they only have one play book to go back to in order to fight it.  What else would you expect them to do?  The truth doesn't really help their cause.

1 comment:

  1. That's just amazing. We truly do live in a sue everybody society


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