w do you describe the current economic situation between Greece and their Euro-zone creditors, primarily Germany? You’ve probably seen on the news how Greece owes billions of dollars to its creditors and is now unwilling and unable to pay. Maybe it will be easier if I describe it in a way that some of you may unfortunately may understand all too well.
Mom and dad (Germany) have worked hard, saved their money and are doing quite well. But they have a grown son (Greece) who is reckless with his money and is constantly asking Mom and Dad for their financial help. Mom and Dad have been loaning the son money for years when the son would get in a financial bind. The son always says he will pay them back. Mom and Dad work out a plan with the son for him to repay what he owes them. The son agrees and promises to do so. But the plan seems too harsh to the son and his reckless ways. After a short while, the son gets behind on his repayments to Mom and Dad, and needs more money from them.
Finally, they have had enough. Mom and Dad refuse to loan the reckless son anymore of their money. The reckless son accuses Mom and Dad of being heartless and not caring about the hardship they have put on him. They should be more lenient with his debt. But there are other members in the family (Spain, Italy, and Portugal) who also have been reckless with their finances, and are also wanting lenient treatment from Mom and Dad. They are watching closely to see how Mom and Dad deal with the situation. So Mom and Dad (Germany) finally decide that it’s time to get tough with the reckless son (Greece) and refuse to forgive his debt or loan him anymore money.
Well, just how reckless has Greece been with their money? (Actually, it’s other people’s money.) Greece owes its official lenders 242.8 billion euros, or $271 billion, according to a Reuters news service calculation based on official data. Greece is a nation of only about eleven million people, or two million fewer than Greater Los Angeles. I was going to figure out what that debt per Greek citizen is, but my calculator doesn’t have that many zeroes.
How can any country get in that much debt? Easy, because prior to the financial crisis of a few years ago, there were so many willing lenders. (And that itself was a major part of the problem.) Greek politicians found out that voters love free or easy money. Michael Lewis, in his book, “Boomerang,” wrote about the money party that went on during that time.
In 2011, Lewis wrote, “In just the past twelve years the wage bill of the Greek public sector has doubled, in real terms, and that number doesn’t take in account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The Greek school system is one of the lowest ranked systems in Europe. It nonetheless employs four times as many employees as the highest ranked, Finland. The retirement age for Greek jobs classified as ‘arduous’ is as early as fifty-five for men and fifty for woman. As this is also the moment when the state begins to shovel out generous pensions. More than six hundred Greek professions somehow managed to get themselves classified as arduous, like hairdressers, radio announcers, waiters, musicians, etc.”
The money party went until the financial crisis and the credit dried up. The rest of Europe, mainly Germany and France bailed out their fellow Euro-zone partner, Greece with loans. Greece was to start pension and government reforms, but has done little of either. The country raised its tax rates, but that has generated little additional income since, because of bribery and corruption, it only collects 10% of the taxes owed anyway.
So Greece stands at the doorstep of bankruptcy as a country and an uncertain future. What should be the message from all of this to the U.S., and to us? While no politician will spend little time talking about our country’s national debt, it is still there and growing. They know we Americans love our entitlements, subsidies, affordable healthcare and tax breaks. Medicare, Medicaid, and Social Security account for 70% of our government’s spending. All three of these programs are scheduled to run out of money within 20 years. So the question is, could Greece, but on a much larger scale, be in our not so distant future?
Mac McPhail, raised in Sampson County, lives in Clinton and can be reached at [email protected]