Friday, 21 October 2011

Pay back time in Greece

Today, the Greek parliament narrowly passed yet another austerity package. Like the previous packages, it contains another round of public sector downsizing; wage cuts, benefits reductions, cuts in civil service numbers.  Overall, the package was nasty; top full of dreadful and desperate measures designed to stem Greece's slide into the abyss.

The streets of Athens witnessed another day of mayhem. In their incandescent rage, Greeks feel the need to take to the street. I am not quite sure about the purpose of these demonstrations. Tramping around the centre of the capital isn't going to generate any additional revenue for the Greek state. Nor will it contribute directly to economic growth. 

It all begs the question would it not have been better to constrain public expenditure during the years of economic growth, rather than let things slowly drift along. Year after year, the Greek public sector spent more than it received. Government debt rose, in terms of GDP.  There were opportunities to fix the Greek economy, but it was easier politically to let things slide.

Whether Greece defaults or not, the country will have to pay for those decades of fiscal irresponsibility with declining living standards and deteriorating public services.  The next time you hear someone advocate higher public expenditures, remind them of Greece. 

It is payback time in Greece and it is a terrible thing to watch. I wouldn't want to see anything like that here.  So lets agree to take the fiscal medicine now, get government finances in order, and avoid the kind of crisis that has destroyed Greece.


Anonymous said...

Whether Greece defaults or not? Greece already has defaulted in all but name. It is rolling over its debt only thanks to support from other governments. And its paltry revenues are about to collapse thanks to the effective shut down of its finance ministry. The only question now is how much the creditors lose and when they acknowledge they've lost it.

Anonymous said...

No pay cuts for the "leaders" though.
UK councillors to get a rise of 25%on "allowances".

Anonymous said...

"Tramping around the centre of the capital isn't going to generate any additional revenue for the Greek state."

Of course it will. The public destroy the buildings and infrastructure through rioting. The government have laid off the workers that would fix the damage. Private firms are required and paid to do the job, a very slow but effective movement of funding back into private and therefore back into a possible growth model.

Easy as.

.. now if we can just maintain the level of rioting... ;)