A world in economic crisis

Greece gets downgraded to a CCC credit rating and their unions go on strike

Posted in Greece by Aussie on June 15, 2011

Greece is a financial mess, and there does not seem to be a real willingness to deal with the problem. The Marxist Papandreau has to introduce austerity measures that will no doubt hurt a lot but it is necessary if Greece is to avoid total bankruptcy. Greece is in this mess because of all of their double dealing they did to get into the Euro zone, as well as the ridiculous welfare measures that exist in that country. They have to face the fact that a retirement age of 45 is contributing to the killing of the Greek economy.

Instead of dealing with the mess, the unions are preparing for yet another general strike. It seems that they do not comprehend that general strikes make matters worse, not better. The BBC reports the following:

Activists and unionists plan to gather at Syntagma Square on the front steps of the assembly in central Athens on Wednesday.

Mr Papandreou faces the risk of a backbench revolt over the plans.

One MP defected from Mr Papandreou’s PASOK party defected on Tuesday, leaving it with only 155 of the chamber’s 300 seats.

“You have to be as cruel as a tiger to vote for these measures. I am not,” George Lianis, a former sports minister, said in a letter to parliament’s speaker announcing his departure from the parliamentary group.

At least one other Socialist MP has threatened to vote against the new programme of cuts and privatisation of state assets.

The government has appealed for consensus over its proposals, which would see 6.5bn euros (£5.7bn; $9.4bn) worth of tax rises and spending cuts this year.

“Every Greek, particularly the new generation, demands that we fight the battle with all our power, a battle to avoid a disastrous bankruptcy which will undermine the future of the country,” government spokesman George Petalotis told reporters.

“We are fighting the battle to serve the common good, in the most crucial moment in the country’s modern democracy.”

The EU and IMF is demanding the measures in return for the release of another 12bn euros in aid next month which Athens needs to pay off maturing debt.

The welfare state in Greece is contributing to this situation. There is no way that any state can survive when a majority of the population is on welfare, and it is left to the minority to pay the taxes to keep the majority on welfare. It is not just the native Greeks who are at fault, it is also the migrants from Middle Eastern countries who have flocked into Greece and who have helped to overwhelm the system.

This is a case of where the State must get rid of those enterprises that do not need to be state run, because these are costing money. Greece needs to return to being a free market economy, and it needs to learn to be entrepreneurial.  Greece also needs to become a producer of goods, rather than a “taker”. There are plenty of things that can be made, especially things like cotton, that can be exported to overseas countries.

Greece needs to offload the Socialists and they need to boot the Anarchists in the backside, telling them to go get a job and stop being spongers on society!!!!


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The Greek debt crisis

Posted in Greece, stagflation by Aussie on June 10, 2011

First of all, I want to express that I think it absurd that Østupid would contemplate “loaning” funds to Greece. The fact is that unless Greece introduces far reaching reforms they will never dig themselves out of the current hole and throwing money at the Greek government will not cure their financial woes. Greece is a Communist country, and those protesting are anarchists and Marxists. These are the people that are currently helping to destroy the Greek economy, especially with their willfulness and inability to accept that things have to change. The welfare system in Greece is one of the worst in the world from the point of view that there are not enough taxpayers because Greece allows people to retire at around the age of 45. This has to change in the future and the retiring age needs to be adjusted to at least 60 years if there is going to be any long term improvement in the Greek economy. I have previously highlighted where Greece is nothing more than a welfare basket case. This is why a country that is in ever greater indebtedness than Greece should not even be contemplating giving money for yet another bailout, where the debt is unlikely to be repaid. (I will write more on this when I have read through the available material).

Second, one solution being proposed has been nixed by the chairman of Europe’s Central Bank, Jean-Claude Trichet:

Germany’s finance minister, Wolfgang Schauble, wrote to Trichet, the IMF and his eurozone partners this week to propose a swap in which private debt holders would trade in their Greek government bonds for new ones, giving Greece an extra seven years to work through its debt.

But ratings agencies argue it might be impossible to conduct such a swap on a voluntary basis, while Moody’s warned a Greek default could impact the ratings of Ireland and Portugal, the two other eurozone countries that have had bailouts.


Jean-Claude Trichet, chairman of the European Central Bank, heightened the sense of disharmony at the centre of European politics after he warned that only a voluntary agreement among all parties holding Greek debt would get the ECB’s seal of approval.

Trichet added to the gloom when he also signalled a rise in euro base rates next month that will push up the cost of borrowing for Greece and other debt-laden eurozone countries. A quarter-point rise to 1.5% in July was deemed a certainty after Trichet said the central bank was in “strong vigilance” mode over inflation, using a code word to signal that a rate hike is probably only a month away.

Bond yields also jumped, with the Athens administration now expected to pay 25.08% interest over two years if it tried to borrow from the financial markets.

Investors had earlier digested the news that Greece’s crisis-hit economy expanded by a sickly 0.2%, down from a previous estimate of 0.6% – revealing the economy shrank at an annual rate of 5.5%.

Greece is expected to plunge back into recession this year as austerity measures bite, with the European Union and International Monetary Fund now both predicting a 3.8% contraction. Unemployment figures released on Wednesday showed that 16% of the Greek workforce is now jobless; among 15-24-year-olds, the unemployment rate is an extraordinary 42%.

From what I am reading, and I have no idea if I am correct, it would appear that Europe is in trouble as inflation starts to take hold. On top of that, the debt-ridden Greece has a very high unemployment rate, and it faces a massive 25% interest rate if it seeks to borrow on the open market. These are all of the indicators that point to stagflation.

Since the issue is really about stagflation, it seems to me that the wrong approaches and remedies are being pursued. This is probably because of the adherence to the Keynesian prescriptions. I suspect that if they were following the Hayek prescriptions that they would be equally stuck, because stagflation requires a different approach than the old Keynesian approach.

In all probability what is happening is that the flaw of initiating a eurozone in the first place is being highlighted. The eurozone seems to be leading the European economies down the toilet, especially when each of those countries are committed to the the Socialist aims of a welfare state.  In this situation it is innovation that is being stifled because private investment in corporations is being stifled as Government takes a larger slice of the money available for investment.

I think that what is required is a new approach that will link big government with the stifling of the rest of the economy. Until economists are willing to take the stagflation of the 1970s seriously they cannot deal with the current situations, especially when big government as well as Marxist ideas have contributed to the demise of world economies.

More on who should be the next IMF chief

Personally, I like the idea of Christine Lagarde getting the post. She has a well rounded career and she would bring a fresh face to the role. She has the respect in Europe as well.

However, there are some countries that seem to have other ideas about who should lead the IMF. As regards to the opinions of the Goose (Wayne Swan) from Australia, he is such a bad Treasurer that his opinions should not matter in the slightest. He is one person who has absolutely no idea about what is required in the top job. Put it this way, I would value the opinion of Paul Keating (a man I detest anyway) over that of the Goose.

If the person is chosen on merits then Christine Lagarde should remain the number one contender. Amongst the other names being mentioned is the failed politician UK Gordon Brown. It is well known that he aspires to this type of role, but, he does not have the support of the present leadership in the UK. On top of that Gordon Brown messed up the economy in the UK in both of his roles.

Socialism and pushing socialism through the IMF is not going to help the world’s woes. At present the IMF has a big problem in Europe. It really does need someone with credibility in Europe to head the group. Gordon Brown does not have that credibility. Christine Lagarde has the credibility. The people being pushed from Singapore and other countries do not have that credibility. There is one other new contender from Brussels.

Some of the issues that I have with the IMF structure includes the heavy socialist emphasis. The challenges of the eurozone has meant that there has been a need to catapult some of the present ideas. Keynesian economics will not work in a time of stagflation. This is the lesson that should have been learned from the 1970s and the 1980s when the stagflation was prolonged. There is a need for a different set of responses to the crises that occur.

For too long Europe has turned to socialism (which is not quite the same as Communism) in order to offer a raft of welfare benefits to their communities. What most of these governments have forgotten is that there is a need to have people working in order to gather taxes, and there is a need for business and industry in order to have people working. Policies such as high taxes on business do not work because in the long term employers make the decision to leave the marketplace. When this happens the consequence is a drop in tax revenue as well as higher unemployment which in turn leads to higher welfare benefits.

Europe also has another problem that desparately needs attention: open borders attracts the wrong kind of immigrants. This can be seen in countries such as Spain, France, England and Germany, as well as in Norway and Denmark. These immigrants see this as an opportunity to place their wives on welfare, and they soak up all of the other welfare state benefits such as free medical, free education etc. etc. If this is not kept under control, inevitably it leads to a break-down in the whole system. At the root of this problem is taxation, or rather taxation receipts.

Under Dominique Strauss-Khan the IMF has steered a number of European countries towards putting in place austerity measures that are supposed to bring about a restructure of their economies. Those governments can only be compliant if the people are compliant and stop their protests that cause disruption, and in the instance of Greece, become extremely costly in terms of property lost, as well as lives lost due to the riots. The Greek attitude has not been conducive to the necessary reform required.  Greece is the typical example of a country where the expenditure on welfare outstrips by a long shot the taxation receipts, but the lazy Greeks do not seem to understand the implications of their own bad welfare system.

I am not against some form of welfare buffer for the most vulnerable in the community. There is a need to protect such individuals. I am not against short term unemployment benefits for those who are able-bodied. I do think that government needs to have other structures in place that will help the unemployed find work. What I am really against is the expenditure of government funds on projects such as wind farms that are inefficient and will never deliver according to government expectations. The windfarms do not increase employment, but decreases employment in some sectors.

The watermelon policies and the claims regarding AGW or climate change need to be challenged, and governments everywhere need to stop wasting money on bogus research. This also means that I am against the use of IMF funds going third world countries, where such funds would only be wasted upon dead in the water projects whilst those third world countries continue to purchase arms and kill their own people.

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A kick in the pants for Greece

Posted in European Union, Greece by Aussie on May 19, 2011

The IMF has warned Greece that its plans for budget reforms fall well short of what is required. At least the rhetoric is a good kick in the pants for the lazy Greeks.

The BBC reports:

Greece must cut its budget deficit to 7.6% of GDP this year to meet the terms of its EU and IMF bail-out.

Poul Thomsen told a conference in Athens that it would struggle to get the deficit below 10% at the moment.

Greece is attempting to raise money to pay off the debt via the sale of state assets, which includes assets such as gaming, telecoms, water management and electricity.

At the same time, it seems that the socialists in Europe continue to not understand that their solutions are a real disaster. However, there are others who have seen the light:

The EU and IMF are waiting for Greece to give further details of its plans before paying the next tranche of cash.

Mr Thomsen said: “The programme will not remain on track without a determined reinvigoration of structural reforms in the coming months.

“Unless we see this invigoration, I think the programme will run off track.”

‘Recipe for catastrophe’

There has been much response to Tuesday’s comments from the head of the eurozone finance ministers Jean-Claude Juncker, when he said that a “soft restructuring” of Greece’s debts was a possibility.

The European Central Bank’s chief economist Juergen Stark said restructuring the debt would be a “recipe for catastrophe”.

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Finnish anti-Euro party gains in election – Portugal rescue package in doubt

Posted in European Union, Greece, Ireland, Portugal, Spain, unemployment, welfare state by Aussie on April 19, 2011

Now for the latest in the Euro rescue saga. Portugal is next to last of the PIGS nations to need a financial rescue package. Spain is still on the cusp, but has not needed to be rescued so far. However, the Portugal package is on the line, the Greeks are revolting (again) and the Finns are becoming more and more anti-Euro zone.

The success of the TrueFinns means that the Portugal rescue package is not a sure thing, since the TrueFinns have vowed to vote against the supplying of any more funds for these failing economies.

Portugal has opened its doors to the IMF and the European Commission, who will need to evaluate the economy and make recommendations. It is expected that Portual requires a package worth about $70 million Euros.

However, just like Spain, Ireland, Greece, and yes, even the U.K. unless these countries are willing to evaluate their social welfare criteria these packagaes are truly a waste of time. All of these countries need to re-evaluate their socialist system, because long term welfare policies do not work.

Greece has been a prime example of what has gone wrong. The lazy Greeks simply do not want to understand that the changes are necessary if the economy is to survive. Those changes include reforming social welfare payments in order to cut the government debt. However, I doubt that the Greek government has the will to make the deep cuts, especially in the face of protests from the Greek anarchists. The Greeks have shown themselves to be lazy and selfish in that they are unwilling to make the necessary sacrifices for the good of the country.

For a different perspective on the same European economic woes, there is more here and here is a snippet to get a taste of what is in store if there is no change in a welfare system that is bankrupting countries left, right and centre:

Greece is now paying 19.7% on 2 year bonds and there is a real fear of government default. This will put even more pressure on the other PIIGS, who are either on or already over the edge. The question then becomes which economies are triaged. Greece, Iceland, and Ireland are all moribund. Portugal is in the middle of a political crisis, and Spain is teetering on the edge. We are seeing the slow motion destruction of the economic and social programs that helped these economies enter the 21st century. It is hard to believe where these countries ranked economically and demographically even 25 years ago.

Tackling the Debt Crisis: Lazy Greek Anarchists riot again

Posted in Greece by Aussie on December 16, 2010

Tackling the Debt Crisis: Protests in Europe Ahead of Euro Summit – SPIEGEL ONLINE – News – International

Make no mistake about this: the rioters in Greece are anarchists and Marxists. They are a lazy group who want everything their way. They want to be paid for doing nothing and contributing nothing to the general well-being of Greece.

The riots in Greece were orchestrated with union protesters in France, Spain, Belgium, Luxembourg, Denmark and the Czech Republic against the austerity measures that have been introduced.

The Greek demonstrations became violent when masked protesters clashed with riot police. This is not unusual when anarchists are involved in these protests. Everywhere there has been a G-20 meeting has ended up in rioting, and violent clashes with the police. It is the modus operandi of the anarchists to have these violent protesters. They continue to do great harm to the economies of sovereign nations as a result of their selfish actions.

The Greek Parliament had agreed on Tuesday to make further reforms including wage cuts for state-owned bus and railway companies and a weakening of trade union power to negotiate industry-wide pay deals. The change sees company wide pay deals taking precedence over industry wide pay deals (which is fair because it increase competition for labour).

I see the Welfare State in Europe as a critical factor in the demise of each of these economies. Greece has been the best example of a basket case country due to the Welfare State. The reforms in Greece have been necessary and the Greeks need to simply pull their fingers out in order to restore the health of the Greek economy. They need to stop being dependent upon the Government and they need to look at ways of producing goods that they can trade with other countries. I do know that Greece produces a nice cotton product that can in turn be knitted or crocheted. They have other products such as olives and with the Mediterranean climate they should be producing wine and grapes.

In the meantime, I get the sense from these reports that perhaps we are seeing the beginning of the end for the European union.

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More on the der Spiegel’s article on the IMF

Posted in G20, Greece, Hungary, International Monetary Fund, USA by Aussie on October 7, 2010

Despite the rather flowery language of the author, this article on the IMF and where it wants to head is worth reading. It takes time to digest because it becomes necessary to remove all of the flowery language to get down to the nuts and bolts.

There are several European countries that are in danger of collapse: Spain, Greece, the U.K., Ireland, Turkey, Italy and a new one to add to the list Hungary.  The IMF seems intent upon interfering in the economies of these countries by providing loans coupled with austerity measures. This is certainly the prescription that was given to Greece. (I have already covered the issue of the laziness of the Greeks).  The question though, is whether or not this interference is justified, especially when these Socialist countries do not seem to want to reform, let alone grasp the reality that their Socialist policies might be to blame for the imminent collapse of their respective economies.

Hungary had been on the brink many times since the fall of the Berlin Wall, and it had been borrowing from the IMF on and off for several years, until the negotiations were broken off. Any country borrowing from the IMF must be prepared to make certain necessary reforms including: a reduction in the civil service employees and employee pensions.  Here is an outline of Hungary’s interaction with the IMF and the results for that country (not all that encouraging):

Hungary has been an IMF member since 1982. The country embarked on economic reforms early on, and to do so it needed IMF loans — to the tune of $520 million in the first year of its accession to the Fund. Hungary, a model student when it came to developing a market economy, relaxed its import policies in 1984. Subsidies were cut and the Hungarian forint was devalued, all at the request, urging or instruction of the IMF.

The country received six more loans by 1996, one for $365 million, another for $480 million, and in 1991 the Fund approved a loan worth $1.6 billion. In all those years, Hungary was reinventing itself. The banking system was restructured to satisfy free-market requirements, and a value-added tax was introduced. In 1990, the government passed laws to allow foreign investment, removed customs barriers, reduced government bureaucracy and lifted controls on prices and wages.

But there was a dark side to the policies, even though they pleased Washington, attracted investors and were rewarded by the financial markets. The real wages of Hungarians — those who even had a job — declined by 22 percent between 1989 and 1996. When the Berlin Wall fell and the country opened up to global markets, Hungarian industrial production declined by more than a third, unemployment rose and inflation reached 30 percent. In other words, workers, retirees and the overwhelming majority of Hungarians had less in their pockets from one year to the next, they had to work longer for a pension that was smaller than expected, and when they became welfare cases, the state no longer felt responsible for them — because the very nature of the state had changed.

Hungary’s accession to the EU in 2004 brought a new round of so-called adjustments. And then came the global economic crisis. By 2008 Hungary was on the verge of default. To avert a disaster, the IMF, the World Bank and the EU joined forces to provide Budapest with $25 billion. The IMF, which put up $15.7 billion of the total, dictated the conditions: pension cuts and a freeze on civil servants’ salaries. It was back to square one for Hungary.

The real gems in this article come from the economist Rogoff from Harvard University.  These gems includes not very flattering assessment of the new financial reform legislation, as well as some not very flattering comments about the way in which the IMF and the G-20 handled the GFC.  Here are some of the statements and assessments by Rogoff:

“A Greek bankruptcy is unavoidable. There is a 95 percent chance that Spain will go bankrupt. Hungary is on the brink. Things will get much worse in Eastern Europe. We will have a certain number of countries that will go bankrupt. We will have a number of euro zone countries that would be well advised to take a sabbatical from the euro for a year. The situation in the United States is very worrisome. The markets will refuse to tolerate this level of debt.”

and on the Wall Street reform legislation:

The government asked him to comment on a draft bill on the regulation of the financial sector. “The draft had 2,000 pages,” says Rogoff. “I don’t know what to say to that. I suspect that those 2,000 pages are filled with enough loopholes that Wall Street will discover and exploit to come up with new business models.”

A real reform of the banking and finance sector would have to drastically shrink the system to a business volume that existed 30 years ago. Rogoff says: “The financial market, with all of its products, adds up to $200 trillion, $120 trillion of which represents trading in debt securities. I remember a speech given by Angela Merkel. She said that the Americans make the profits while distributing the risks, with all those debt securities, worldwide. That’s true. This could be curbed.”

On the IMF and crisis management efforts:

“We are fundamentally too quick with bailout packages and too hesitant with default,” he says. Rogoff believes that the G-20 and the IMF, with their protective mechanisms, have already pre-programmed future misconduct. Experts call this a “moral hazard,” the notion that bailout packages, instead of preventing crises, simply create new ones. “It boils down to the banks ultimately speculating with taxpayer money,”

The final gem in this piece comes from the Chinese IMF worker Min Zhu. It is actually a sage piece of advice, and I might add here that it is quite obvious that this is the remedy that Europe should be seeking (rather than agreeing to follow the Watermelons to the precipice of destruction):

. “There is the issue of social welfare, and demographic change. Everybody has longevity, so the cost for the pension and health insurance is very different today than, say, 20 years ago. The model, of course, does not fit today’s needs. It would not survive tomorrow.” Besides, he adds, Europe needs a growth strategy, an industrial strategy. Europe must invent new products and sectors that meet the demands of the world — otherwise, with labor costs of $30 an hour, they won’t prevail “against a country that pays $3.”

A German-Greek scandal

Posted in European Union, Greece by Aussie on May 22, 2010

Complicit in Corruption: How German Companies Bribed Their Way to Greek Deals – SPIEGEL ONLINE – News – International

Whilst I should be shocked over the issue of bribes relating to Germany and Greece, I must admit that I am not shocked at all. Perhaps it is because for many years I have known that bribes are the way in which many companies and countries around the world do business. I first became aware of these bribe scandals when I learned about the bribes that take place when dealing with Indonesia. I learned about those bribes perhaps 10 years ago. Is it any wonder that I am not shocked to learn that the lazy Greeks have used a similar system when dealing with other countries. On top of that I am aware that bribes is also the way that many Chinese do business. How strange that when a Chinese councilor in Sydney (a man who was a member of my own church parish) was caught accepting a bribe, I had the urge to justify his actions, based upon what I had learned about such cultures.  However, I am ahead of myself in dealing with this topic:

It seems that in the Greek economy there is what is known as miza and fakelaki. The fakelaki is the small envelope type bribe that might be paid to a doctor or a tax auditor. On the other hand the miza is the small suitcase kind of bribe and without miza no foreign company can do business within Greece. To me this sounds exactly like doing business in Indonesia. The large bribes are especially prominent with large government contracts. The bribes themselves enrich industrialists, civil servants, politicians and military, whilst the payments themselves are written off as commissions for negotiating contracts.

What has this got to do with Germany? Well it seems that the German car company Daimler has been paying miza to pave the way for vehicle deliveries to Greece. Germany’s national railway operator  Deutsche Bahn resorted to bribes to win an underground railway contract in preparation for the Athens Olympic games in 2004. Another corrupt company involved with Miza is Siemans.

Investigators into the Siemens scandal have found that the company’s Greek branch needed an annual slush fund of some €15 million. To secure the €500 million OTE contract alone, the firm allegedly paid €35 million in miza in the late 1990s. At Siemens headquarters in Munich, they spoke with great admiration of their branch in Athens for years — hardly any other national subsidiary had delivered such impressive results.

Even politicians in Athens have allegedly benefited from the deal. According to statements made by company executives involved in the payoffs, up to 2 percent of the revenues from the Siemens Hellas telecommunications division were paid to the two main political parties, the Panhellenic Socialist Movement, better known as PASOK, and the conservative New Democracy. In Athens one never knows which government will remain in office — or for how long. Both parties have denied accepting any payments.

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Anarchy rules at Athens University

Posted in Greece by Aussie on May 10, 2010

Better to die from a bullet than working: That is the mantra of pampered, lazy Greek rioters used to living off the state | Mail Online

The reporter’s taxi driver, a man by the name of Vasilis is a wise man compared to the lack of wisdom of most Greek workers and anarchist students. The reporter is confronted by signage in the room occupied by the anarchists at the university and one in particular catches his eye: “It is better to die from a bullet than working”. It is the mantra of the lazy Greek rioters who prefer living off the state than taking care of themselves in the proper way.  The taxi driver does not find the sign to be funny and he tells the reporter that this sign is at the heart of the whole crisis in Greece… and he is correct.

Greece is a country that “is not working hard enough and suffers from a bloated, money devouring state and a mentality that the state owes them a living.”

Vasilis who works 12 hours a day earns around $860 per month, is angry, not just at the government but at the public sector workers who refuse to make necessary changes. It is he says, like a restaurant that earns $1million per year but spends $10million to stay open. According to Vasilis too many of today’s generation are lazy, corrupt. They like to sit in the sun and drink ouzo instead of working, and they want the state to pay for them whilst they enjoy that particular lifestyle.

Last week, when more than 30,000 protesters took to the streets again, including a small violent hardcore group of black-hooded anarchists, the Greek government met to consider austerity measures that are designed to get Greece’s debt under control. The riot police was deployed in the capital when shops and banks were attacked and Molotov cocktails were thrown… which left 3 bank workers dead, including a pregnant woman.

The Greek crisis has the potential to ignite a fresh global crisis as the eurozone leaders fear if Greece goes bankrupt then other nations will follow.  It is also a warning to the U.K. that it too must deal with the huge budget deficit caused by the ever-burgeoning welfare state.

The lazy Greek people need to realize that if things are not brought under control and the government is bankrupted then:

  • pensions will not be paid – oh boo hoo for those lazy women who are collecting the pensions of their dead parents.
  • public sector salaries will not be paid – no more bonuses for turning up to work on time;
  • money for schools and hospitals will not be available – I guess the parents will just have to cough up fees to send their children to school like other parents all over the world.

Greece faces the following necessary measures:

  • the budget deficit must be cut from 13.6% of GDP to less than 3% by 2014
  • I:5 public sector jobs to be axed
  • pensions cut by 10%
  • Christmas bonuses paid to pensioners and workers by the govt to be scrapped.
  • taxes will rise
  • unemployment is expected to rise from 11% to 14%
  • VAT has risen from 19% to 21% and in July will increase to 23%
  • tax on alcohol will increase from 19% to 30%
  • tax on cigarettes will increase from $2.50 to $3.66
  • there has been an increase in the CPI of 20% since Greece joined the euro

Despite the fact that Greece is one massive welfare state where the people really need to get their butts working, they are not even prepared to look at their own shortcomings but instead are prepared to blame everyone else, especially Germany, and especially because the memories of former wars continue to run deep. The Greeks think that Germany is the betrayer in this current situation and they are simply not prepared to take responsibility for their own moribund welfare state. Their own laziness is at the very heart of their economic mess, but they really are too stupid to see that they alone are responsible and that they must wise up and accept the pain now rather than waiting until the government is totally bankrupt.

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Greece – the canary in the Eurozone coalmine

Posted in dodgy swaps and derivatives, European Union, Greece by Aussie on May 5, 2010

The BBC reports that the European Commission expects Greece economy to shrink by 3% amid fears over that country’s debt problem.  The biggest fear for the European Commission is the spread of the crisis to other European countries including Spain and Portugal. (this of course, would not be surprising because Spain and Portugal are one of the STUPID countries).

The Commission said the eurozone countries as a whole would see growth of 0.9% – an improvement on the 0.7% forecast earlier this year.

But it admitted that the recovery in Europe “continues to be surrounded by high uncertainty”.

The commission cited “recent tensions” in the markets as a concern.

Greece has been in recession since the second quarter of 2009.

The euro fell to its lowest level against the dollar in more than a year, at $1.2935, with investors concerned that the Greek debt crisis could spread to other eurozone countries including Spain and Portugal.

The euro is also down against the pound, with one pound worth 1.167 euros.

European finance ministers had agreed a bailout for Greece but the deal has to be ratified by several EU states, including Germany. It also faces opposition amongst the Greek public.

Once again Greece is facing strikes and disruption due to the opposition to the austerity measures that are required as a result of the bail-out deal. However, one must question the reality of the Greeks because it seems that Greece has become the ultimate Welfare State.

Reuters had reported on some areas of waste in Greece with regard to welfare spending :

  • tens of thousands of unmarried or divorced daughters of dead civil servants continue to collect their pensions. This largesse is worth more than $500 euros per year.
  • civil servants are protected from dismissal and can retire from work in their 40s.
  • Greek expenditure on pensions is expected to rise to 12% of GDP by 2050

The Greek government has promised to overhaul pension spending by raising the retirement age and banning early retirement.

Other areas of waste in paying civil servants include:

  • being paid extra to use a computer
  • bonus for speaking a foreign language
  • bonus for turning up for work on time
  • in case of foresters they get a bonus for working out of doors
  • bonuses for Christmas and Easter.

The government attempt to trim these bonuses as austerity measures would amount to a saving of 1.7 billion euros. However, the Greeks are not happy about the attempt to implement these austerity measures and they have taken to the streets with rioting, as well as putting on general strikes.

Up until 2008 when it was finally sold, Olympic airways had been a loss making proposition for the Greek government. Even worse, the unions had foiled previous attempts to sell the airline so that they could fly themselves and their families for free around the world. When Olympic airlines was sold the 4600 members of staff were given a generous compensation package. However some of these staff recently took to the streets because they had not received all of the promised benefits.

The Greek government owns 74 companies, mostly in transport and utilities, many of which are over-staffed and loss-making entities. The railways are losing something like 800 million euros per year.

Another area of waste is the employment of committees, even though it is not clear what some of those committees do:

Hundreds of state-appointed committees employ staff though it is not clear what they all do. Greece has a committee to manage Lake Kopais, which dried out in the 1930s.

One Greek paper estimated that committees employ more than 10,000 people and cost over 220 million euros a year.

Coming through on a pre-election pledge to cut such waste, the government recently announced it would shut down or merge at least 200 such committees that have outlived their usefulness.

On top of this, Greece is expending on arms at a higher rate than other countries in the European Union – this is due to the tensions with Turkey.

Tensions with arch-rival Turkey have kept Greek military spending well above that of other EU members, reaching 14 billion euros, or 6 percent of GDP, in 2007 and 2009.

Budget woes have limited military procurements and the 2010 defence budget now stands at 6.7 billion euros ($8.92 billion).

But nearly 80 percent of Defence Ministry spending goes on administrative costs and payments of army staff. The government has said it will gradually reduce costs and spending on arms purchases will be contained to 1.8 billion euros (0.7 percent of GDP) this year