The Worst Possible Deal
Markets reacted seemingly positive on the new deal on Greek debt. However, I believe that this reaction is mistaken.
The underlying, fundamental problem about Greece is that as they are a nation of freeloaders. While I should of course clarify that this description isn't applicable to all individual Greeks, it certainly is applicable to the people of Greece as a collective. The nation which once spawned history's greatest philosopher, Aristotle, has sunken really low. The key facts illustrating this is that both the government budget deficit and the current account deficit is roughly 10% of GDP, meaning that Greece spends more than 10% more than they earn.
If this extra spending had been spent on good investments then it wouldn't have been a problem, but in practice nearly everything has been spent on excess consumption (and to a lesser extent in some cases malinvestments). The Greeks have demanded and mostly gotten a lavish welfare state while they have through tax evasion refused to pay the taxes needed to finance the lavish welfare state they have demanded. In short, the Greeks have as a group demanded the right to live at the expense of others. Few foreigners however pitty the Greeks enough to willingly simply give them money especially since Greece already receices a large net gain from the EU budget so they "cooked the books" and tricked foreigners into giving them money.
Now a deal has been made which says that private lenders will "voluntarily" write down their holdings by 50%. As a result, the Greek fraudsters will get away with living at the expense of others in the past. But unlike what would happen in an outright default, the Greek debt writedown won't mean that their credit line will be cut off. Outrageously enough, EU leaders won't just reward the Greeks for spending too much in the oast, they will actively enable them to spend too much now.
The end result of this is of course that Greece will continue too mooch from the outside world, and that the problem will thus remain unsolved.
The underlying, fundamental problem about Greece is that as they are a nation of freeloaders. While I should of course clarify that this description isn't applicable to all individual Greeks, it certainly is applicable to the people of Greece as a collective. The nation which once spawned history's greatest philosopher, Aristotle, has sunken really low. The key facts illustrating this is that both the government budget deficit and the current account deficit is roughly 10% of GDP, meaning that Greece spends more than 10% more than they earn.
If this extra spending had been spent on good investments then it wouldn't have been a problem, but in practice nearly everything has been spent on excess consumption (and to a lesser extent in some cases malinvestments). The Greeks have demanded and mostly gotten a lavish welfare state while they have through tax evasion refused to pay the taxes needed to finance the lavish welfare state they have demanded. In short, the Greeks have as a group demanded the right to live at the expense of others. Few foreigners however pitty the Greeks enough to willingly simply give them money especially since Greece already receices a large net gain from the EU budget so they "cooked the books" and tricked foreigners into giving them money.
Now a deal has been made which says that private lenders will "voluntarily" write down their holdings by 50%. As a result, the Greek fraudsters will get away with living at the expense of others in the past. But unlike what would happen in an outright default, the Greek debt writedown won't mean that their credit line will be cut off. Outrageously enough, EU leaders won't just reward the Greeks for spending too much in the oast, they will actively enable them to spend too much now.
The end result of this is of course that Greece will continue too mooch from the outside world, and that the problem will thus remain unsolved.
posted by stefankarlsson at 10:22 PM
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