Sunday, January 25

New Leftist Greek government rejects austerity measures, demands lenders forgive loans

Three years ago I wrote several pieces on the Greek debt crisis (here and here, for example).  For those who don't remember it, the problem was that the government of that country had been spending a lot more money every year than its government took in in taxes--mainly due to huge welfare payments and ridiculously generous government pensions.

Back then Greece owed its lenders about $161 Billion, which it couldn't repay.  But because the government was addicted to deficits it needed to keep borrowing money to cover current expenditures.  (Sound familiar?)

Let's review:  Country has huge debt which it won't repay, but still looks to the nations it's already stiffed to loan it even more money to cover current expenses.  Hard to imagine any creditor agreeing to do that, right?  You can't repay what you owe now, but you want me to loan you even more cash.  Sorry.

But of course in the EU Leftist politicians force their countries to do all manner of bizarre things because hey, it's not their money.

So lender nations sat down for a month of negotiations with the Greek government, and as a condition of loaning it even more cash they got the government to agree to a number of "austerity measures" to cut expenditures a few million annually.  Thus reasured, lenders resumed lending.  Can you guess what happened?

Sure you can:  Greek politicians--all wanting to stay in office--agreed with Greek protesters that "austerity" was for dummies, and the government junked most of the austerity measures it agreed to make to bring spending more in line with revenue.

So three years ago I predicted what should have been obvious to anyone:  The long negotiations and resulting "austerity" charade had merely postponed the inevitable.  As long as the government insisted on spending more than it took in, a crash was inevitable.

Now, three years later, Greek government is now $270 Billion in debt--a cool $100 billion higher than it was when the crisis first hit.  (It's a modest amount by U.S. standards but Greece is a very small country.)  Nothing has changed except the amount owed, which is a lot more.  The Greeks could not--and didn't want to--repay then, and that hasn't changed either.

A Leftist party just won an election, on a promise to "renegotiate" the nation's debt to keep the welfare and pension base happy.

Back in 2012, nations like Germany that were the major lenders to Greece agreed to write off billions in loans because the Greek government in effect demanded that as a condition for agreeing to repay *anything.*  It'll be interesting to see how many more billions the Greeks can con out of gullible European governments after fooling them three years ago,

You'd wouldn't think leaders of Germany and other EU nations would let Greece con them a second time--especially so soon!  But astonishingly, I predict the Greeks will succeed in conning Europe yet again.  Because the Leftist governments of Europe, and the thoroughly socialist ministers of the EU, cannot bring themselves to bring the hammer down on fellow leftists--even those who have conned them for $270 Billion.

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