Angry Greeks 'carrying the can' for politicians … Like the sting of police tear gas, popular anger hangs heavy in the air as protesters take to the streets of Athens, for the third time in less than a week. Some Europeans have been surprised by the extent of Greeks' anger over government cuts in wages, pensions and increases in VAT – all measures needed to get the Greek economy back from the brink of default. The measures are a condition for the huge bailout agreed by the IMF and EU, amounting to loans to Greece worth 110bn euros (£95bn; $146bn). Why are Greek people so angry? From the outside, it looks like a spendthrift country getting what it deserves in painful cuts to public spending. At street level, however, the anger stems from a sense of injustice. Many feel that the average citizen is now paying the price for corruption and government spending that they did not benefit from. – BBC
Dominant Social Theme: Greek anger needs a bit more explaining perhaps?
Free-Market Analysis: We can't help but be a little pleased when the mainstream media occasionally validates our point of view (truly cheap thrills), and in this case, the BBC has posted a report that aligns well with something we wrote in late April. Our intrepid feedbackers provided some pushback to our conclusions (expressing the point of view that the lazy Greeks were getting what was coming to them) but we were fairly confident that we had some points to make.
And now the BBC seems to agree – not that we necessarily care for their point of view mind you. What we wrote then, and the BBC has reported on now, is that the average Greek was snookered by his or her leaders (see above). The financial and political elite of Greece took the deal provided by the EU long ago, pocketed the money and stole away, leaving the average Greek (today) to pick up the pieces.
How did the scam work? Well, the EU itself was in on it, and you can bet that doesn't make the Greek-on-the-street any happier. What happened was that EU leaders, in order to bring in as many countries as possible into the EU, offered loans and gifts to the Greek government (especially) to help the Greeks overcome their chronic deficit spending. Once the Greeks cleaned up their books, they were "good to go" – and joined the EU.
Only this Big Fat Greek Wedding was a Big Fat Lie. The money given to Greeks lined the pockets of bankers, industrialists and politicians. If it were ever accounted for, it would probably be found that of the billions that the EU offered, virtually none of it went for its intended purposes. The money resides today in overseas bank accounts or can be seen in expensive Greek villas and yachts, etc. It also went, of course, to buy labor peace. Public unions received generous contracts, though probably these contracts were floated by the stability of the euro more than by the initial flood of money.
What did the average Greek get from joining the EU? Well, as we just remarked, the currency stabilized and Greece was able to borrow more to fund its excessive spending. The average Greek apparently began to borrow more as well; the euro was an expensive currency. The Greeks, we have read, in aggregate went on a borrowing binge. Credit was easy, the euro was strong and Greeks who had never borrowed like this before borrowed now (as they had to) to afford their homes, their cars, their clothes, etc. Credit cards, which had never loomed large in Greek lifestyles, became commonplace. As did second and third mortgages.
But now there is trouble in paradise. Not only is Greece facing bankruptcy (apparently narrowly averted for the moment) but Greeks themselves are being accused of being profligate – of being, basically, leveraged wastrels. Here's an excerpt from what we wrote in at the end of April in Greek Elites Whack Greeks Over Crisis:
The perceptive readers of the Bell (and other alternative publications) know that the entrance of the Greeks into the EU, and the largess that flowed as a result, did not reach the pockets of the average Greek. In fact, the EU exercise was likely one of legalized bribery. Money that was given to the EU to supposedly close budget gaps went to furnish numerous unnecessary private projects. The money was wasted, in a sense, as the projects weren't completed and wouldn't have helped generate a profit if they had been. The EU leaders providing the money knew this. But they didn't care so long as Greece joined the union.
Thus it was that the money cynically provided by EU's socialist leaders went into the pockets of the Greek elite that was in charge of the EU transition. And now this same elite, doubtless, is negotiating the Greek posture as regards the financial streamlining that must take place. If we can figure out what actually occurred, we don't think that it is hard for the average Greek to do so. When one reads about what is being negotiated, and puts it into the context of what went before, we think the average Greek may start to become fairly upset, if he or she is not already so. …
It is actually kind of mind-boggling what Greek citizens are apparently being asked to do. It is not just that public pensions are being renegotiated, but that the age at which one can retire is going up by FIFTEEN YEARS. Is this really acceptable? People in Europe (and Greece) have accepted all sorts of regulatory nonsense (and even the erection of a quasi-authoritarian state) in return for financial security. But now they are to be left with the dregs of the deal and the sweetener is turning sour indeed.
The famous European social compact is being ripped to shreds. What makes the European elites confident that people will just go along? Again, in Greece, the average "Zorba" is likely well aware of what actually occurred, and who benefited the most. Now the social pact between citizens and the state is being drastically rewritten. And the Greeks generally are going to be paying for their entrance into the EU for years, maybe generations, to come.
Maybe we're missing something here. But we have a hard time thinking that Greeks are going to sit still for what is about to come down on their collective head. If one lumps all Greeks together (and we don't, as we indicated in yesterday's article on this subject), then it seems to make a little more sense. The Greeks collectively are getting what they deserved. They played and now they pay. Not so. The same elite that enriched itself initially when the Greeks joined the EU, is now negotiating the terms of Greece's pay back.
Click here to read full article: Greek Elites Whack Greeks Over Crisis.
Well, yes, the Greeks have NOT stood still for it. Though the same EU bureaucracy that provided billions in wasted euros to Greek leaders are now castigating the Greek people and demanding austerity. Actually, we would be peeved too, if that happened to us. First, the euro was an expensive proposition, so we (Zorba) borrowed in order to live. And now we're being told (we Zorbas) that our salaries and pensions – the part of the social bargain that had been worked out under the euro – are being taken away. We are not surprised if Zorba, like Franz in Germany, begins to wonder exactly what the advantages are of living under the euro. In Greece, anyway, there's a higher level of indebtedness and austerity all around. This is the cost of securing Europe from further wars?
The social strife in Europe may only be beginning in our opinion. The trillion-dollar bail out, if it works (a big IF) will not secure the EU from the PIGS' underlying problems. These are economies that just do not work as efficiently as Germany's. The Greeks are not industrialized the same way. The PIGS generally have different strengths. They are to some degree tourist economies, or have been. And thus the Greeks are expressing themselves vociferously. Will these protests simply subside as the Greeks busy themselves with figuring out ways to live on perhaps half of what they used to make?
What about the rest of the PIGS? Greece is suffering now, as is Ireland. But soon other countries will be subject to similar austerity. If Germany is seen as the great enforcer of austerity amongst the PIGS, then surely further animosity shall develop to be shared understandably not only with Brussels, but Germany itself. So much for EU comity! The way we see it, the euro has turned into an almost guaranteed instigator of social unrest. It's going to be a pan-European problem.
We have analyzed two articles in this issue of the Bell dealing with the West's largest current crisis, the potential unraveling of the euro. At its heart, the EU crisis is one of political control. It is impossible to have a single currency and disparate independent nations. This bottom-line problem is not going to be solved no matter how much fiat money is created out of thin air and poured into the PIGS, which is why we have our doubts as to a positive outcome – absent the EU addressing the larger political issues.
But even if the EU does somehow manage to create a single state (speaking multiple languages to be sure) out of Europe's fractious tribes (a monumental task in our opinion) the outcome must be ever expanding antipathy between these various states as people's lifestyles erode and they look around for someone to blame. We wonder (even if the EU is held together by the "iron will" of its socialist leaders) whether one day the profile of the EU may be one of interstate animosity rather than its much-vaunted comity.