The chief cook and owner of Helen’s Restaurant visits Greece, her homeland, whenever she gets a chance. She knows the people. She’s one of the people. And she doesn’t understand why there is so much trouble in Greece these days.
I explained to her that the Greek government borrowed billions of Euros and now they have to pay it back and can’t. And now, the other nations of Europe and the International Monetary Fund (IMF) are refinancing them, but they are insisting that the Greeks make changes so they will be able to pay back the loans. And the people (especially the unions) do not want to make these changes.
The financial press has featured story after story about the very high percentage of Greeks who work for the government and the very low percentage who pay income tax. The press is acting as if we should have seen this default coming.
But Helen is the colour commentator. She knows the up-close-and-dirty bits.
At first was hard to get her to stop bluffing. She kept saying: “It’s only politics,” and dismissing it. But I would not be thrown off: “No, it’s not politics. They borrowed billions and now they have to pay it back.” Once she realized that I understood the real problem, she shifted her attitude. She started to tell me some of the socialist scams that have been going on in Greece.
She talked about the farm subsidies. Let’s say some bureaucrat decided that the Greek government would pay a five Euro subsidy for each sheep that a farmer had. When the civil servant asked the farmer how many sheep he had, the farmer simply made up a great big number. And no-one from the government ever went out into the pasture and counted the sheep.
She talked about holiday pay: how Greek civil servants received double pay when they took certain holidays.
She talked about Greek citizens notoriety for tax evasion.
I could just see it in her eye. She had known all along that the Greek people had been scamming their government. When she discovered that I understood it too, she stopped trying to deny it and revealed just how deep the scamming was.
This is the process that is going on in Greece today at the national level. The unions are very well aware that the jig is up. The gravy train has stopped. The feeding trough is empty. The game is over. But they are in denial. Greek citizens think the IMF and the other European nations don’t REALLY know they’ve been scammed; and with a little bluffing, they will be able to play the game a little longer. The current demonstrations are Greek workers pretending they are entitled to scam the Germans even more. (Helen pointed out that some Greeks still harbour resentment against the Germans from the Second World War.)
The Continuing Saga
The Greeks conned Europe in the same way the US sub prime mortgage deal-makers conned the banks. Massive loans were made to people who could not pay back the money. The Bank of Iceland did the same thing (refer to my previous blogs on this topic.
Western economies are built on people borrowing and paying back. Borrowing and defaulting doesn’t work. Based on the articles in the financial press, we currently live in the world full of defaults:
1. US sub-prime mortgages
2. Bank of Iceland
5. Coming soon to a theatre near you: Ireland, Spain, Portugal, and Italy.
And don’t forget the 2008-9 bail outs for the world’s biggest auto manufacturer, bank, stock broker, insurance company and mortgage company. They defaulted too, but got by with a little help from their governments.
Helen is the chief cook and owner of her own financial entity in Canada. She sees we live in risky times. Is she financially safe here in Canada? Will people keep coming to her restaurant in tough times? Will her RRSP survive? In her quiet way she did know the Greeks are in trouble: the nation can no longer live by spending more than it earns. Yet, somehow, she thinks she’s safe here in Canada. Surely it could never happen here.
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