The Greek economy has been in serious trouble for more than a decade, but it took the Great Recession to bring it to its knees. Almost two years ago, the BBC ran an article titled “Greece’s economic woes” in which they it said,
“Greece has been living beyond its means in recent years, and its rising level of debt has placed a huge strain on the country’s economy.
The Greek government borrowed heavily and went on something of a spending spree during the past decade.
Public spending soared and public sector wages practically doubled during that time.
However, as the money flowed out of the government’s coffers, tax income was hit because of widespread tax evasion.
When the global financial downturn hit, Greece was ill-prepared to cope.
Greece’s budget deficit, the amount its public spending exceeds its revenues from taxation, last year was 13.6% of its gross domestic product (GDP). GDP is the value of all its goods and services. This is one of the highest in Europe and more than four times the limit under eurozone rules.
Greece’s high levels of debt mean investors are wary of lending it more money, and demand a higher premium for doing so.”
Things have only gotten worse since then, and the problems confronting Greece are a direct result of Greek political leaders’ avoidance of tough decisions that could have prevented the disturbances that are haunting Athens right now. Those choices can’t be sidestepped any longer. According to an article in today’s Washington Post titled “Greek parliament approves spending cuts as protesters burn buildings,”
“Greece’s Parliament approved far-reaching spending cuts early Monday in a bid to secure a bailout and stave off bankruptcy, as buildings burned in Athens, set ablaze by furious protesters who fear that European demands to reshape their economy will further exacerbate a crippling recession.
The measures, which will slash the minimum wage, trim a fifth of government workers and slash entitlement spending, are wrenchingly unpopular in a country already seized by 21 percent unemployment and dim prospects for the future. But European leaders say that Greece will eventually go bankrupt — even with the new $182 billion bailout — if it does not make the changes they are requiring.”
I’m reminded of an old Fram oil filter commercial.
Two mechanics are in their shop. The one who changes oil explains why changing oil is imperative while the other one is behind him rebuilding a motor. As the commercial draws to a close, the oil changer says, “Change the oil regularly and put in a new Fram oil filter when you’re supposed to. A Fram filter doesn’t cost much.” Without missing a beat, the rebuilder looks up from the motor and says, “I do.” The commercial’s last line is classic. The oil changer starts a sentence by saying, “You can pay me now,” and the rebuilder finishes it, “or pay me later.”
Violent protests in Greece may be a harbinger of things to come in the United States if our political leaders don’t get our economic house in order. It’s time to pay for our excesses. Either we will pay now or we will pay much more later. Greek political leaders waited too long, and their country is suffering the consequences — austerity and violence. Had they acted sooner, they could have avoided the violence. Will America make the same mistake? The 2012 presidential election will probably determine the answer to that question.
Neil Snyder is a chaired professor emeritus at the University of Virginia. His blog, SnyderTalk.com, is posted daily.