Greece, Euro, and Even the EU on the Ropes | Print | E-mail
Written by Charles Scaliger
Friday, 26 February 2010 21:00
Let us be perfectly clear: The fiscal woes of Greece, one of the European Union’s weaker economies to begin with, are quite likely beyond even the abilities of the denizens of Mount Olympus to solve. Greece, a thoroughgoing socialist basket case for decades, is probably going to lead the rest of the soft economic underbelly of Europe — Spain, Portugal, and eventually, Italy – into insolvency, a chain of events that may dissolve Europe’s decades-old experiment in economic unity.

With the onset of the great global recession, Greece’s public debt soared to 12.7 percent of the GDP, the highest in the eurozone. Fifteen percent of tax revenues will be required to service Greece’s debt this year alone.

Initially reluctant to impose austerity measures of any sort, and confident in a full bailout from the rest of the EU, Greece indignantly resisted calls to cut benefits for its massive public sector (more than 700,000 Greeks are on the government payroll, and they are compensated for 14 months of work every year). Greece’s safety nets are far more lenient than those in the United States; the retirement age is only 55, for example. Add to the mix the fact that Greece’s four-month-old Papandreou government was swept to power last fall amid promises not to cut benefits, and we have the makings of a full-blown meltdown, Iceland on the Aegean.

In recent days, chastened by the reluctance of the EU’s heavy hitters (Germany in particular) to subsidize Greece’s pampered public sector, the Papandreou government has reluctantly introduced cost-cutting and austerity measures, including tax hikes, government hiring freezes, and curtailment of public sector benefits. “The dilemma is — are we going to let this country go bankrupt or are we going to react?â€