Recent events in Greece have brought me back to the blogging state of mind with a whole range of new thoughts on how a nation ends up in this scenario, how it developed and what it means going forward. Some of my thoughts are in line with the great and the good of economics but I do think that there are a couple of nuggets of my own in here.
Once upon a time ...
Historically Greeks have had what can only be described as an avant garde relationship with personal taxation. During the 70's and 80's avoiding tax was the national sport and there were more Porsche owners than tax payers. This is really the bedrock of the problem - culturally it was ok to avoid tax and do it openly with no fear of any real danger. This gave rise to a nation where it was possible to retire at 50 and live comfortably from your ill-gotten gains.The 80/20 Rule
When examining catastrophic failures of this type I often use the 80/20 rule of thumb. This generally means that 20% of Greek establishment is responsible for the problems of the remaining 80% of the Greek population. That same 20% is both the cause of the issues and not taking the necessary steps to redress the pain they have caused. It brings the question of who are the 20%, an important factor in the current Greek situation.
What if...?
What if a company ran on the same basis. What if the management of the company spent more than it generated in revenue. We wouldn't expect a company to survive in those circumstances so why do we expect Greece to? We would blame the management wouldn't we? Of course the current Greek government is not the one responsible for the stupidity and irresponsible actions of the previous governments over the past 30 years but it is now taken responsibility for getting Greece out of its debt black hole so needs to act quickly and with only Greece in the here and now in mind.
What on Earth!
At a point in time when Greece can ill-afford it, the current government has lost the plot. It might not like what the European Union is saying but it doesn't have a choice. It needs its 3rd bailout in 5 years or the abyss beckons - but it seems that the government will not accept the terms for the money it needs and will therefore bring Greece out of the Euro and into the financial wilderness.
It is absolutely the case that the Greek people have suffered, suffered terribly over the 2010-2015 period but the phrase that comes to mind is "self inflicted - no sympathy". This is clearly the point of view of many of the Euro nations and has been drilled into the Greek psyche buy many a German politician.
What now?
Greeks in general need to see the situation they are in as last chance saloon and act accordingly. This is not a moment for any kind of defiance or heroic last stand. The country will take 3 generations to recover outside the Euro, it might do it in 2 if it remains in the EU. The political establishment in Greece has called the situation wrong and needs to see that the EU will protect itself from Greece's problems no matter what.
What next?
Portugal, Spain and Italy should all be worried. They are all in various stages of the decline that Greece suffered which probably explains why they are campaigning hard for Greece to stay in the Euro. Portugal has a very similar cultural problem to the one that saw Greece plummet. A small number of tax payers, an elderly retired group of a disproportionate size and a struggling economy in terms of jobs and growth. I suspect that there are a couple of Portuguese politicians shitting themselves. A little further back are Spain and Italy, they still have time to act to stop themselves "doing a Greece" but Italy has a lot of problems in the post-Burlusconi era.
What would I do?
A hard question to answer in some respects but I think it would be largely what I needed to to keep the IMF on side. What I wouldn't do is promise deliverance and jam tomorrow by holding out, being proud and going down with the ship. Without the support of those organisations that can sling a couple of billion Euro's in my direction when I need it its impossible to see how the whole economy wont collapse. Banking is key and the Greek banks are out of cash and out of time. The Greek nation would continue to suffer under the austerity of the times but a nation finding it touch is better than a nation finding tough on its own.
