Greece's Debt - But Europe's Problem

My beloved Greece is burning.

Well, not quite yet - but watch out. This is a proud nation of intelligent philosophers and closet politicians who are acutely aware of the political winds and what it could mean for them.

In North America, changes in our lifestyle have come far more gradually than they did in Greece. Real wages have remained flat since 1980 (in truth they are down, had CPI had been accurately reported). Furthermore, we all know that our grandfather - who had a then-good job in middle management or on the shop floor - was able to have a house, a car, family vacations and perhaps a cottage while our grandmother stayed home taking care of the household.

Today, with both spouses working, they can only hope to have a fraction of what Grandma and Grandpa had. But for us, that lifestyle is a relic of a bygone era and rarely front and centre in the national psyche. In Greece, however, those changes didn't take 50 or more years - they swept the country in the span of half a generation.

When I first went to Greece 17 years ago, I recall asking my aunt how big a mortgage she had. She asked me what that was. Thinking I had made an error in Greek, I translated it to the more descriptive "a loan on your house". She responded in shock and horror, "Christos kai panagia, pios kani tetio pragma!" The loose translation is "Jesus, Mary and Joseph, who would do such an awful thing!".

Also noteworthy was that while most of my relatives worked, they still were able to take time off work to entertain us at the local bars and restaurants every night. Well, 6 years later I went back and things had begun to change. People had begun sinking into credit card debt and mortgages were becoming more of a household word, although we could still go out. In fact, I recall going to dinner at a restaurant by the seaside on one of the islands. Six adults stuffed themselves and drank copiously. I decided to play some shooter and picked up the tab...all $65 CND of it (tip included).

Fast forward 5 years later: we went back to the same restaurant with essentially the same crew and the tab came to 300 dollars! I split that one. With all the scheduling and work commitments it was hard to get that one night out and "I would love to see you this week but work is hectic and finances are tight" was the answer from cousins and friends to requests to get together. From almost the day the EURO was introduced, they experienced 200 to 300 percent inflation on everything but wages, which had been locked in at par. They were beginning to really feel the debt squeeze.

My aunt, who had been mortgage-free, was forced to take one so that she could afford to buy groceries and help her kids a little bit. Her savings, which had been ample prior to the "merger", were now woefully inadequate under the new regime. Unless you scratched the surface, the changes looked for the better. They drove newer cars, had better TVs, and less young adults lived at home. But it was all financed by debt. In the end, they had given up their enviable lifestyle and their inheritance for a newer car, a new tv and a few less years under Mom and Dad's roof...and a few pairs of designer jeans.

As a "poor" nation, pre-Eurozone, Greece had virtually no national debt. Since then, the debt has swelled to 300 billion dollars - 50 billion of which is rolling this year - and is now critical. They have been overwhelmed by immigration, and many Germans, French and Brits have bought up prime real estate at cents on the dollar, not to mention the binging on the likes of Olympic Airways. The investment capital came, but the jobs never showed up. In fact the youth of Greece is now known as the generation of 600 - named for the prevalent monthly salary. Mere peanuts that they see no hope of exceeding...ever.

The new austerity measures, that I had the privilege of previewing, are a model that any progressed Western economy would be happy with. In a Greek context, they are laughable. Unfortunately, the Germans couldn't see that. Their attempts to impose such measures on people who know better - and are well aware of their crumbling lifestyle - will end with Greece telling them ENOUGH. There will be some changes to the public sector and a few new rules, but the rest of Europe will soon see that Greece's inevitable unrest will threaten to spill over to their neighbourhoods - and that they'd be better off dropping the strict loan conditions.

I see this as a growing pain for Europe, but they will have to understand that there is no middle ground. They will have to come to grips with the fact that Greece is akin to California - an essentially bankrupt state that is fine as long as the Fed will take care of it - or as Canada sees has-nots like Newfoundland. If the understanding that unity requires balance doesn't come shortly then not only will my beloved Greece burn, but the nascent Eurozone is doomed too.

A German politician recently said that the debt-ridden Greeks should sell their islands and the Acropolis to raise funds. He will soon have the collective finger raised by the Greek people facing squarely at Berlin...and Merkel will just cut the cheque.

OXI