More on the Greek Deal

1. Steve Rattner in The New York Times, July 16:

The latest turn of events is already exceedingly unpopular in Greece. That’s understandable. But in reality, Germany and other tough-minded European nations should be thanked for forcing Greece to bring its economy into the 21st century.

2. A friend makes a comparison with Chile:

Greece is a corrupt, indolent society that continues to assume that other Europeans should support it. Even in all of this hard negotiation, the Greek government has kept control of the various EC transfer programs, such as technical training, so the money can be used as regional political slush funds.

In 2014, Chile had approximately the same GDP per capita. Their debt was 12% of GDP. Greece’s debt was 177% of GDP. Greece directed the loan money into consumption and created a completely unhealthy and unbalanced economy. Chile receives no support from anyone, much less massive subsidies for agriculture, etc., like Greece. Chile has wisely managed investment in the country and it has invested in infrastructure, education, training, etc.

The so-called Greek Miracle of the period before the financial crisis was all based on debt. Now they want more money to continue to support a bloated corrupt bureaucracy and a society that has earned almost none of the benefits they receive. I recognize the heroic efforts to reduce the deficit. However, they have made little effort at restructuring so that they have actual commensurate tax revenue, honest management of EC transfer money, for example, for agriculture and social programs, and a real recognition of the economic processes that must support the people and the government.

Chileans pay taxes. They have rule of law and they are law abiding people. They have a future because they have built a solid base.

Greece has no future as it currently stands other than as a supplicant. If they were to leave the EC, they would default on all of their debt because a separate system with a devalued drachma would give them nothing with which to repay. They would recover no huge transfers from Brussels for the hugely inefficient farms and any growth in tourism would not compensate for lost EC transfers and debt.

When I [my friend] was very young, I spent some time on the Greek islands. I remember my hotel costing $2 per night. You could live like a prince on $10 per day. Greece’s fundamental economy has not changed very much since then. They are still a poor country but with delusions of richness based on free money. The piper must be paid.

I can fully understand why the Poles, Finns, and Slovenes are furious. They took the bitter medicine. They restructured. They did all of the necessary things that brought about their success. Now they are asked to support the fat lazy cousins who did nothing other than stand there with their expectations of family support.

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