By Michael McCune
Today, once again, the U.S. stock markets raced upward on hopeful news from Greece. The Greek Parliament passed the long-awaited austerity measures necessary for the completion of the $170 billion bailout from the Euro Union and the IMF over the weekend. Why the U.S. markets are reacting favorably is a mystery because the Greeks have shown a very hostile attitude towards their Parliament’s approval.
Many Greeks took to the streets to protest the punitive measure which forces drastic cuts in pensions, wages and jobs across the board in an effort to meet the $423 million in budget savings, less than 10% of the total budget savings Greeks still face in the future. The EU warned Monday the consequence of the measure not being met were “devastating” so the Greek Parliament, depleted by protesting defectors but reinforced by pro-measure appointees by PM Lucas Papademos in time for the vote, inked the deal; meaning it is good for now, on paper.
Here’s what the Greek Parliament agreed to: 22% reduction in the minimum wage with a 32% cut for workers under age 25, a raising of the required pension age to 60, an estimated 17% cut in public sector jobs (one in every six), and a 12% cut in pension compensation. These numbers make even less sense than they would in the U.S. because Greece has practically no free enterprise left–everything is government run–and the measures do not come close to fulfilling the $4.3 billion in necessary savings called for in the immediate $18.8 billion rescue bailout measure needed to meet bond payments on March 20. This in a country whose total government assets don’t total $1.3 billion.
Athens resembled a war zone in the aftermath of Parliament’s approval. Rioters and police battled across Athens and it appeared the rioters were winning. Looting and uncontrolled fires swept through the cinemas, shops and banks of Athens as the community turmoil surged once again. The real question is what happens when the police payrolls, also targeted in the cuts, can’t be met. Who will stop the riots then?
EU leaders expressed dismay over the riots but what did they honestly expect? A miracle apparently as EU Monetary Affairs Commissioner Olli Rehn said a disorderly default would have a devastating consequence for Greek society. Yet the Greeks have shown time after time they are completely unwilling to give up their lifestyle as long as there is any chance they don’t have to compromise further and have had disorderly defaults before. Rehn didn’t state specifically what consequence he foresaw for the Greek society but one can assume he meant the same consequence that would be felt if Europe and its euro toppled because Greece brought it down.
In what was a particularly accurate situation assessment, the left-wing French Daily Liberation asked, “What if we all became Greeks? Is what is being imposed today on this pressured and humiliated country a foretaste of what will be prescribed for Italy, Portugal or, one day, France?”
Ah! That’s the rub for America too. Except our economy is much, much larger than Greece’s and we have many more times the resources, what, in specifics, is the difference between Greece and the U.S. beyond the ability to print fiat at will? The Greeks have outspent their GDP just like America. The Greek problem then is a glimpse of what the future holds for Americans when the dollar is replaced as the No. 1 world currency and we can no longer afford to repay our debt.
The leader of Portugal’s largest union, Armenio Carlos, praised the Greek rioters’ “heroic resistance” to the austerity measures and warned his own country could face a similar social explosion if such imposed cuts were mandated to continue financial aid to his Iberian state, which is also facing sanctions as the EU and IMF run on borrowed funds themselves.
In what is sure to become a rallying cry for the rioters, Greek deputy PM Philipp Roesler told German television, “Now we need to wait and see what comes after the legislation. We have taken one step in the right direction but we are still far from the goal.” If the riots are any indication there won’t be much movement towards the goal in the immediate future unless members of Parliament have a death wish.
But the asinine U.S. markets soared as if the Greek rescue goal was accomplished, again, seemingly disregarding the fact it was the U.S. Federal Reserve that put the tax-weary U.S. citizen on the front lines by sending its massive three-month printing spree overseas so there could even be a modicum of discussion for a Greece bailout.
It is insanity for markets to continue projecting hope when the debt grows daily and is far beyond the capacity of the debtor to repay. The euro is failing, just as every other fiat in the world is. The common sense not to run the printing press is overwhelmed by the desire to protect the government’s own fanny, so the presses are operated without legitimate resources to cover the fiat. The only way to change the situation is to let Greece drop into the slime it has created. It may not make for catchy sound bites for the rest of the world, but then everyone will be aware you reap what you sow. Maybe then the Eurpoeans, Asians and Americans will be ready for their bitter harvests.
