Forget About A Grexit, Who Permitted the Grentry

The Greeks have voted in a referendum which has resoundingly said "no" to something.  What it said no to is a little harder to grasp although it has something to do with austerity (they want less), money (they want more) and the EU (they want to stay in it as long as they don't have to endure any more austerity and can continue to get money).  This puts the EU in a bit of a pickle.  What are they going to do with Greece?  The Greek opposition leader has resigned as has the Greek finance minister.  How did it get to this?

It didn't start in 2001 but that's as good a place to start as any.  That's when Greece joined the Eurozone, connecting its sclerotic, debt ridden economy with the rest of the nations silly enough to think a single currency was a good idea.  The Greeks got in by basically lying through their teeth, about their debt and budget deficits.  Now, having borrowed about a gigabillion dollars with little to show for it except a lot of swimming pools in up market suburbs of Athens, they are struggling to meet repayments.  And by "struggling" I mean completely unable.

So it's all the Greek's fault?  Well, yes and no.  A fair amount of blame can be sheeted home to the people who accepted their paperwork and let them into the Eurozone in the first place.  Since borrowing unsustainable amounts of money and subsequently going bankrupt has been pretty much Greece's only economic policy since 1830 anyone who believed their assurances of fiscal rectitude must have a case of criminal negligence to answer.

Once Greece was in it was breathtakingly easy to borrow money, so they did.  The only other alternative was to live within their means.  Greece is a poor, ageing, thinly populated country.  Living within their means pretty much implied living in poverty.  They decided not to and large numbers of governments and financial institutions were prepared to lend to them.  The lenders, in defiance of all rational probability, apparently believed that Greece was good for the money.

Strangely, the only people to come out of the above with any credit are the Greeks.  They knew their economy was a basket case so they lied through their teeth, gained access to the Eurozone and, for a while at least, new streams of money.  Everybody else appears to have been a gullible moron which would be believable if we weren't talking about some of the best educated people in the best educated continent on earth.

Still it is amazing how stupid intelligent people can be when intelligence is inconvenient.  The Euro bureaucrats were giddily building their empire and crafting their quite idiotic dreams of European unity imposed from Brussels (Brussels can't even impose unity on Belgium) and the financial institutions probably figured they could get out before reality got too burgeoning.  Then came the global financial crisis and evidence that the major financial institutions across the world combined a breathtaking level of moral bankruptcy with an almost staggering amount of incompetence.  In short everyone (with the possible exception of the Greeks) had bought so heavily into their own propaganda that they actually believed it. 

Disillusion when it arrived was unpleasant.  For the most part the banks managed to persuade governments that tax payers should take the strain thus demonstrating that they hadn't completely lost the skill set that made them rich in the first place.  Governments (and tax payers) screamed, buckled and somehow staggered on, except in Greece.  Greece had never been able to pay back the money it had borrowed.  All the financial crisis had done was point this out very clearly to everyone they owed money to.  Not surprisingly these people a) asked for their money back and b) stopped lending any more.

Well the Greeks tried, or rather they tried to make it look as though they were trying.  Austerity measures were implemented with the very predictable result of destroying what was left of the economy.  If your economy basically relies on you spending money you don't have  then ceasing to spend that money doesn't help.  It actually makes things worse.  Cuts in government spending meant that people selling things to the government went broke.  Cuts to salaries and pensions meant that people selling things to government employees and pensioners went broke.  With all of these new people broke they couldn't afford to buy anything either and anyone left in the country who wasn't broke went broke.

So what happens now?  Well the Greek government is still talking to the IMF and various other concerned bodies.  It's fair to say everybody wants a solution since if there isn't one everybody is going to look like a complete imbecile.  Except the Greeks who kept the game going as long as they could and by comparison with everyone else involved in this crisis actually appear more level headed and rational than most.  At least they knew they were bankrupt and were taking the EU for every penny they could get.  Still based on experience to date one would be unwise to discount the imbecile option.  One thing I do know, Greece won't pay back what it owes.  It can't, purely and simply, it can't.  What is under discussion now is exactly what are the consequences of that going to be for everybody.  Once that is thrashed out Greece can start borrowing money again and gets its "economy" back on track.  In the meantime can we please focus on China.  The economic problems there have the capacity to do more than just make a bunch of Eurocrats look like idiots.