It’s not often one gets to say it but… I feel sorry for the Germans. Why should they have to pay up billions because the Greeks want to retire at 53 and get paid extra for arriving at work on time?
I’ve listened to and read some pretty intricate analyses of how the Greeks got themselves into this mess and whether their contagion risk will spread to the UK. I’ve learned new phrases like junk bonds and austerity measures. Cool! There’s a fairly good explanation of the whole thing in Q&A terms here.
I’d like to put past you my take on it and hear what you all think. Now I’m not an economist but I’ll try my best. Here goes.
Greece was spending more than it made. That’s it really.
Greece is like a dude who is earning ten grand a year, spending twelve, and making up the rest on his credit card. This can’t go on indefinitely; somewhere down the line he’ll go bust. Then he’ll have three options. Borrow. Cut his spending down to his earnings. Increase his earnings.
Greece has to do all three. Unfortunately, in this story, Germany is like the dude’s responsible, high-achieving brother who has to bail the loser out. One-for-all, and all that.
I wrote a blog early last year called Cutting the Crap of Recession-Speak (Part 1). In it, I argued that what is good for individuals is good also for nations. Save. Don’t spend more than you earn. Don’t borrow more to pay off debt. Yes, there are short-term exceptions to these rules, but in the main they are sound. It’s not rocket-science. Or brain-surgery.
Here’s my prediction. The UK will follow Greece unless we cut public spending way beyond mere efficiency savings, clear our debts quickly and forever, and lay long-term plans to encourage entrepreneurship like never before. We need to discover the virtue of profit and a free-market customer service attitude.
Otherwise, this is one Greek tragedy in which we will find ourselves unwilling actors.
Image credit: Lawrie Cate.