Thursday, February 9, 2012

A meditation on Greece

by Leslie S. Lebl

For any of our readers who worry about what's going on in Greece, here's a little background and historical perspective.

Greece actually has two problems: First, its government spends more than it takes in and has, as a result, run up a huge debt. Add to that strict labor laws and generous social benefits, and you end up with a bloated public sector, full pensions for hairdressers who retire at 50, and so on.

That would already be bad enough, but Greece has an additional problem: it's a member of the eurozone. As its internal crisis unfolded, the EU has sought to 'bail out' Greece. The EU wants to ward off default while paying as much as possible to Greece's foreign creditors in hopes of keeping the euro from getting a bad name.

The result: for two years Greeks have been hit with all kinds of austerity measures yet still face a huge debt. Kinda the worst of both worlds, especially when you look at this chart. Only 19 cents of every euro given to bail out Greece goes to the Greek government; the rest goes to creditors.

Just a short while ago, the EU demanded that Greece accept a new prime minister acceptable to the EU. Greece complied, but of course that didn't solve the problem. Now Germany, the EU's financial strongman, has proposed that Greek financial decisions be turned over to EU authorities. In other words, bye-bye to any remnants of Greek democracy. Naturally, Greeks are protesting in the streets, burning the German flag and shouting 'Nazis out.' (Other EU member states also oppose this idea, unsurprisingly, as some of them also risk default.)

In the past, creditor countries have taken over countries that defaulted on their debts. This happened in 1882, when Great Britain invaded Egypt and made it a protectorate. In 1905, President Teddy Roosevelt persuaded the Dominican Republic to let the United States manage its tariff collections, so as to forestall any action by European creditors. The United States didn't invade - probably, after the Spanish-American war, it wasn't necessary.

In other words, it usually requires force or the threat of force to take over another country's finances. Maybe the EU has found another way to accomplish this goal, but I doubt it.
A retired Foreign Service Officer, Leslie S. Lebl is a writer, consultant and lecturer. In the Foreign Service, Ms. Lebl served as Minister-Counselor for Political Affairs at the U.S. Mission to the European Union in Brussels. Prior to that, she was Political Advisor to the Commander of Stabilization Forces (SFOR) in Bosnia-Herzegovina, first in the American sector in Tuzla and then at SFOR headquarters in Sarajevo. Other assignments included Russia, the U.S. Mission to the United Nations in New York, Bolivia, Germany and Poland, as well as a year as diplomat-in-residence at Yale University. She speaks French, German, Russian, Polish and Spanish. She is currently at work on a book about radical Islam and the European Union.

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