Greece
For the past few months we have been bombarded with reports on the Greek debt and how they will default on their loans repayments to all their creditors; the doom-sayers are predicting the end of the Euro, others saying Greece will revert to the Drachma plus no end of other scenarios that will all be played out for the next few days.
In order to understand some of the problems that Greece has we must look back at Greece’s history. I don’t claim to know it all but will speak about my observations of the problem and my knowledge of the Greek people.
I have been travelling to and from Greece since 1953/4 normally staying with family in one of the family homes. I have seen Greece evolve from a very backward third world country to what it is today. In the late 60’s the average Greek family did not own a television, granted the main reason being that outside of the major cities reception was poor at best. Greeks did not own cars, have air conditioning or many other household appliances that we took for granted.
As technology and travel improved Greeks saw how the rest of Europe was living and rightly so aspired to the same or even better. Problem being Greece was just coming out of a strictly regimented military junta (1974) and was once again getting to grips with democracy and the rule of the people; however despite the military stepping down there was still the unsaid threat that they could return.
Tourism grew rapidly and the Greeks began to have disposable income to spend on themselves; the outdoor eating culture has always been there as has the good life, but now they wanted the luxuries that the rest of Europe was enjoying.
The trouble with the Greek economy is that they are not net producers, they have a fantastic tourist industry, but rely for most of it on the income generated on the islands that are only open for less than 6 months of the year, so they only employ short term contract staff to cover that period. These employees are unemployed or odd-jobbing for the winter months and therefore cost the country vital revenue.
Greece’s main export is refined petroleum (35%) though this is offset by raw petroleum accounting for 24% of all imports. After petroleum Greece’s next export is packaged medicaments 3.1%, followed by various metals and related products.
Greece’s other industry is agriculture and fish, in my opinion Greece produces the best olive oil in the world which accounts for 1.3% of all exports, though once again due to the terrain much of Greece is rocky and not suitable for crop growing; yet the parts that are produce first class, cotton, oranges, lemons and a variety of other products. Figures obtained from Observatory of economic complexity.
None of which can equal the might of the heavily industrialised countries of northern Europe either in production or profit.
The culture of Greece is very different in that they work to live, rather than live to work. The Greeks have a relaxed way of dealing with life, they will take things slow and easy and perhaps never finish the job. This is partly because of the climate, working in a hot factory or near a blast furnace is bad enough in colder climates; imagine that heat in Greece when outside temperatures soar above 40degrees.
We mustn’t forget that while northern Europe was going through the industrial and agricultural revolution Greece was an occupied state and subservient to the Turkish empire, all of which held Greece back and stopped them taking advantage of the new discoveries; and yet the people of Greece remained happy, lived a good life and are among the longest living people in the world.
The current problem stems from their borrowing. If an individual or a company wishes to buy a house or expand their business they have to meet certain criteria and prove they have the ability to repay the loan. A sensible lender then credit scores the borrower and accepts their plans and figures tally and the loan is granted or refused as the case may be.
In the case of Greece it was all very different, the EU are so desperate to gather new members to the club that any proper investigation as to their credit worthiness is cursory at best and downright lies at worst; so a loan is granted even though there is no hope of ever getting the money back (these are the same people that scream about irresponsible bankers).
No matter the outcome of Sundays referendum in Greece, the results will be to accept more cuts and remain in the Euro, there is absolutely no chance that Greece will ever be able to repay the loan as they do not produce enough to generate the Euros to settle the debt or even meet the interest payments.
The Germans also have their back to the wall as they know should they be lenient with Greece then others (Portugal, Spain, Eire and Italy) will want the same treatment, leaving Germany and a nigh on bankrupt France to foot the bill.
It appears to me that the only solution to the loan and Euro problem is for all the members of the Euro club to give up any sovereignty to their tax raising and government bond rates and for Europe to have one “bank” in charge of the Euro exchange rates, national tax, interest rates and government bond/funding rates. This could be helped by allowing countries or districts to impose local “purchase tax” on certain items in order to fund local needs.
To have various countries using one currency when the earning and buying power of that currency varies so much is a recipe for disaster.
The problem would be which country would you trust to look after such a scheme when each country still distrusts their neighbour?
In the meantime Greece should be good for a holiday this year as the locals are desperate for cash as their banks are shut; so take cash with you and enjoy Greece.
