Sunday, April 25, 2010

Beware of Greeks Bearing Bonds

In his address to the nation from the tiny Aegean island of Kastellorizo, just off the coast of Turkey and home to a mere 500 persons, Prime Minister George Papandreou announced that Greece would ask the European Union and most likely also the International Monetary Fund for a temporary financing package of about $60 billion, enough for Greece to pay its bills for a year.

I’ve been to Greece a half-dozen times since 1967. It’s a tourist paradise. The Greeks party late into the night, enjoy late morning coffee and breakfast, and seemingly have lots of leisure time to sit around and play with beads. The wealthy keep their money offshore and tax evasion is a national sport.

But Greece is no longer a residential paradise. Having lied about economic statistics for years and having lived well beyond their means, Greeks are in for a nasty reduction in pay, benefits, consumption, and public services, the price of wanton profligacy.

In what must rank among the year’s top ten examples of chutzpah, Papandreou blamed “market speculators” for the dramatic rise to 10 percent interest on two-year bonds, an unsustainable level.

One German critic advised Greeks to get up early and begin work at 8:00 AM. China is concerned about Greek debt and its potential effect on the value of the euros it holds among its central bank foreign reserves. As Greece goes, do Portugal, Spain, and Italy follow later? Will putting a band aid on a deep financial cancer forestall national default? Watching some militant Greeks demonstrate and break windows in the central square of Athens is not an encouraging sign. Hardly good advertising for summer tourism either.

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