This whole Greece debt default situation is very puzzling. Report after report from reputable sources almost insist that we stand on the precipice of another recession that will, at a minimum, rival 2008 – the worst economic contraction since World War Two. Now generally I’m not terribly interested in economic issues as they seem to require understanding of esoteric concepts that are simply above me. Plus, it is boring. But when the livelihood of hundreds of millions (if not billions) of people hangs in the balance, it tends to peak my interest – and it should your’s as well.
What is puzzling me about this whole situation are two things: first, given the severity of the alleged consequences of Greece defaulting on its debts, it seems odd that the crisis is being framed in an almost tragi-comic light. The narrative spun by most journalists has focused on anecdotal evidence of their fiscal laxity and corruption and how both are quintessentially (and charmingly) part of the Greek national character. Michael Lewis (author of Liar’s Poker, Trail Fever, Moneyball, and Blindside), one of the most-read financial journalists follows just such a trope in a recent piece for Vanity Fair, not so cleverly titled “Beware of Greeks Bearing Bonds“. To be fair the article is well researched and well written, laying out how Greece got into its current predicament, but it barely investigates the most pressing questions we should have about the current crisis: one, how do we get out of this mess? Two, why does Greece matter?
Looking at the second question, consider the following: according to the IMF’s figures, Greece had only the 12th largest economy of all European Union members in 2010, valued at $305 billion, just behind Denmark and ahead of Finland, countries whose populations are HALF that of Greece. Given those figures, Greece’s economy is a 1/10th the size of Germany’s and represents only 2% of the total EU common market GDP. Those are hardly the numbers of an economic super power. The fact is that Greece’s economic troubles should have little bearing on the health of the Europe, much less the world. If Greece reverted into a third-world country tomorrow, why should that affect us?
I don’t mean to be so cavalier about Greece’s financial woes. Obviously the country is headed toward a very dark period bailout or no bailout. What I don’t understand is how the mismanagement of an economic lightweight should bring down the entire global economy, subjecting the rest of us to similar misery?
Is it a question of confidence in country’s with similarly fragile economies (namely Spain) that when in trouble the EU will come to the aid of its fallen brethren?
Is it a case of financial institutions adopting a sceptical view that low-interest loans for dependent economies (which since 2008 is virtually all given the revenue shortfalls affecting the Western world) are a smart investment, causing interest rates to rise (which will inturn cause budget deficits to increase)?
Where does predatory lending and the interests of foreign (German and American) firms that have banked more than $400 billion in Greece fit with the pressure to bail the country out (thus receiving a return on their possibly known bad investment) at tax-payer expense? And why am I having a tough time finding material on that angle?
Shades of 2008 all over again. We may have a new setting but the antagonists appear to be the same.If (ha!) this happens again, will we be outraged enough to do something about it? I hope so, but we have to pay attention first.