All the news not fit to print
Email | Back to History | Back to the world news | Home | Support this website

TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.

The cost of Greek austerity

  • (July 2015) The cost of Greek austerity

    In 2008 i was shocked to read that Lehman Brothers had accumulated a total debt of $613 billion: imagine what the world could do with that much money, money that just one firm managed to lose. At the time i was in Africa and i remember checking the GDP of African countries: i was amazed to realize that (in 2008) this amount was more than the GDP of any African country.
    It is hard to believe, but in five years the money spent to save Greece from bankruptcy amounts to 350 billion euros (as calculated by the Greek statistics agency ELSTAT), which is about $400 billion. I was, again, reading this while i was in Africa, where some towns don't have electricity because they cannot find $100 thousand. In 2015 there is only one African country whose GDP is higher (Nigeria, $650 billion). I was in Zimbabwe that is suffering from a drought: farmers are losing their crops because nobody can find a few million dollars to build irrigation canals. International charities are happy when they can collect $1 billion in a year: Greece, a country of 11 million people, got $70 billion a year. Again, i am shocked to realize how much money the financial world can waste on lost causes when so much could be done with much less to improve the infrastructure that limits the opportunities of billions of people. If you don't care about the number of people, put things in financial perspective: Greece's economy is about $240 billion. If it were part of the USA, it would rank 25th after Louisiana. With all respect for the cradle of Western civilization, one has to wonder why the international community felt that it was so important to bail out this small economy.
    The Greeks seem to have used some kind of guilt trip: "we're in this mess because of the austerity that you creditors imposed on us". I am not sure that this theory flies. GDP rose by 0.7% in the third quarter of 2014, as Greece finally exited recession for the first time in six years. In november 2014 the Guardian (usually a critic of austerity) titled "Greece growing again, Italy back in recession. Germany has narrowly dodged recession." Yes, just a few months ago Greece's economy was actually growing faster than Germany's (and Italy's). In fact, Greece GDP ended the year with a 1.7% increase over the previous year: by the standards of the eurozone this was not a bad number at all.
    Two months later the populist Syriza party won national elections (it is usually labeled as "leftist" but it is mostly just anti-austerity - its fans include right-wing French politician Marine LePen). Instead of blushing at the amount already spent on his country, the new prime minister set out to negotiate with the creditors in order to obtain more money.
    It is interesting that so many people are telling the Greeks what they can learn from Argentina 2001, Brazil 2002, Latvia 2008, Iceland 2008, Ireland 2009, Portugal 2011, Cyprus 2012, Spain 2012, not to mention Poland (not a euro country) and Lithuania (the two big success stories of European austerity), but noone is telling the Greeks to learn from their ancestors, who used to be the wisest west of India. It is fascinating to speculate what Socrates, Aristoteles and Platon would think of this mess.
    One thing these philosophers might have pointed out, because they were more objective and educated than today's voters, is that "austerity" is a vague term. I can hear Socrates ask: "which austerity?" As Jeffrey Dorfman has shown, most European countries who lament the effects of austerity have actually increased their government spending. This is hardly the definition of "austerity".
    Austerity is what a peasant family in Zimbabwe feels when a drought erases their crop. Austerity is what millions of families feel when they don't have electricity to turn on a light bulb at night (let alone to run air conditioners in unbearable summer heat).
    Socrates' last words, as reportedly spoken to Crito by Platon, were: "Don't forget to pay our debt."

    TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.
    Back to the world news | Top of this page

Email | Back to History | Back to the world news | Home | Support this website

TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.