Greece, the weakest link in the chain

Published 10:03 am Friday, June 29, 2012

Column: Donald Kaul, Other Words

The stock market keeps going up and down like a yo-yo. I thought you’d like to know why.

It’s Greece.

Donald Kaul

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Oh, not totally — there are other miscreants involved — but pretty much everyone agrees the Greeks are the first and foremost cause.

This is because years and years ago the finest minds of post-World War II Europe devised an economic system that made all European nations hostage to the political stability and good economic judgment of its weakest member: in this case, Greece. That’s like going mountain climbing with your safety rope tied to the town drunk.

At the heart of the system is the euro, the common currency that sews together the nations of the European Union in an interdependent economic network — without political linkage. It’s fine when the going is good. But in harsher times when one nation’s economy falls, it sets off a domino effect that sends the rest tottering.

And Greece is one weak domino.

Other countries have problems, but Greece’s are an encyclopedia of bad behavior. If you combined the worst abuses of the welfare state with the most wretched excesses of free-market capitalism, you would have Greece.

Do other countries have a surplus of overpaid government workers? Greece’s government workers make almost three times the average private-sector wage.

The national railroad, which is government-owned, has annual revenues of 100 million euros — and a wage bill of 400 million, plus expenses. A Greek minister of finance once said it would be cheaper to put all of Greece’s rail passengers into taxicabs. He wasn’t kidding.

Do other countries suffer from waste, fraud, and abuse? Greeks who go to public health clinics assume they’ll have to bribe someone there to get some health care. The same is true of its educational system.

Greece has four times as many teachers per pupil as the next most teacher-rich nation (Finland), yet scores near the bottom of school systems in Europe.

Do other countries labor under the burden of overly generous pension systems? Greek men in what are classified as “arduous” jobs can retire as early as 55. For women it’s 50.

More than 600 professions are listed as “arduous,” including radio announcers, musicians, hairdressers and waiters.

Do other countries have a tax-evasion problem? Greece’s central bank estimates that the government collects only two-thirds of the tax owed it and that the off-the-books “shadow economy” accounts for more than a quarter of the country’s total product.

Most of these figures appear in Boomerang, Michael Lewis’ engaging account of the continuing crisis in Europe and elsewhere. I recommend it to all NASCAR fans. It’s more fun than a seven-car crash on the backstretch.

The Eurozone members, led by Germany, have been stern with Greece. They offered to bail it out only if Greek officials adopted the harshest kind of austerity measures.

The Greeks did, and the measures completely tanked the economy, as austerity measures tend to do to economies in trouble. Something like 50 percent of young Greeks are unemployed, and people are rioting in the streets.

And they’re also voting. Last week they held an election that boiled down to a contest between left-wing populists who promised to renegotiate the terms of the bailout and the current government, which is trying to appease the Eurozone. The results favored the government but were largely inconclusive.

There’s no one who thinks this is the end of it. It may not even be the beginning.

The prospect of a Greek default of debt and abandonment of the euro continues to cast its shadow over all of Europe, and the nations there have taken measures they hope will help them survive a Greek collapse. But then it would be Spain’s turn to be the cause of everything bad. Or Italy’s.

Welcome to the global economy. columnist Donald Kaul lives in Ann Arbor, Mich.