Greek Lessons for US
By John J. Metzler
UNITED NATIONS ― Evoking an ominous tale of mythology, the current financial crisis in Greece threatens to undermine the European currency, the euro, and more especially rattle global markets and nerves.
The lessons of the Greek government's profligate spending, fiscal irresponsibility and sloppy oversight have turned a crisis in a small European country into a wider challenge affecting the 16 member eurozone currency union. Tellingly it provides a cautionary tale for the United States too.
The hydra-headed monster of massive government spending creating debt, deficit and depression threatens Greece. Government debt as a percent of GDP stands at a whopping 125 percent.
But Greece, alas, is a small country of 11 million people but its influence in the global market, as its influence in Western philosophy, weighs out of all proportion.
The original crisis was triggered by the government conceding its budget deficit would be double its previous estimate which in turn triggered fears over $35 billion in Greek bonds.
Curiously the Athens government approached the state bankers in Beijing to fund their deficit.
For the People's Republic of China with its huge foreign reserves sloshing around, the Greek deal would be pocket money. Politically though this would allow Mainland China wider influence inside the European Union itself.
Should this deal transpire there's the double irony that the home of democracy has to approach the world's largest dictatorship for a loan.
Now the European Union has cobbled together a financial rescue plan for Greece which raises economic pressures on the Athens government.
Realistically, the French and German taxpayers will pay for this bailout, and pull the Greeks back from the brink at least on the ledger sheets.
What is less certain is that the country's radical public sector unions or political parties will settle for austerity and higher taxes even from George Papandreou's ruling Socialists.
Yet, profligate spending is not only the curse of Greek politicians; in Italy debt to GDP is 117 percent, Belgium 101 percent and the United Kingdom 80 percent. The European Union average stands at 79 percent.
But before Americans get too smug, for 2010 the United States debt projections ring in with 93 percent of gross domestic product, and still rising.
While government deficits in the European Union average out at a dangerous 7.5 percent; as percent of GDP, in the United States ballooning public sector deficit for 2010 comes in at 13 percent. The new White House budget represents $1.6 trillion in additional debt, the highest debt ratio since WWII.
Now look at the massive spending in the U.S., cross reference Europe's bad financial grades, and then realize the deep and enduring danger from the Obama administration's massive government spending.
And let's not forget that American debt and bonds are being bought up by Beijing so that the People's Republic of China has become the U.S.'s chief creditor. And this is Ok?
Among the major European debtor states, Greece, Spain, Portugal, Belgium and United Kingdom, there is the common thread of socialist or Labor party governments. The United States is governed by a basically social democratic administration.
Now view the more prosperous members of the European Union ― France, Germany and the Netherlands ― which all have elected conservative governments. In these countries, while the debt ratio and spending is quite high, so too is economic growth.
As with the albatross of legend, the crisis serves as a political millstone to the euro currency and a warning to many European politicians, bankers and economists.
Both in Europe and the U.S., it is glaringly apparent, if not admitted, that such spending is unsustainable and threatens to debase the currency, the confidence and the very wellbeing of future generations.
And like the Greek chorus one must repeat that unrestricted government spending comes with the price of debt, delusion and eventual disaster. This is not mythology but the lessons of what politicians have wrought.
John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of ``Divided Dynamism ― The Diplomacy of Separated Nations; Germany, Korea, China'' (University Press, 2001). He can be reached at jjmcolumn@att.net.