The Greeks voted No. Well, I guess they did. Rumor had it that 9 out of 10 Greeks didn’t really understand the questions. But, what the hell, they voted. Right! Democracy and all that, right where it all began.
Now let’s get a little realistic. Greece is not Europe’s really big problem. It is just the headliner. The problem for Europe is “what they do with the Greece problem.”
The real problem in Europe is that a bad idea, that seemed so good on the original presentation, is coming home to roost.
The very idea of the Euro was flawed in the beginning and we all know that bad ideas can be dressed up in and presented as great ideas for a long time. But sooner or later the window dressing starts falling off and we slowly get a look at what is underneath. The Euro was a great idea – for Germany. Possibly a few other countries with well run economies and a labor situation that did not stifle their ecvonomy.
But for Greece, who had to lie to get in, and close their eyes to reality to stay in, today was inevitable. For Greece, the vote was relatively immaterial. The final outcome for them will be pretty much the same regardless of what happens in the near term. Greece as it has been operating in recent years is finished.They have been living far beyond their means and it will soon be time to pay the piper. Whether they stay in the Euro or leave it matters little for Greece. Their goose is cooked. They are bankrupt. Their economy is in a death spiral and they are relatively hapless in stopping it. They have a cultural problem and it will not be easy to solve. There will be much pain in Greece in the near future and it will be enough to go around so all will get to share it.
Now, what is Europe’s problem?
You have probably heard the term PIGS associated with discussions of the EURO. The PIGS was an acronym for Portugal, Italy, Greece and Spain.
Well the new acronym is PIFS. Greece is going to be old news soon. Yes, their will be much ado about the no vote. But nothing will happen immediately. Europe will agonize for a spell and then something will happen. Who knows what? But it won’t be what Greece must have to pull out of this nosedive. Europe will do something, but they cannot do enough. Not beaseu of Greece, but because of the rest of Europe.
Whatever they do will probably make the Greek situation go away for a while, one way or the other. For us perhaps, but not for the Greeks. For them it is time to pay the piper.
But the PIFS will remain, and they are the real problem in Europe. Why? Because Greece was much ado about very little. The economy of Greece is a tiny fraction of the Eurozone. The powers to be of the Eurozone could solve Greece debt problem instantly. They could make it easy for Greece to pay a prorated share and then be debt free. It would not break the bank of the Eurozone to do that. But what they do for Greece would set a precedent. And that is the real problem.
The PIFS are the three remaingin members of the PIGS – with the addition of France. Whatever the Eurozone does with Greece it must be willing and able to do for the PIFS.
And aside from Portugal, bless its little heart, the economies of Italy, Spain and the big F, France, are just too big to bail out of their downward spiral. Somehow, another solution, other than a bailout, must be found. The solution involves pain – a awful lot of pain – an politicians will kick the pain can down the road as long as possible.
The combination of debt, unrealistic labor laws and ridiculously lavish promises from politicians is going to sink the PIFS – and ultimately the EURO – in spite of everything the Eurozone can do. They will moan, groan, complain and possibly try several things, announced with great fanfare. But reality is a harsh teacher and that class is about to begin in the Eurozone.
Of course, the good ole US of A is not far behind, even as we speak.
The problem with debt is that sooner or later the dumbasses who lent it in the first place start asking for it back.
And that is the problem. The solution is a bit hazier.
And it will take a bit of time. I plan to sit back and enjoy the show. It should be quite a spectacle.