By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system.
Greece is going to become less regulated and less socialist just due to lack of money. Foreign investors will swoop in to pick off pieces that become available as the Greek government sells assets. Greece will become a cheap holiday resort destination. Chinese and German companies will compete for pieces of the carcass.
Even with a bail-out and a more than halving of government debt Greece may end up once again unable to service its debt.
The Germans are getting ready for the Greeks to bail from the Euro currency zone. Read that article. The severity of the problem has sunk for the Germans.
Plans for Greece to default, potentially leaving the euro, have been drafted in Germany as the European Union begins to face up to the fact that Greek debt is spiralling out of control - with or without a second bailout.
If the oil price spike causes another world recession (and I rate that likely by 2013 or 2014) then I'm counting Italy and possibly Spain or Portugal or Ireland as candidates to leave the euro zone. The world economy is bumping up against resource limits.
While some argue that European economic troubles will dampen Europe's oil demand enough to keep prices down I think they miss the big picture. The developing nations of south and east Asia will grow their own demand enough to eat up that oil. The US and Europe are going to have to keep cutting back their own demand to make up for rising demand in Asia. that means our economies will perform poorly and our living standards will at best stagnate and due to declining labor force quality more likely living standards will decline.
My standard advice: Try harder to learn more skills and pursue a more rewarding career. You need to compensate in your own life for what's going wrong at the macro scale.
Update: One of Greece's problem is that government employees are corrupt and expect bribes. That's a reflection on the population that they come from. The Greeks should behave with more virtue and force their government to do the same.
|Share |||By Randall Parker at 2012 February 20 05:19 PM Economics Sovereign Crises|