Greece might get kicked out of the Euro zone and they might go belly up. According to Reuters, Greek Prime Minister George Papandreou said today, September 10th, that he will do whatever it takes to stay in the Euro zone. The probability of default is likely, but how soon is the question. The Germans do not want to bail them out unless they follow through on the reforms they promised.
Greece is a socialist government with a strong Communist influence. When people say Socialism works and Capitalism doesn’t, I wonder if they have taken a good look at Greece lately.
Greece has an untenable problem with tax evasion and it is allegedly one of the biggest holdups in reforming and saving Greece from insolvency. The response by the unions in Greece towards the austerity measures is anger towards the Prime Minister, who said today that he will redouble his efforts to fight any government tax evasion. Protesters, tired of the austerity measures, march through the streets, some rampage. Read here: Greece on fire.
So, there you have it. Faced with bankruptcy and untold damage to the Western economies, angry union mobs protest. Not that I’m unsympathetic. They are suffering, but their suffering is self-inflicted, it’s ideologically-caused suffering which lessens my sympathy. It’s not just the unions, the private sector is suffering, seriously suffering.
The reality doesn’t seem to matter as they complain about their suffering. For example, if the Greek government had to account for all their future unfunded pension liabilities, it would come to 875% of their GDP – hardly sustainable. Click here for further information and here. The Prime Minister is a courageous person with the right vision for Greece. He could save the country. He seems to have the will to do it despite the adversity. But, and it’s a big BUT, he needs to do something about the entire ideological premise with its foundation of outrageous taxes. The government seems willing to push privatization, but, unfortunately, they want to increase the VAT tax, not a great idea.
The taxes in Greece are absurdly high because so many are on the government payroll at unaffordable salaries and because the government is enormous. The Greeks have a Value Added Tax (Nancy Pelosi’s dream tax) of 21%, but that isn’t enough to keep the inflated government boat afloat so they also have income tax rates that range from 15% to 40%. The result is the same as it would (will?) be here, people are evading taxes.
It’s a catch 22. The unions demanded too much, the government grew too much, all have to cut back, the people are resisting and suffering, and the economy is down the proverbial drain.
As Greek workers are facing a 60% slash in wages and/or unemployment, the GDP is shrinking and they are sinking further into recession. I feel sorry for them and I don’t. They did it to themselves, but no one wants to see them in pain.
In the United States, we have more than 50% of our union workers on the government payroll with far higher salaries and benefits than those in the private sector. Medicare, Medicaid and Social Security, unfunded liabilities, are unsustainable. Our debt is running at close to 100% of GDP, and, as we send more-and-more manufacturing jobs overseas, the President sees the answer as more taxes and, especially, he sees the answer as higher corporate tax rates. What business would want to stay here?
Higher taxes didn’t work for Greece and they won’t work for us and the reasons are exactly the same.