Greek Government Essentially in State of Default

Nice tax refund you have coming .... we think we'll keep it

The [Greek] government has decided to stop tax returns and other obligation payments to enterprises, salary workers and pensioners as it sees the budget deficit soaring to over 10 percent of gross domestic product for 2011.

For all the supposed austerity, the budget situation is worse in Greece.  Germany and other countries will soon have to accept they have poured tens of billions of euros down a rathole, and that they will have to do what they should have done over a year ago - let Greece move out of the Euro.

Government workers and pensioners simply will not accept any cuts without rioting in the street.  And the banks will all go under with a default on government debt.  And no one will pay any more taxes.  And Germany is not going to keep funding a 10% of GDP deficit.  The only way out seems to be to print money (to pay the debt) and devalue the currency (to effectively reduce fixed pensions and salaries).  And the only way to do all that is outside of the Euro.  From an economic standpoint, the inflation approach is probably not the best, but it is the politically easiest to implement.


  1. Hasdrubal:

    I wonder if pensions and government salaries are at least partly indexed to inflation. That would complicate things.

  2. Anon:

    Sounds like California.

  3. Ted Rado:

    Politicians piss away money to get themselves reeelected, knowing that the s--- will not hit the fan until they are long gone. Well, the "long gone" has arrived.

    Prediction: the USG and all others will inflate their way out of the mess. Bernanke is already printing money, and there is no program afoot to deal with the USG debt. I won't be around to face the music (I am 83) but you younger folks are in deep doodoo.

    Already there is no good palce to put one's money. The USG has set bond yields at almost zero so we have lost our bond income. The principal will disappear when inflation sets in. Meanwhile, the stock market gyrates wildly and gets riskier. Is ther a deserted island I can move to?

  4. caseyboy:

    Right on Ted Rado. It will get worse before it gets better.

  5. Smock Puppet, Frequent Fantasy Flyer:

    >>> they will have to do what they should have done over a year ago – throw Greece violently, and without mercy out of the Euro.

    Slight error in tone there, fixed it.

    Glad I could help.


  6. Smock Puppet, Frequent Fantasy Flyer:

    >>> Already there is no good place to put one’s money.

    Hmmm. Funny how no one seems to be commenting anywhere that the spot price of gold is up to 1500 an ounce. This is almost twice its peak in the early 80s, which I'd think is close to a record in terms of price-adjusted levels, ever since it was allowed to float.

  7. Benjamin Cole:

    Before pointing fingers---remember there are federal employees who qualify for lifetime pensions and medical care after just 20 years on the job. Can be as young as 38. You could be paying their pensions and health care for 50 years after that. They work in uniform for the Defense Department.

    VA outlays have tripled in recent years.

  8. Dan from Gilbert:

    The good news is (if there is any), Greece will become a third world country once again (when it comes to their exchange rate) and tourism will soar because it'll be so cheap to travel there. This will start them on the road to financial independence again. That and reigning in their pension and social net expenses, will create a robust economy... in 10 to 20 years. If they can raise their birth rates, too... that will help even more.

  9. me:

    News from Germany: throwing Greece out is not likely to happen; the ECB is printing Euros already (hey, banks, you can participate in a special loan program at 0% without collateral... anyone want to participate? Loaning at 0 and lending at 6-10 sounds interesting?)

    There'll be massive inflation in the Euro zone in a few years, but that is probably not going to be much of a problem. I keep wondering about how cheap things here are (dairy is cheaper by a factor of around 10, good wine bottles start at $3 and excellent vintages around $7; computers and gas are costly)

  10. caseyboy:

    Dan from Gilbert, your comment about the Greek birth rate is spot on. the combination of early retirement ages and low birth rates equals an aging population. This is also true of other European countries, except France whose population is growing due to Muslim birth and immigration rates. Via, La, Arabia.

  11. Emil:

    the ratholes they poured money in were in "Germany and other countries" ... did France reposes those frigates, or did Germany reposes the tanks ?