Grexit is such a lovely catch word – named for a new product launched by Mad Men perhaps? It would seem easy to encapsulate the troubles in Greece into a neat little story.
Grexit is such a lovely catch word – named for a new product launched by Mad Men perhaps?
It would seem easy to encapsulate the troubles in Greece into a neat little story. Greece is a minor country contributing only two per cent of the economic wealth of the European Economic Community. The primary reason for keeping Greece afloat in the Union is political. The Greek people are being portrayed as lazy and spoiled. The Tsipras-led government might shift to the protective umbrella of Russia and leave the IMF with yet another bad loan on its books. If Grexit happens, investment money in the European financial marketplace might cut and run to other global investment portfolios. It is of little if any consequence to Canada.
But just a second. Greece is a founding member of the Organization of Economic Cooperation and Development, and is the 34th wealthiest country in the World's Globalization Index. It is classified as an advanced, high-economy country being the 51st richest in the world in terms of purchasing power at close to $26,000 per capita. In 2013 Greece was the 13th largest economy in the 28-member European economic consortium. The Greek Merchant Navy is the world's largest. Greece's tourism industry is powerful, being the 16th most visited country in the world. And Greece's people work hard having the most hours per year work in Europe.
So what happened? From 1900 to 2008 Greece's economy grew annually. Its unemployment rate was a respectable seven per cent. Then recession hit. Industrial production, building activity and retail sales dropped precipitously. Unemployment rates rose to 28 per cent with youth unemployment reaching 65 per cent. Government revenues dropped precipitously.
The Greek government operated a rich social services and educational infrastructure. Greece's economy is based on the service sector (81 per cent). Its agriculture component, while the strongest in the Balkans, accounts for only three per cent of its economic income. Paying taxes was, to a large extent, voluntary – particularly by the richest in the country. Greek merchant fleet owners were also losing money as world trade was dropping.
So what did the government do? It kept service sector people at work as best it could, maintained its social services programs, trod lightly on collecting taxes and borrowed the money to meet its own expenditures. The economy has not yet recovered. And now the lenders want some of their money back while the Greek economy is in shambles.
Isn't it interesting that the drop in oil and gas export revenue in Canada was supposed to have been counterbalanced by an increase in industrial manufacturing and exports. It hasn't happened. We now have a near record deficit in international trade balance. The Ontario government has been borrowing money in the marketplace at a rate of $10 million a week with an accumulated debt of over $500 billion. Quebec is a persistent financial basket case. And the new Alberta government has committed itself to maintaining social and educational services spending while revenues drop.
Our prime minister won't meet with provincial premiers, but we now have a free trade agreement with Ukraine.
Alan Murdock is a local pediatrician.
