Monday, Apr 23, 2018
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Greece's Trojan horse

IN the end, Germany and other members of the euro zone had little choice: bail out the profligate Greeks, or watch as other of Europe's weaker economies followed it into the financial abyss. If that had happened, the implications for the still-shaky American economy could have been severe.

Greece has been spending more than it earns for years, accumulating a huge national debt that today stands at about 113 percent of the country's gross domestic product.

The cradle of democracy also suffers from widespread corruption. Bribery of public officials is common and expected. Public sector employees are wildly overpaid and have pensions that would be the envy of unionized workers in the United States. Tax evasion is a national sport.

Nobody asked too many questions when the European economy was humming. Then, along came the global recession. Unemployment rose and revenues declined, but for a time Greece weathered the storm by borrowing.

Today, interest payments on its debt eat up nearly one-quarter of Greece's revenues. The country's credit rating has tanked, making it almost impossible to borrow. Greece was in real danger of defaulting on some $11 billion in loans due May 19.

But the International Monetary Fund and members of the euro zone stepped into the breach, pledging a $145 billion bailout over several years. In return, Greek Prime Minister George Papandreou announced severe austerity measures, including freezing wages, increasing taxes, and cutting pensions. It's likely the Greeks will be on this fiscal Mediterranean diet for several years.

Despite Mr. Papandreou's apparent sincerity, it doesn't appear the Greeks are going to embrace reform willingly. Tens of thousands of public employees have taken to the streets in violent protests that resulted in the deaths of three bystanders. Eliminating public corruption and getting people to pay their taxes may require basic changes in the way Greeks view civic responsibility.

Nor is the bailout popular in countries that will be footing the bill. Many Germans wonder why they should pay the tab for the Greeks' free-spending ways.

The answer is: so that Greece's troubles won't turn into a Trojan horse for the rest of Europe and the world. If Greece's economy were to sink into the Aegean Sea, it's possible that euro-zone partners Portugal, the Republic of Ireland, and perhaps even Spain might follow. If that happened, Europe's recovery from the global recession would falter and many European countries would have to cut back on their own spending.

And because U.S. businesses depend so heavily on the vast array of products they export to Europe, those developments would slow, or even stop, the recovery of the American economy as well.

Greece always has had an influence on the world out of proportion to its size. Ask the Trojans or the Persians. Or ask anywhere democracy has taken root around the world.

So Americans shouldn't be surprised that trouble in the eastern Mediterranean could have had a ripple effect over here.

They should just be grateful that it's not America's checkbook that's paying for this gift from the Greeks.

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