Once upon a time, there lived a government that ruled a country called Kulahappy. Kulahappy’s government had no problem spending money, actually lots of it. You see, in the government’s mind, the people had to be taken care of and it instituted a fairly generous public pension and healthcare system. The public pension system was open to all working citizens of the country and productive citizens were allowed to take early retirement and jump into the merry pension bandwagon. The people were very happy, especially since the government of Kulahappy was not in the habit of taxing them very much. Everything was humming along very well until a global financial crisis occurred.
Suddenly Kulahappy and other countries had difficulties borrowing money in the international markets as everyone turned off the lending taps while trying to assess who was a good or bad credit. Kulahappy’s government then decided to let out a secret that it had been hiding for several years: they had a massive budget deficit and were spending way faster than they were able to collect in taxes. It was so large that they couldn’t possibly fund it by issuing more government bonds in the domestic market. They needed external help. But international private lenders had had enough of Kulahappy’s antics and were struggling to sell off the existing government bonds faster than you could say Athens. With no takers, Kulahappy had to turn to the Union of neighboring countries with its hat in hand and ask for help.
The Union rapped Kulahappy’s delinquent knuckles very hard and said they would only lend if Kulahappy started taxing its citizens more and cut down on its public spending. What? Kulahappy was being asked to act like a grown up and it didn’t like this one bit. Its back was against a wall and, with its piddling options, started making pension and healthcare cuts while slowly trying to increase the tax brackets. The Union released the funds, 107 billion units of relief, which was the biggest debt-restructuring program in the history of the world and life went on. But the citizens were not a happy lot at all. Pension cuts led to social unrest while the underlying economic factors of production were not improving, in fact the economy contracted by 25% over the next four years. Youth unemployment began to rise, there were more poor people on the streets and before you could say Tsipras is your daddy, the government was thrown out and a new one was voted in.
The new government was made up bad boys. These boys were so tough that they told the Union exactly where it could go and stuff its face with German sausage. You see, the new boys had managed to convince the electorate that the Union-inspired austerity measures were bringing the Kulahappyians to their non-taxpaying knees and that the Union was the cause of all their problems. The new government told the Union that, quite frankly, it wanted a 50% debt write off and it wanted any discussions about budget cuts thrown into the pit latrine of history. Did I mention that the debt that was being requested to be written off was the biggest emergency loan given to a country in the history of mankind? These boys were gamblers par excellence, taking a bet that it would be suicidal for other Union members to try and force a Kulahappy exit. In their rose tinted glasses view, they were all joined at the hip for better or for worse, in richness and in poverty and only a communal seppuku ceremony would separate all parties concerned. The disgraced Kulahappyians and their thoroughly annoyed Union cousins lived unhappily ever after.
The Greeks are having a tad bit of “kula happy” fever. They have the European Union members over a barrel as everyone probably wants them out but the legal process for exiting the monetary union was not put in place as it was never envisaged that a free-wheeling, sun kissed, tax avoiding member would fall into the kind of trouble that Greece has done. The Greeks are better suited as African Union members since we can totally relate to their habits of runaway spending and tough talking governments.
But their mastery of political doublespeak is what should make them card carrying members of Africa’s political elite. Prime Minister Tsipras and his team have some serious gumption to stand in front of its lenders, the International Monetary Fund and flip them a proverbial finger by saying they have to go to the people and get their mandate as to whether to implement the austerity program. Tsipras has put the monkey on the back of his austerity weary citizens: “Say no to the austerity, so that we can bring the lenders back to the negotiating table on the basis that the people have spoken. Say yes, and we’re up the creek without a paddle. Chaos panic and disorder will become our mainstay and, by the way, I’m out of here because I can’t see a way out of the quandary this government is in.”
Good people, we need to keep a careful watch over what’s going on in Greece. We can’t shrug our shoulders every time the media highlights yet another profligate abuse of financial discretion by the Senate or the National Assembly. Each and every penny of government spending comes from us, at least that which is not funded by borrowing. If ever the music stops, and the government is unable to finance its budget deficit externally for whatever reason (political turmoil, default of existing debt etc.) the trickle down effect of a government that stops spending are too frightening to dream about. The economic contagion of a broke government inevitably leads to social unrest in an already fragmented country. But I guess no one wants to hear doomsday news like that. Neither did the Greeks five years ago.