Beware of Greeks bearing gifts

Once upon a time people compared Ireland to Iceland simply because their banks collapsed at the same time.  Both countries set about addressing the problems all be it in different ways with different impacts on their citizens.  No 2 countries have identical economies but when something as fundamental to any economy as a banking system collapses the reality is that no sector in that economy will escape the implications.

What dragged the Irish state down in 2010 was the reliance of the states coffers on the property sector which the bank fuelled with cheap money.  The then government’s failure to address spending added to the catastrophic decision to guarantee all bank deposits and their failure to identify how deep that banking pit had become did for us.  Their cronyism with the bankers and builders condemned generations regardless of what government would be in office to underpinning the casino capitalism which deregulation primed.  Can you remember the call for citizens; “Where’s my bail out”?.

What actually saved this country was membership of the euro.  If we had the punt, the debt would have been in foreign currency and the punt would have lost international value as interest rates would have climbed.  By now national debt would have crucified society, we’d have no hope.

Which brings me to Greece.  Tonight we will know the result of their election.  The likely winners Syriza started the election with a swagger and a list of promises.  One senior member quoted on RTE’s Drivetime this week said that if they keep just 3 of the 10 promises they make he’ll be happy.

The suggestion of Greek burning bondholders, leaving the Euro and debt default is off the agenda.  At best the Syriza spokesperson says they’ll press for a European debt conference for a write down.  Accessing the ECB’s wall of money  (otherwise called QE) requires each state including Greece to stand over whatever money is printed for that state through bond buying.

This week’s move by the ECB may in time have more influence on Europe than the Greek elections.  Greece was allowed into the Euro without real diligence being paid to the reality of Greek finances.  The Greeks have paid hugely for this.  Hospitals closed all around the country, no rail service to the Peloponnese, transport to islands cut, social welfare slashed with huge numbers of public servants let go. Heavy taxes imposed on a people where tax was by all accounts voluntary. Retirement age raised to that elsewhere in Europe.  There is little extra money in Greece’s economy, there was no suggestion as there is in Ireland of an economic pick-up.

So when the Greeks come knocking asking for another break, one can understand why Irish or Portuguese citizens might just ask “What about my bail out?”. Greece has been cut more than its fair share of slack in the last 7 years by countries like Ireland.  I’ve no problem with a Debt Conference but what about crediting those countries like Ireland that actually dealt with its debt at such conferences?

Any lender will ask themselves just one question before they loan and it is this; “Will I get my money back?”.  If a lender throws more money after bad debt, they may enter any conference on debt with a less than positive attitude. What can Syriza do then?