Greece is the Word! (With all due respect to the recently departed Jeff Conaway.)

Well folks it would appear that the Greek situation will be coming to a head very soon. Sooner than expected by some and not soon enough for others.

In some ways it’s hard to figure out whom to feel sorry for in this Promethean tragedy. On the one hand you have the Greek citizens and unions who have repeatedly elected the same corrupt politicians based on the foolish promises of ever expanding social welfare programs and public employment with unrealistic compensation and benefits packages.

In order to finance this fool’s errand the government has nationalized larger and larger segments of the private economy, borrowing the money to do so. As those now government held industries became less and less efficient and less and less profitable (as always happens under nationalizations) the government was then forced to borrow even more money to subsidize them in order to keep up the charade of prosperity.

On the other hand you have the bankers and the sovereign wealth funds of the other European states that were of course more than glad to help them out. After all the Greeks weren’t the only ones playing this game of circular self-deception. The Italians would lend to the Greeks and the Greeks would lend to the Spanish and the Spanish would lend to the Irish and round and round it would go. All of them being good European Social Democrats, they were of course obliged to help each other out.

But it was only a matter of time, at some point on the circle the piles of debt would grow so deep and heavy that that corner of the system would have to lose inertia and come dragging to a halt and begin to pull the other players down with it. Quite simply what has happened is that the accumulated interest and principle due on existing debt has out grown the capacity to take on more debt, and it just so happens that it’s Greece that is only the first to reach this point in the end game.

This brings us to where we are today. Someone has to pay. The banks say there have to be “structural reforms,” i.e. austerity, lay off state workers, reduce benefits, raise taxes, privatize state owned industry in order to make the payments on the existing debt in exchange for lending the government even more money. The government, that is to say the politicians, who are owned by the banks that finance their campaigns, by agreeing to these terms, bring themselves to odds with the citizens and particularly the unions who equally feel that they own the politicians through their votes and union’s political contributions.

The threat from the banks being that if Greece does not comply, then it would imperil the stability of all the debts of the other PIIGS that are behind the Greeks by only a matter of degrees. This in turn would destabilize the financial systems of Germany and France that played their own part in this little game of Russian roulette.

The unions and the radical socialists are already making their play with the very real threat of social chaos and the now almost daily mass demonstrations and violence. (There was very little mention in the news here of the fact that they had occupied the Greek Financial Ministry building on Friday.)

So we have what appears to be the irresistible force meeting the unmovable object. Which is which I will leave for the readers to decide for themselves. Is a compromise possible wherein the banks and bondholders take a haircut and loose billions not only in Greece, but also across the entire spectrum of European debt and risk seeing the entire Euro experiment come to an end? Do the citizens, led by the unions and the radicals get the revolution they want, overthrow the government they elected, declare default, withdraw from the Euro and pay the debt with a wildly inflated Drachma, and similarly bring down the Euro system? Or are bribes paid and the Greek military step in with its well-established tradition of performing a coup d’etat to become the banks enforcers? Whatever the outcome you can pretty much guarantee that the independent Greek business owner and those citizens that work for them are the ones that will be caught in the middle and suffer the most. They are the ones for whom we should have the greatest sympathy. Seems like that’s how it always works out.

In any case, its going to be a long hot summer in the Aegean and the waves of unrest may well spread all across the northern shores of the Mediterranean Sea. (Any confluence with the chaos in the Middle East and North Africa is just to dizzying to contemplate at this point, but will need to be addressed at some point whether we want to or not.)

So while the readers watch this splendid little farce come to its violent conclusion they might be well served by asking themselves just how different is all this from our own situation? With state after state facing growing deficits and increasingly under funded pension obligations, are our politicians and bankers and unions all that different than the European’s? Or is this the “European model” that so many of them aspire too?