The world is waiting in anticipation to discover whether Greece, after their referendum last week voting a resounding ‘no’ to austerity, will accept the conditions attached to a bailout deal, or face expulsion from the European Union. Like some finale to a Bond movie, Greece has been given 72 hours to submit, or accept life in the darkness outside the ‘Euro zone’.
Greece is a significant test case for what happens when a country can no longer pay its bills. I have written before on the scandal of debt, both individual and societal, and the danger, both moral and practical, of kicking our financial burdens many generations ahead of us, onto our children and grandchildren.
But what if the creditor comes calling before then? What if a country cannot even make the bare minimum of payments on its debt load?
For individuals who could not pay their debt, at least until not so long ago, there were debtors’ prisons, whose lurid and subhuman living conditions were made infamous by authors such as Dickens. People were locked up in crowded jails, until they could ‘pay the last penny’. But, in a classic catch-22, since they could not make an income in prison, the sentence often dragged on for years, until the debtor died of disease or starvation.
We more or less got rid of prison sentences for debt, and being sentenced for non-payment of loans is in fact illegal in the U.S. and Canada. Well, sort of. There are some debts that can send you to jail, for example, not paying a fine; the judge, however, has to determine some level of willingness not to pay, what is termed mens rea, or a guilty mind. Basically, if you can and should pay, then you must pay.
If you simply cannot pay for reasons beyond your control, we have lenient bankruptcy laws, wherein one can ‘start over’, or ‘restructure’ one’s debt. We should keep in mind, however, that for those (hopefully) few who declare bankruptcy, someone, somewhere, sometime, is paying their bills. That unpaid debt gets washed into the system, absorbed. Hopefully, like a bit of dirty water in a vast ocean, it does not make that much difference and we, as a society, have been willing to help the minority who fall on hard times.
Problems arise, however, when we apply this principle not just to individuals, but to entire nations. Bankruptcy becomes vastly more complex when a whole country, like Greece, applies for financial protection and help.
Here is one rub: Greece, like most developed (and even undeveloped) nations on our planet, has a bloated, overpaid public service, many of whose former employees are now living on rather generous pension plans. As Mark Steyn writes, the myriad of public servants enjoy 14 monthly paychecks a year, and retire at the tender age of 58, so many Greeks live for decades on the public purse, enjoying fine wine and the white beaches and turquoise waters of the Mediterranean. One can imagine the frustration of the Germans being forced to pay for this largesse.
Is this what bankruptcy looks like? For individual debt, declaring bankruptcy requires that one seriously reassess one’s financial situation, and begin to live within one’s means. But any hint of ‘austerity’, to use a word from their own language, is anathema to the Greeks, as last week’s referendum demonstrated.
Furthermore, even if the Greeks do accept the bailout conditions, the European financial system, like a cheap paper towel, is running out of absorbing power for bad debt. In a society, if 1-2% are insolvent, the other 98% can see them through. But what if 50% go bankrupt? What if, perish the thought, we are all bankrupt, and the whole Ponzi scheme will be shown up for what it is?
As the Holy Father says in Laudato Si, there is a vast and increasing dissociation between the artificial economy (what he terms ‘finance’) and real economy (the true wealth of a nation), and this divide is being put on full display in Greece, the disintegration of whose economy has already begun. People are now trading in Gucci handbags and bagels, and airlines will only accept American currency.
What do you think would happen if Greece is cast off from the Euro and forced to go back to the drachma, which is likely worth not much more than a Zimbabwean dollar? (Curiously, just last month they stopped printing currency in the south African nation when it topped out at 35 quadrillion to one U.S. dollar. I am not even sure what a ‘quadrillion’ is, and fear to look it up).
The current bailout, like the previous two totaling one-third of a trillion dollars, will only buy some time until they, and we all, can begin to live within the confines of the ‘real’ economy. So far, the fake-Euro has masked any earlier Greek financial reckoning (as it has the Italian, Spanish, Portuguese, Irish and so on), by artificially buoying up their currency, allowing Greeks and the rest to live well beyond their means.
As Saint Thomas says, following Aristotle, a small error in the beginning leads to a big and difficult-to-correct one in the end, and one implication of this principle is that the farther one deviates from reality, the harder is the contact when one finally meets it: Correcting a mistake in math is easier when one first learns addition and subtraction than when one faces calculus; ending a bad romance is easier soon after the first date than when one or the other is in too deep; jumping from the first floor onto terra firma is better than the 24th; and paying back what is owed soon after one starts borrowing is far better than getting hooked on other people’s money.
Alas, the Greeks, and most of us, have drifted quite a ways into uncharted levels of debt, and no one quite knows where we are going.
What we do know is that the fateful day of Greek reckoning will come, as it will for us all, but in the meantime, the island nation will have to accept the austerity measures which will hopefully bring them some little ways back to economic truth. But even the multi-billion dollar package, or even an outright ‘forgiveness’ of the debt, will not mean much unless they radically correct course. Otherwise, Greece will soon be in the same leaky and sinking financial boat.
But from the looks of things in Greece, that will be a hard sell for Prime Minister Tsipras.
As the old saying goes, manducemus et bibamus, cras enim moriemur.
July 13, 2015
Saint Henry I, Emperor