Sunday, 28 June 2015

The Greek Tragedy



With a public debt of $ 320 Billion , and unable to raise fresh loans ( to pay off old loans ) , Greece is on the verge of bankruptcy - and exit from Euro-Zone


Dire predictions are being made by the Economists / Bankers / Politicians etc , as to what will be the impact on :


*    Other debt-ridden countries like Portugal / Italy / Spain etc

*    Economies of the European lender-countries 

*    Balance Sheets of Financial Institutions ( eg : IMF / European Common Bank etc )

*    Economies of Developing countries , unable to export to Europe


But hardly anyone seems to be asking :


*    Why did Greece land itself in such a trouble ?

*    Will Spain / Portugal / Italy - and other debt-ridden countries - soon find themselves in a similar condition  ?
      

You don't need to have a Ph D in Economics to know the obvious answer  !


Greece finds itself in this trouble for the same reason that a person would , if he starts spending far in excess of his income


Usually by borrowing lots of money from friends / relatives , who , oblige without asking :


>    What is your current income ? What is your current savings ? 


>    What is likely to be your future income ?


>    What do you need this loan for ?  When - and how much - will you repay  ?



If there are no satisfactory answers , then you know that either the borrower has no capacity to repay

or , ( worse ) , no intention to repay  !



Apparently , Greeks have been living beyond their means ( income ) for many many years


Generation after generation of Greeks thought :


>   Let us enjoy today .  Why worry about tomorrow ?  Let our children worry about that  !



The 20+ something Greek youth ( of which , 26 % are unemployed ) , have " inherited " that debt of $ 320 billion , from their fore-fathers


Hence , it is reasonable for them to say :


"  Hey ,  I did not borrow / spend all that money  !  Why should I be made to suffer for the sins committed by my parents / grand parents  ?  "


Problem is not that the lenders cannot accept this argument and agree to , even write-off $ 320 billion


All that the lenders are telling the Greek Youth ( thru Greek Government ) , is :


"  No problem , but no more money either , 

   Just learn to live within your own income . Learn to fend for yourself .

   Stop living on borrowed time ( - and borrowed money ) "



Here , there is a lesson for us Indians , as well  !


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hemen  parekh  /  29 June, 2015


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