What Country is too Big to Fail?
June 29th, 2011While citizens around the world are abruptly finding out that their countries have been living beyond their means, governments around the world are being forced to pull back the reigns on what has been a fruitful decade of welfare, militarism, and benefits to public workers. The headlines have been met with protests and consequently gallons of tear gas.
Greece has been on thin ice through the past year (even longer, but under wraps) and is now approaching its last leg of stability. Greece must cover 6.6 billion euros in bonds or find itself unable to pay pensions and government salaries. That would mean Greece would go bankrupt, a first for a Euro-nation. The UN has offered a bailout, but only under “strict” measures: take away the welfare state and raise taxes…OR the government officials won’t get paid. Guess how that vote turned out? I’m not defending or opposing government support of programs such as public schooling for pregnant teens, labor employees’ paychecks, or other subsidy recipients. However I’d like to point out that reactions are of no surprise. How would American people react in the United States if food stamps were voted to be discontinued as an austere measure mandated by the Federal Reserve, in order to receive a bail out for the country’s government and prominent businesses. Who is actually going bankrupt here? The individuals or the government? Who made the financial decisions for Greece?
One can argue the individuals make up the government and also make the decisions by voting people in to make the decisions for them. If that’s the case, why are Greek citizens on the streets receiving tear gas to the face? This measure of austerity is not something they prefer. The Greek government will survive while the lives of the common person in Greece will be destroyed, although, perhaps, only temporarily.
This isn’t the only country experiencing thin ice. Portugal plans to go “beyond the terms” that the EU has set out before the countries under threat of bankruptcy. Details of Portugal’s austerity deal have not yet been released.
These sort of arrangements are also not solely occurring in the EU. Even California is imposing measures to avoid total bankruptcy as a state. The closing of state parks, mental health programs, college and universities, while also increasing taxes is a large part of California’s plan to return themselves to fiscal health (however most legislators are saying that deficits would return in full force by 2012, regardless of the measures).
As countries approach their financial demise, we can all assume that a larger entity with no actual wealth, only a printing press, will be stepping in to bail them out. All the hype about Greek going bankrupt is legitimate, however nothing to be too worried about in the present state, because with the way the central banking systems work around the world, countries, much like large corporations are too big to fail…for now.
