Waxing biblical, David McWilliams suggests Greece, and by extension Ireland, invoke the Bible as a reason for working out of the mountain of debt the government has foisted upon us. McWilliams cites Deuteronomy, which calls on creditors to release their debt every seven years. One version I found on the internet starts off like this:
In the seventh year thou shalt make a remission, which shall be celebrated in this order. He to whom any thing is owing from his friend or neighbour or brother, cannot demand it again, because it is the year of remission of the Lord.
It is very similar to the quote in McWilliams’ article. Sounds good, right? Well, no, because the passage then goes on to say: “Of the foreigner or stranger thou mayst exact it.” Since Greek and Irish bonds would be sold mostly to foreign investors, the Deuteronomy excuse is hardly likely to fly!
On a more serious note, the amount of debt faced by many European countries is awe inspiring. Bond markets react to the debt by expressing doubts that countries will be able to repay it — and then push up the cost of debt up even more. It’s a vicious circle than can only end badly. It is even more difficult for countries locked in to the euro since austerity measures are usually accompanied by a currency devaluation. As McWilliams says:
The Greeks will be asked to bear all the brunt of austerity without the cushioning effects of a cheaper exchange rate; this is a first in economic history and militates against a successful adjustment.
Writing in the Irish Independent, meanwhile, Dr. Constantin Gurdgiev, argues that the Greek situation is a precursor to what will befall Ireland with our “extreme degree of deficit financing.” The interest payments are so high that:
Three years worth of income tax levies imposed by the Government in the Supplementary Budget 2009 will go up in smoke.
Worse yet are the strains that will be placed on the euro itself. He says the worst-case scenario of a euro-zone collapse and a return to national currencies “looms large.” How that will be managed simply defies description. As for the €480 million we don’t have that we borrowed to bail out Greece, Gurdgiev says, the likelihood of getting that back is “virtually nil.” Oh well, it was only money.