Too Much Socialism and Tax Evasion Triggered the European Sovereign Debt Crisis

Posted by PITHOCRATES - November 12th, 2011

Week in Review

The cause of the Greek problem was too much socialism (see Newsmaker: Greece’s Papandreou, Socialist scion, felled by debt by Dina Kyriakidou posted 11/6/2011 on Reuters).

Greek Prime Minister George Papandreou was elected as a Socialist who would lavish jobs and benefits on the poor and working class, but was brought down two years later by an economic crisis that forced him to do the opposite.

That’s the problem with being overly generous.  And its why businesses are very reluctant to make long-term generous financial commitments to their employees.  Because everything works during good economic times.  But when the economy turns sour, look out.  Those generous commitments can sink a business.  Or a country.

His Socialists came to power in 2009 with promises to help the poor that had been left behind by an economic boom that followed the country’s entry into the euro single currency.

But since he took power and announced that Greece’s debts were higher than thought, the country has suffered its longest recession in generations, and the poor and working class have been hit hardest.

To stave off bankruptcy, Papandreou has been forced to impose severe spending cuts and hack back at a welfare state and a system of generous treatment of state workers seen as the legacy of his own charismatic father.

That’s right.  The Greeks cheated to get into the Euro.  Had they been truthful about their debt they would not have met the requirements to join the single currency.  And the rest of the Eurozone would not be struggling to save the Euro.  Debt matters.  Too much of it is always a bad thing.  And if you’re lying about it you have way too much.

Of course, continuing business as usual hasn’t helped.  It’s only made things worse.  Which led to the European Sovereign Debt Crisis .  And the hated austerity measures.

A raft of austerity measures followed to counter pervasive tax evasion and scale back a bloated public sector to meet the terms of EU and IMF bailout packages.

This is why socialism doesn’t work.  It takes high taxes.  Which the recipients of those generous benefits don’t mind.  Because they’re not paying those high taxes.  It’s a different story, though, for those who have to pay those taxes.  And they go out of their way not to.  Because they’re too high.

Of course, the defenders will say it’s just another example of the greed of the rich.  Those selfish people who don’t want to work long and hard so others don’t have to.  The taxpayers, of course, see it differently.  They just don’t see it as their responsibility to take care of everyone else as well as their own families.

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