The debt that binds us

Americans may think that they are not in as much economic trouble as Greece but perhaps they should take a closer look, particularly if they factor in the game of chicken their politicians are playing with their futures. 

Earlier this week some international newspapers carried a photo of a woman standing outside the Capitol building inWashington with a placard telling those inside playing chicken with the US economy that  “we are not Greece”.

Not surprisingly being Greece is the new catch-all for economic lowlife.

The trouble is, Ms ‘placard’ is mistaken. Greece has been drowning in debt for years and has been thrown a very troubling and deeply unpopular lifeline by the Eurozone in order to save its own skin, not out of love for the Greeks.

America has been drowning in debt also, and now faces the prospect of not paying the bills for what has already been spent. It’s lifeline of course is to do what its done so often before...raise the debt ceiling allowing the government to borrow yet more trillions.

It’s about as unpopular in many parts of the US as the Sarkozy-Merkel plan is around Europe. After all why should German taxpayers who receive pensions considerably lower than the Greeks fork out for them? Slovakia had the guts to give Frau Merkel & Co. the proverbial finger arguing to the accolades of Slovakians that they are actually a poorer country than Greece and have no intention of paying for those feckless Athenians.

Sitting here in a villa on the gorgeous Greek Island of Naxos it is difficult to make the link to the crisis this country is in...until you see the expressions on the faces of the locals when even the most vague reference is made to the economy.

It is bad. Very, very bad, and what may seem like rock bottom is not necessarily so. Things could get worse, and it is all out of their control – much like the game of chicken going on in Washington is out of the control of the people who will be most affected by it.

The oh so very clever boys and girls lunching in the stately salons of Brussels really have no idea how hard the Greek tragedy is on real people. Nor it seems do the squabbling Greek politicians who are either congratulating themselves for doing a deal to stop the deficit hemorrhage, or, as is the Opposition, flinging accusations that the Prime Minister having taken the country to the brink of collapse is now lying to avoid his own collapse.

You have got to admit it does seem a little delusionary of PM Papandreou to claim that after the deal that will slash the salaries and pensions and hike the taxes of ordinary people in order to avoid being kicked out of the Eurozone, he now claims Greece to have established its participation at the core of the European Union.

Has he not been following the news? He’s at the ‘core’ purely and simply because the Euro apple is rotten. He’s leading the biggest nightmare to have ever hit the unified currency, and he’s been bailed out not because everyone loves Greece, but to save their own skins.

Of course there’s always the possibility that a few of those without Greece’s fiscal woes wouldn’t mind picking up the Acropolis, or perhaps an island or two at a mortgagee sale.

For the locals in Naxos, they are deeply mistrustful of their leadership, full stop.

They work hard in a brutally honest way. They also know the wealthy in Athens will not suffer like they will/are. That’s the way things work.

They know too that with the economic crisis teetering in Spain, Portugal and Italy, much of their regular, relied upon tourism has been hit hard. Fewer people on the streets, fewer in the tavernas, fewer renting cars and villas, shops and small businesses closing.

Don’t get me wrong, Greece is now being called to account for over spending, bloated bureaucracy, ridiculously low retirement thresholds and consistently delayed government reforms amongst other fiscal sins.

And now thanks to global interdependence in things economic, it could get worse if Washington doesn’t sort itself out. Essentially if America defaults on its debt then watch the world spin. Not that it isn’t wobbling already.

The brinkmanship continues, seemingly unimpressed with the fact that ratings agencies already have the US on negative watch, as they evaluate the looming spectre of the leading economy not being able to pay its bills, of domestic and foreign creditors inevitably demanding higher interest rates which will seep into the financial dealings of all Americans, many of whom will be denied their social security payments because the piggy-bank is empty. They don’t even seem to care about the general humiliation in having deliberately destabilised the richest country in the world.

Those who farm, fish and wait tables on Naxos understand the results of what’s going on in their patch, and will not hesitate to tell you it really hurts.

It is yet to be seen if their ‘ordinary folks’ counterparts in the US can see as clearly, although it seems an Obama call to get them to urge Republicans to compromise may be gaining traction with phone lines and the Twittersphere jammed with irate callers.

Perhaps they are not prepared to buy the Boehner line that it is most important to keep the wealthiest American individuals and companies happy, and the rest can go to hell? Hell, because cutting only entitlement programmes for the poor will indeed create a hell for the bottom fifty percent of households which combined, make less than the top one percent. Boehner, embarrassingly forced to exit the Congressional debate on his own unworkable bill which carries loony Tea Party instruction to ring-fence the top echelon of millionaires and billionaires as untouchable in terms of tax increases, may well have overplayed his hand big time.

Perhaps many Americans are buying the Obama claims that he’s been incredibly reasonable, compromised away a number of core Democrat concerns in order to slash spending but also must raise some revenue via tax increases at the top of the economic food chain?

There is no doubt Obama wants to avoid a short-term fix which would raise this whole mess again during election year. Equally there is no doubt that’s exactly what the Republicans want so they can campaign on Obama having wrecked the economy.

The Euro crisis is not over with the big fat Greek bailout and the widening of the scope and powers of the Eurozone’s bail-out fund, with private banks being able to pick up a share of the second bail-out. Leading economists still see the future of the euro at stake and the risk of contagion ever hovering. Others consider the only winners are the European banks which have, for a relatively modest contribution to the aid package, escaped the much promised wrath of Merkel. 

Mirroring the Euro saga the US crisis will not be over even if one of the two parties blinks first and an interim deal is done so default is avoided – for now. The damage of indecision is palpable throughout global markets, and the lustre of the AAA rating has well and truly tarnished.

The placard that America is no Greece may be technically true, but there should be little room for complacency in such a technicality.