A Day No PIGS Would Die
Don't take this the wrong way, but there oughta be a putsch in Germany right now.
Or at least, German voters, who never got to voice an opinion on whether to exchange the deutschmark for the (now supposedly endangered) euro, should at least break a few windows to protest the speed with which they're being bilked into bailing out the government of Greece, a socialist coalition led by the beyond-stale political grandson Geórgios Papandréou.
But while there's been plenty of attention on the general strike in Greece (to protest the bankrupt government's "austerity" measures), there has been no thought given to the popular reaction among French and German taxpayers. Seeking Alpha's Edward Harrison has an interesting argument that political opposition from Germany's Free Democratic Party might still block the Greek bailout. Maybe things are different in Germany, but the American experience teaches us bailouts happen regardless of what the voters want.
Why is all this happening? MarketWatch's William L. Watts explains that the "credibility" of the euro is at risk, and pads the case with the usual no-more-Mr.-Nice-Guy codswallop that preceded the passage of the TARP in the United States:
As a result, any aid package is expected to come with tough conditions designed to ensure Greece cuts its massive deficit at all costs, setting its fiscal house in order and acting as a warning to other euro members, analysts said.
You know what aid package would require Greece to get its fiscal house in order at a much lower price? No aid package! Greece has a bloated and rapidly growing public sector. It's taking a space in the EU that Turkey (a true friend of the West) should have. Greeks retire four years earlier than Germans (and Americans) and are furious at suggestions that the retirement age be raised by two years. Every piece of evidence screams against pouring any more money down this hole.
Even if you believed a Greek bailout would succeed, for the first time in the history of Earth, in making the recipient more fiscally responsible, this would still be just the first sucking sound from the PIGS countries (for Portugal, Ireland, Greece and Spain, sometimes spelled PIIGS to include Italy). Europe is full of lazy, super-entitled bums who aren't even a threat anymore now that their penchant for violence is directed into soccer fandom rather than war. Why even suggest bailing them out?
Finally, on the issue of the euro and its credibility: Some reckoning like this was bound to happen in the changeover to the common currency. That's why the founding documents of the EU put so much emphasis on quality public finances and curtailing support for profligate governments. A Greek default would not endanger the euro any more than a California default will endanger the dollar. It was (IIRC) President George W. Bush who warned us to beware of Grecians seeking gifts. Now is not the time to forget that lesson.