The Greek debt crisis is putting enormous strains on the European Union. Greece is heavily in debt. Its 2009 budget deficit was projected to reach 13 percent of its Gross Domestic Product. Greek’s mounting debt problems prompted fears that Greece would default, causing investors to sell Greek debt instruments, which in turn put pressure on the European Union’s common currency, the Euro. As a result, European financial and political leaders are pressuring the Greek government to impose unpopular austerity measures, and some members of the Greek community have been protesting those cuts. In the meantime, Greece is appealing to Germany and France, as the financially stronger members of the EU, for support. The French President, Nicolas Sarkozy, says the EU has to support Greece or give up on the idea of a common currency and common political future. The German government seems to be more on the fence.
The interesting point about this story is not that it has happened — with Greece’s borrowing-oriented, over-the-top welfare state mentality, a budget crisis was inevitable, and other debt-laden EU countries are not far behind — but the cultural and political fissures that have been exposed. In Germany, in particular, citizens and politicians are resisting bailing out the Greek government because they believe they are subsidizing sybaritic, free-spending ways of the Greeks. In Greece, workers can retire at 63; in Germany, they must work until age 67. Some Germans believe that the salaries paid to Greek civil servants are too large, that Greeks are too lazy, that the Greek culture is corrupt, and that Greek farmers are swindling the EU.
What the Greek debt crisis really demonstrates is that any political union must be based on trust and equity. When times get tough, there must be a sense of shared sacrifice and shared values. Eventually, if enough Germans believe they are being played for saps because they are working hard to support the unsustainable lifestyles of pleasure-loving Greeks (and others), they will refuse to continue to do so and the European Union will fracture and fail.
There is a lesson in all of this for California, which is facing its own version of a serious debt crisis. Over the long term, California cannot expect the federal government to bail it out of its budget problems. It won’t take long before hard-working Texans, or North Carolinians, or Ohioans, will object to subsidizing California’s absurdly generous public pension system, its unwillingness to cut programs, or its oppressive regulatory regime that has caused many companies to flee the Golden State for more business-friendly locations.
America is more politically and culturally cohesive than the European Union; Texans have much more in common with California than Germans have in common with Greece. Still, the pressures that come from the ant subsidizing the grasshopper are the same, and would better be avoided by California getting its budgetary act together.
Webner House 
Get ready for the hedge fund hyenas, “PIIGS” (as the Soros/Goldman boys have callously named all of you). They’re cooking up ways to attack sovereign debt and the bonds of your governments as we speak. America may even be next. I wonder how many sheep in the United States will still be echoing big business by chanting “down with big government” when the bankster billionaires intentionally collapses our entire system.
Greece does not need an austerity program, as the Greek labor movement has eloquently argued in the course of their successful and admirable general strike last week. Greece does not need a bailout from Germany, the sinister International Monetary Fund, or from anyone else. Least of all does Greece need to accept the advice of Austrian school or Chicago schools charlatans who recommend the catharsis of a deflationary crash that would destroy an entire generation through unemployment, poverty, and despair. Greece needs to defend itself with a 1% Tobin tax on all derivatives and other financial transactions. Greece should take the lead in outlawing credit default swaps, which amount to issuing insurance without meeting the capital requirements of being an insurance company. Greece needs to enforce EU and national antitrust laws. If Soros and his gang succeed in breaking up the euro, Greece should make the best of it by immediately imposing heavy-duty exchange controls and capital controls to protect the new drachma, on the model of Malaysia a dozen years ago. Greece should shut down domestic zombie banks and seize its central bank and use it to issue 0% credit for industrial and agricultural hard commodity production. If the Greeks made plain what they intend to do if they are forced to fall back on the drachma, the financiers who fear such an example would have another reason to relent.
Another obvious expedient is that of a bear squeeze or short squeeze. Soros, Goldman Sachs, and their gang of hedge fund allies have now used derivatives to establish short positions against Greek bonds and the euro, betting that these latter will go down. Political pressure is now being brought to bear on the European Central Bank and the Greek central bank to undertake an unannounced large-scale purchase of Greek bonds and euros in the forward market, causing the Wall Street predators to lose their bets, thus punishing them severely with extravagant losses. This is normal central bank practice, and it will be astounding if the Greeks do not execute such a maneuver very soon.
The world now faces a stark choice between two alternatives, with Wall Street forcing the issue. The first is that the zombie banks and hedge funds, having been saved and bailed out by national states and their taxpayers, will repay the favor by driving the national states and all forms of state, provincial, and local government into bankruptcy. This will be synonymous with the destruction of modern civilization itself. The second and preferred alternative is that the national states summon the political will to use the inherent powers of government to place the zombie banks, hedge funds, and related purveyors of derivatives into bankruptcy receivership and shut them down once and for all, relying in the future on nationalized central banks for the provision of credit. The second alternative would allow the preservation of modern civilization as we have known it. But in the meantime, the derivatives-based speculative attack on the southern flank of the euro has accelerated the arrival of the second wave of depression, which now appears likely to strike the world before the end of 2010.
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