{UAH} How countries run broke, Part I:The Greek experience has a lot to teach us

In 1999, Greece, then part of the Eurozone joined other countries to adopt the Euro as a common currency. There was a boom in trade as the market was larger. This honeymoon was short-lived for the 'peripheral' Eurozone countries like Italy, Greece and Spain - the free movement of labour meant that richer countries like Germany attracted the cheaper labour. Higher costs of labour in the peripheral countries like Greece drove up the costs of their exports - their exports were ignored as the mammoth EU market could afford to negotiate for much cheaper goods (and services) from elsewhere. They slipped into a trade deficit - and then they could not finance their budget - hence a budget deficit. So they started borrowing - because they had been used to living a 'good embellished life' they soon became mammoth borrowers for the sake of balancing their budget and maintaining their lifestyles.

In came the bomb-shell: In 2008, a recession hit Europe and the richer countries started to mind about saving - 'nebakodowala'. Then the Greek government lied about their financial health and when this lying was discovered, the insurance costs of lending to Greece shot up. They could not borrow as they wanted. The costs of lending followed - interest rates shot up because of the risk involved in lending to poor people - then their banks run short of money and Greece was insolvent. For the first time, in 2012, they failed to pay their IMF loan! This was the mother of scandals because their credit worthiness nose-dived and it became a high-risk gamble lending them any money. Since 2012, they have been surviving on bail-outs from richer EU countries - but with tough strings attached - the recipients had to down-grade the lifestyle they were used to and change to a life of austerity. This year, their shoe-string budget went even tighter. As the money they'd borrowed run out, they defaulted on several loan payments and their lenders set tougher austerity conditions.

The most recent development is that the country has voted to reject the new conditions that require them to live like poverty stricken peasants. What does this mean - no one is going to lend them any money anymore. Just last week, banks put a cap of Eur60 per day on every person withdrawing money (and Eur120 per week) - whether you saved the ka-money you'd worked hard for. There is simply no liquidity. Now, with their current vote to reject a forced peasant livelihood, the banks will run short of money in a week. When countries are poor, they often devalue their currency, so as to reduce the costs of goods and services hence increase exports - but these guys CANNOT devalue a currency they are not in control of. Only three options left:
1. Leave the Eurozone and print sacks of cash so that they can buy their tomatoes at 1 Million 'Greek Moneys' each OR
2. Sit down on a table and agree with the lenders that they reduce their already miserable lifestyle to more austerity OR
3. Seek debt forgiveness - not even relief but complete forgiveness, hoping that those who lent them the billions do not need them (extremely difficult)

Whichever option they choose, Greece might be the first developed country to recede back to a third world country like Uganda where austerity is normal and pervasive.There are lessons for the EAC, and that's why Tanzania is very cautious on the common currency proposal

Germany in 1953 had a robust plan of reviving and rebuilding their economy from scratch. The plan was very convincing and attracted lots of dimes.And the plan worked.The Greeks do not have a convincing plan. They are trying childish stunts like political blackmail... thats why they held a referandum over a deal that was non-existent.... they are talking to Putin, they are giving their citizens false hope.And no body wants to listen to that trash.

Almost 90% of Greek debt is from tax funded institutions like foreign governments and IMF. These too have tax payers that they are answerable to.Greece's total government debt stands at more than $320bn .... Yes... (Three hundred billion dollars).Thats more than double the equivalent of the amount of money the US pumped into Europe in the Mashall Plan.If Greek's total debt was reduced by $17bn.... that would probably give it a lifeline for a couple of months and they would be back asking for more. Thats what is unacceptable.

But you see the issue is not the amount of money.The issue is that the Greeks want to keep bacon, wine and brandy on their tables.They dont want to cut spending. No one wants to keep picking their bills for the next 100yrs. Nooooo !!!!!
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"War is nothing but a  continuation of political intercourse, with a mixture of other means. Man will never be free until the last king is strangled with the entrails of the last priest." 

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