Recently by Simon Black: Does the US Government Want to Prevent You From Leaving?
I went to dinner last night in an upmarket area of Thessaloniki. It wasn’t a touristy part of town at all, nearly everyone there was local.
As we walked down a narrow cobblestone path flanked by traditional Greek restaurants, all the various hostesses and proprietors ran out to greet us and pitch their menus.
“We have the freshest seafood!”
“We have the cheapest prices!”
“We offer free drinks and dessert!”
Within seconds, outright calamity ensued with each thrusting menus in our faces, pulling at our shirtsleeves, and shouting over the competition. Then a shoving match… and then finally an all out physical altercation, literally coming to blows over what amounted to a $20 dinner tab.
Now, aggressive behavior is common in this part of the world; it gets even worse in Turkey and North Africa. But there is an element of desperation that I have not yet seen before here. Given the graveyard of former restaurants gone bust nearby, it’s clear that last night’s owners are trying to stay afloat at any cost.
Later in the evening, I dropped by the city’s ancient agora ruins. Inside I could see a number of stray dogs marking their territory as they saw fit, and it was the perfect metaphor. This place has literally gone to the dogs.
Coincidentally, the Greek government held a ‘successful’ bond auction yesterday, unloading 1.6 billion euros of six-month bills. This sounds like a lot of money until you figure that it just barely covers this month’s interest payments on the roughly 340 billion euro debt that they already owe.
Just last month alone, the Greek budget deficit was 2.2 billion euros. Greece must continue indebting itself not only to make interest payments, but simply to keep the lights on. Meanwhile, the principal balance owed keeps rising while tax revenues are falling… making the situation perpetually worse.
Bailouts can’t fix this problem. Think about it like this: say your best friend is swimming in debt, paying $5,000 per month in interest. His best job prospect is $1,000 per month, so he’s in the hole $4,000 per month and rising.
If he receives a new $10,000 line of credit, would this fix his problems? Not at all. He’d be staring at bankruptcy again within 3 months.
