More news later today on my new/old book project, but for a moment let’s look at what’s happening in Greece, because I’ve become quite convinced that markets have gone completely mad and the world economy is about to suffer for that madness. In fact I am sure of it. That’s because stocks are up today on word of a second debt bailout for Greece — a bailout that has no more hope of standing than the one before it. Greece is bound to default, beginning a likely fall of economic dominoes across Europe. And while that news is not explicitly about technology, it will certainly affect all of us interested in technology, because Greece is screwed along with much of southern Europe.
Here are the facts — not my opinions, facts.
In January, Greece’s tax revenue from its Value Added Tax (VAT) collapsed by 18.7 percent from a year earlier.
The VAT rate for food and drink rose from 13 percent to 23 percent in September to comply with demands of the European Union, European Central Bank, and International Monetary Fund.
The effect of this boosted tax revenue has been overwhelmed by the contraction of Greece’s economy with overall tax receipts (not just the VAT) falling 7 percent compared to a year ago when they were also considered to be terrible, just not quite as terrible as they are now.
Meanwhile, 60,000 small firms and family businesses have gone bankrupt in Greece since the summer, this in a country with only 11 million people. Imagine a quarter of all businesses disappearing from Ohio over just three months, because that’s the equivalent.
The Greek budget deficit is stuck near 8-9 percent of Gross Domestic Product (GDP) because the country’s economic base is shrinking so fast.
Yet shares are rising on markets across Europe supposedly on the idea that Greece will this time fulfill its obligations under the new debt accord — obligations that will continue until 2020 when the country will still be prostrate with public debt at 120 percent of GDP — if everything goes perfectly?
Now my opinion: Greece is screwed. The new debt accord won’t hold, austerity measures won’t be fully implemented, and the Greek government will formally default within six months. And stocks are rising as powerful people and organizations prop up share prices just long enough to unload their own positions, leaving the little guys to drown.
Far better to just let Germany take over the payments and own that Greek jalopy outright.
But that’s just one geek’s opinion. What the heck do I know? Yet I must speak up because I sure don’t see any of this in today’s business press.