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Greece Hits The Bottom of the Socialist Death Spiral

In the course of critiquing President Obama’s 2015 State of the Union address, columnist George Will remarked: “Ignoring reality is part of the job description of being a progressive.” Greece’s new, far-left Prime Minister Alexis Tsipras plans to ignore reality more than any other politician in recent memory.

Americans who haven’t been paying much attention to the collapse of Greek socialism have been missing a very instructive lesson in where their own country may be heading, for Greece is the end stage of Obama-style debt-fueled dependency politics. Tsipras’ sweeping electoral victory marks the point at which the Takers, weary of intellectual pretensions and empty promises to work hard and become self-sufficient, tell the Makers to stick ’em up and hand over their wallets. It could happen in America, too, most likely beginning with demands for huge federal bailouts by bankrupt Democrat-run basket case state governments.

Tsipras isn’t simply ignoring reality. He’s going to weaponize his own national debt, making a “too big to fail” argument to squeeze more cash out of the European Union welfare system that keeps his beggar nation running. Previous deals to resolve the Greek debt crisis involved giving its creditors “haircuts” – that is, asking them to accept a return on their investment considerably lower than what they were promised. Tsipras says he’s going to lower that barber chair all the way and go Sweeney Todd on Greece’s creditors, writing off a big chunk of its enormous national debt – currently standing at more than 175 percent of its gross domestic product – and reneging on the terms of the 2010 bailout package Greece received from the European Union. Critics who thought that bailout was a bad idea are about to be vindicated, good and hard.

Greece’s bailout and haircut debt-reduction giveaway was premised on the country adopting “austerity” measures, an agreement not dissimilar in principle to what debt-consolidation companies might expect of an individual who seeks low-interest loans to pay down overflowing credit cards. “Stop going further into debt” is the sane demand made of every insolvent party looking for a bailout. Tsipras, on the other hand, campaigned on spending money like it’s going out of style. He’s going to take his beyond-bankrupt government on a wild spending spree, tossing bales of money he doesn’t have to cheering crowds… and then he’s going to demand more bailouts. He thinks he’ll get them because his nation is too big to fail – the EU won’t stop cutting welfare checks to Greece, because then it would lose all hope of recovering the hundreds of billions of euros it’s already plowed into keeping it afloat.

The thin intellectual cover draped over this shakedown will be the contention that only by pumping fresh billions into the Greek dependency system today can its people ever hope to become comfortable and productive enough to repay any significant fraction of the debt tomorrow. The uglier undercurrent will amount to fiscal blackmail – at this point, if the EU cuts Greece loose, it would lose more than the $50 billion or so Tsipras demands today.

This is not to say that Greek voters lashing out against their “austerity” programs are without legitimate complaints. “Greeks believe, not unreasonably, that the conditions imposed by the troika have been disastrous,” the Wall Street Journal editorialized on Monday. “The 2010 and 2012 bailouts came with draconian fiscal tightening, in the usual IMF fashion, with too little attention to promoting pro-growth reforms. The result has been falling wages and pensions and rising taxes, with no growth in return for the pain.”

The Journal faults the previous Greek administration for failing to properly implement “reforms to labor markets, business regulations, and a crackdown on corruption that would have promoted growth.” Funny how corruption is always the last thing to get cracked down upon when socialist governments go belly-up, isn’t it?

The resulting stagnation created the sort of environment where the WSJ warns that extremist parties, including the victorious left-wing Syriza and the disturbingly fascist third-place Golden Dawn, can flourish. That’s a fine and prescient warning, so allow me to repeat it to the voters of every more-or-less-solvent republic in the world: Don’t let socialists cripple your economy and turn your political environment into a vicious battle between extremists.

Back when the 2010 bailouts were debated, critics warned that Greeks would quickly tire of the austerity measures demanded by its creditors. It’s impossible to sustain a political coalition for long against pressure from a public accustomed to socialist dependency. They’ll run out of patience waiting for an economic rebound, and develop bitter resentment for the creditors who expect them to make do with less. That’s exactly what happened, as the Associated Press report on the triumph of Tsipras’ Syriza party makes clear:

Syriza appeared just shy of the majority that would allow it to govern alone. With 97.6 percent of polling stations counted, Syriza had 36.4 percent — and 149 of parliament’s 300 seats — versus 27.8 percent for Prime Minister Antonis Samaras’ conservatives.

If Tsipras, 40, can put together a government, he will be Greece’s youngest prime minister in 150 years, while Syriza would be the first radical left party to ever govern the country.

The prospect of an anti-bailout government coming to power in Greece has revived fears of a bankruptcy that could reverberate across the eurozone, send shockwaves through global markets and undermine the euro, the currency shared by 19 European countries.

The already battered euro was down 0.3 percent Monday, at $1.117, on the news of Syriza’s victory. That was its lowest since April 2003.

Syriza’s rhetoric appealed to many in a country that has seen a quarter of its economy wiped out, unemployment above 25 percent and average income losses of at least 30 percent.

Tsipras won on promises to demand debt forgiveness and renegotiate the terms of Greece’s 240 billion euro ($270 billion) bailout, which has kept the debt-ridden country afloat since mid-2010.

To qualify for the cash, Greece has had to impose deep and bitterly resented cuts in public spending, wages and pensions, along with public sector layoffs and repeated tax increases.

USA Today contrasts the resignation speech of outgoing Prime Minister Antonis Samaras – still naively babbling about how he hopes his country remains sober and responsible – with Tsipras’ fey screw-the-creditors promises:

“The Greek people spoke,” Samaras said at a news conference. “My conscience is clear. I received a country which was almost destroyed and I was asked to hold a hot potato and I did that … We managed to take the country out of deficit, out of recession.”

He said his party’s work, including taking difficult austerity measures, set the foundation to pull the country out of its fiscal crisis.

“Above all I hand over a country that is a member of the European Union and eurozone and for the good of the country, I hope the next government would maintain all this we have achieved,” he said.

Tsipras, in his victory speech, said, “Today the Greek people have made history. Hope has made history.”

Tsipras, 40, could become Greece’s youngest prime minister in 150 years.

“The sovereign Greek people today have given a clear, strong, indisputable mandate, ” he told a crowd of supporters. “Greece is leaving behind the destructive austerity, fear and authoritarianism. It is leaving behind five years of humiliation and pain.”

Sounds quite a bit like a certain other spendthrift politician’s “hope and change” campaign rhetoric, doesn’t it?

Back over at the Associated Press, we learn that Europe isn’t taking the news from Greece very well. It sounds as if some continental bankers are in a state of denial, or maybe they’re hoping Tsipras is just trying to rattle them with his chicken-in-every-pot spending promises, and he’ll negotiate more responsibly when he’s alone in a room with German money men:

Greece’s creditors insist the country must abide by previous commitments to continue receiving support. In Germany, Bundesbank President Jens Weidmann told ARD network that he hoped “the new Greek government will not make promises it cannot keep and the country cannot afford.”

The election results will be the main topic at Monday’s meeting of eurozone finance ministers. Belgium’s minister, Johan Van Overtveldt, said there is room for some flexibility, but not much.

“We can talk modalities, we can talk debt restructuring, but the cornerstone that Greece must respect the rules of monetary union — that must stay as it is,” Van Overtveldt told VRT network.

JPMorgan analyst David Mackie said negotiations between the new government in Athens and creditors “are likely to be very difficult” but cannot drag on indefinitely.

“If Greece is unable to honor its obligations this year, then economic, financial and banking stress is likely to lead either to an agreement, or to a second round of elections, or to an EMU exit,” he said, referring to Greece’s membership in the eurozone.

But Re-Define think tank analyst Sony Kapoor said that while Greece has failed the eurozone and EU authorities, they have also failed Greece.

“The Greek rescue package was financially unsustainable, economically wrong-headed, politically tone-deaf and socially callous,” he said. “Syriza deserves a chance, and their victory will force the EU to confront the elephant in the room: unpayable debt and bad policy decisions.”

He noted that Syriza’s moderation of its rhetoric before the election “is promising, making it likely that it will govern closer to the center than many think.”

We’ll know soon enough whether a more centrist heart beats in the chest of a man who named his own son after Che Guevara. I’d advise EU ministers to take these debt-bomb threats seriously. Tsipras’ supporters are going to expect the big government spending he promised them. He’ll pay far more attention to them than he will to European working men grumbling about being forced to pay Greece’s exorbitant bills.

The lesson to be learned here is that socialism is a much steeper death spiral than its apologists like to pretend. Greece was ruined long ago; the last chance to change course came and went long before the country’s unsustainable finances went into full meltdown.

The same moment is passing in other nations right now, most definitely including the United States. Socialists always tell everyone to stop worrying as long as they can keep borrowing and printing enough money to keep their schemes floating. They tell us not to worry about bankruptcy until after it happens… but as Greece illustrates, it’s far too late by then. When the final stage of socialist cancer arrives, it has weakened the population so much that they have no way to fight. They can only collapse in their national deathbed and demand fresh infusions of cash from everyone who still has a dollar to lose.

“The problem with socialism is that you eventually run out of other people’s money,” Margaret Thatcher famously observed. As long as other people still have money, socialists will find a way to take it, and when push comes to shove, they won’t be shy about using their own bankruptcy as a weapon. They won’t tell you today that their goal is to build a government that cannot be reformed when tomorrow doesn’t live up to their predictions.

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