Standard & Poor’s downgraded the credit ratings of nine euro zone countries, stripping France and Austria of their coveted triple-A status but not EU paymaster Germany, in a Black Friday 13th for the troubled single currency area.
[…]S&P lowered its long-term rating on Cyprus, Italy, Portugal and Spain by two notches, and cut its rating on Austria, France, Malta, Slovakia and Slovenia by one notch.
The move puts highly indebted Italy on the same BBB+ level as Kazakhstan and pushes Portugal into junk status.
The credit-rating agency affirmed the current long-term ratings for Belgium, Estonia, Finland, Germany, Ireland, Luxembourg and the Netherlands.
[…]The credit-rating agency put all 14 euro-zone nations — Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain — on “negative” outlook for a possible further downgrade.
Germany was the only country to emerge totally unscathed with its triple-A rating and a stable outlook.
A negative outlook indicates that S&P believes there is at least a one-in-three chance that a country’s rating will be lowered in 2012 or 2013.
It’s gotten so bad that Greek families are abandoning their children, and ordinary medicines like Aspirin are in short supply.
Greece is a socialist country
Why is this happening to Greece?
Well, Greece elected a socialist majority in 2009, and the socialist party was in power from 1981 to 1989, 1993 to 2004, and now 2009 to 2012.
The Panhellenic Socialist Movement, better known as PASOK, is a Greek centre-left political party and the current majority party in the Greek Parliament. In 1981 PASOK formed the first socialist government in Greece’s history, and subsequently governed the country for most of the 1980s, 1990s and early 2000s. PASOK served as the main opposition party between 2004 and 2009. It is a member of the Party of European Socialists and the Socialist International. In the European Parliament it has 8 out of 22 Greek MEPs. On 31 January 2006, the party’s president, George Papandreou, was elected President of the Socialist International, the worldwide organisation of social democratic, socialist and labour parties. Following the 2009 legislative election, PASOK became the majority party and Papandreou became Prime Minister.
The Wall Street Journal explains what the socialists in Greece have been doing lately.
“The present government has done absolutely nothing during the last 12 months to speed up privatizations, reduce the public sector or open up closed professions,” Athanasios Papandropoulos, a leading economic analyst, told me recently in an interview. “In these 12 months it has not fired even one civil servant. The only thing it is doing is trying to tax the private sector out of existence. Why should we believe that they will do something different now?”
One commentator writing in the newspaper Kathimerini this week made the point even more forcefully: “Whereas more than 1,000 Greeks were losing their jobs in the private sector every day in August, the government was assuring civil servants with lifetime tenure that their job privileges were not in danger.”
Structural reforms have been repeatedly announced by Greek officials during the past. Yet nothing has happened. Greece’s plans tend to resemble Soviet Five Year Plans: They look good on paper but have absolutely no bearing on reality. Anyone in the government who tries to point this out is forced to resign. Economist Stella Balfousia, the head of the Greek Parliament budget office, had to tender her resignation after her office published a report contradicting the government’s official forecasts on debt and deficit.
Privatization is a case in point. Greece will have to raise some €1.7 billion by the end of September from the privatization program and €5 billion by the end of the year from the medium-term fiscal strategy program. Yet in the past year and a half not a single privatization has taken place. The explanation given for this is the low share prices of the listed companies. The real reason is probably that Greek politicians are loath to give up the system of spoils that they have long run through these enterprises, which are staffed by the party faithful in exchange for votes.
I saw that Zero Hedge posted recently regarding the massive withdrawal of deposits from Greek banks.
The year is not over yet, and already Greece’s banks have lost €36.7 billion of their deposit base in 2011, and a whopping €64.6 billion since the beginning of 2010, which is down from €233 billion to €173 billion in under two years. In October another €3.5 billion was withdrawn from Greek banks and likely either redeposited somewhere deep in the heart of Switzerland, or converted to various inert metals and buried somewhere in the back yard. The good news: the outflow is just over half of October’s record €6.8 billion. The bad news: at this rate of outflows, Greek banks will have zero deposits in around 4 years. Which at the end of the day is all the matters, because while the Troica can keep funding capital shortfalls indefinitely, all faith in the country’s banks has now been lost and Greece is officially a zombie economy. The fact that the country’s deficit as a % of GDP is about to be re-revised even higher is no longer even meaningful: the Greek economy and its banking sectors are now officially dead. We merely feel bad for anyone who still has cash in banks as, just like gold in 1930s America, any residual cash may soon be “sequestered” for national security purposes. After all there are bankers who need record bonuses, and Military sales from Europe and the US that have to proceed using what will likely soon be “commingled” deposit cash.
Greece is a socialist nation. And they are reaping the rewards of socialism. You cannot spend your way out of debt. You cannot create jobs by taxing job creators. You cannot create wealth by punishing those who create wealth.
Since Barack Obama was elected, we have been running deficits of about $1.3 trillion dollars each year. The last Republican deficit under Bush and Boehner was $160 billion dollars. We made a mistake and we elected a socialist, and now we are Greece – just a little less far down the road to serfdom.