Greece wants to "kick the can down the road" when it comes to implementing austerity measures. That is likely to torque off European pay-master Germany, the International Monetary Fund and the sovereign investors who took cuts of 70% in the value of some of Greece's paper. The Financial Times reports:
Greece is seeking a two-year extension of its latest austerity programme aimed at improving the country's debt sustainability and prospects for a return to growth.
The request adds to those in other parts of the world to postpone the inevitability of debt and deficit problems, sour real estate markets, unemployment and austerity commitments. These range from U.S. congressional delays on the budget to a what appears to be a reversal of course about cuts planned by the U.K. government. British Prime Minister David Cameron is currently on vacation in Spain, another country that wants to push back budget cut provisions for a year or more while it works to make its economy recover. With unemployment at 25%, Spain will wait years and years before a real recovery takes hold, stimulus or not.
Greece, like other nations that want time for a recovery of their GDP growth, and that of the world in general, would like investors to believed that time can heal what the extensions actually cannot. Greece's economy will not recover because of the way its tax and pension systems have worked for decades, among other things. Any delay in austerity measures, even if those make the Greek economy worse for a while, will allow its deficit to continue to rise. And the day when the Greek economy bottoms and wages and property values become attractive enough for companies and home buyers to come back into the markets will only be pushed out by years.
Any direct comparison between Greek economic problems and those of the United States and United Kingdom is absurd, but that does not mean some parallels do not exist. It is nearly assured that Congress will do nothing about tax and budget provisions until it is forced to, or at least until after the president for the next term is picked. The composition of Congress may be different by then, because of the national election in November. The fate of government spending and taxes cannot be predicted because of the potential sea changes.
The term "kick the can down the road" was used regularly a few months ago to talk about U.S. economic problems and those of much of Europe. It has gone out of style, but will be back shortly.
Douglas A. McIntyre
Filed under: 24/7 Wall St. Wire, International Markets Tagged: featured