Written by Orphe Pierre Divounguy
The Greek government 2010 budget deficit calculated at 13.6% of GDP is simply adding to the highest debt to GDP ratio in the EU (113% of GDP). The rising debt has led to high borrowing costs, the inability to repay its debts and a severe economic crisis. The recent current downgrade of Greek Bonds to “junk” status has made debt servicing even more unsustainable. Should the world be surprised that a country ran by a government with a socialist agenda be in such a dire economic condition? The Greeks are in the middle of a crisis because of a fiscally irresponsible socialist government! Greece is an entitlement nation. Under the condition, that the Greek government implements severe measures, by cutting spending (mostly entitlements), and raising taxes, Greece will be bailed out by its European counterparts and by the IMF.
What can America learn from Greece?
Answer: Beware of socialist governments and entitlement programs!
The US debt currently stands at approximately $13 trillion and yet the current government is spending more than ever before on entitlements. According to the Congressional Budget Office, the newly enacted health care reform will cost an additional $940 billion over 10 years. In a March 2010 article published by the Cato Institute entitled “My Big Fat Greek Budget”, economist Daniel Mitchell describes the long run federal spending CBO estimates. Just like Greece, if we keep borrowing to fuel out of control government spending, we will eventually suffer the consequences. The scary part is that there won’t be an economy big enough to bail us out! The outcome will be severe deflation, and a long painful economic recession that will make the last one seem like a walk in the park on a beautiful Sunday afternoon.