Greece Is Burning and Nobody Cares

Greece is burning. Not that this is a new phenomenon. But it sounds so sinister, so ominous.

When you find out why it's burning, it becomes a tragicomedy. The Greek government -- led by unelected economist Lucas Papademos -- promises to slash the safety net of many Greek citizens for a big sack of bailout money. Ordinary Greeks, whose futures are being mortgaged, are very angry. Things burn. Then everyone goes home and waits for the money to arrive.

The process repeats with such frequency that a lengthy Wikipedia page has sprung up to catalog each outburst, hence the tragicomedy. And why shouldn't the country erupt in flames every so often? The country is a tinderbox with half its young people unemployed and 20% of the broader populace jobless.

Greece has never been much more than the first domino. One is all you need, and few of Europe's dominos are stable at the moment. How many fall, and how far the chaos spreads, is not something anyone can predict with accuracy. But this repetitive charade of punishment and protest has done nothing to steady the pieces. At some point, European leaders will have to decide whether unity is more important than stability.

Lined up and ready to fall
More important issues have been pushed to the back pages by the struggles of Greece, a small rocky nation of professional tax dodgers that contributes about as much to the global economy as the state of Maryland. Take the upcoming French elections. Nicolas Sarkozy may lose badly. With four major candidates in the running, Sarkozy is polling second, 8 percentage points behind a politician once mocked as "Mr. Pudding."

The threat is so dire that German Chancellor Angela Merkel will actively campaign for Sarkozy ahead of April's vote. This international political alliance has sparked a countermovement, with Francois Hollande -- Mr. Pudding to you -- stumping for Germany's anti-Merkel Social Democrats and lending his support to Spanish Social Democrats as well.

The Merkel-Sarkozy (or Merkozy, if you prefer) alliance has been crucial to a unified EU. Despite cultural and social differences, Merkozy have moved mountains to bring the EU closer together. Already this year, a fiscal stability treaty has been approved, further empowering Europe to directly influence its member states' economies. The French government will not ratify the treaty until after April's elections, and Hollande has gained popularity in part because he refuses to do so. If France rejects the treaty, there's little reason for other member nations to uphold it. But Merkozy's fiscal austerity has done little to fix the EU's problems, so perhaps there's little reason to continue down that road.

It's all downhill from here
This Wednesday will offer critical information on the state of the eurozone economy. Fourth-quarter economic estimates for eurozone nations will be released then, which may well corroborate earlier predictions that the region is sliding into recession. Other indicators bear out this belief. Eurozone retail sales fell during the holidays. German factory orders plummeted. EU-wide unemployment rates are testing heights not even reached during the last recession.

Country

Total Unemployment, October 2009*

Youth (16-25) Unemployment, October 2009

Total Unemployment, December 2011

Youth Unemployment, December 2011

France 8.3% 24.7% 8.2% 23.8%
Germany 7.3% 11.4% 5.2% 7.8%
United Kingdom 5.7% 19.4% 6.1% 22.3%
Spain 16.7% 39.8% 20.6% 48.7%
Italy 6.9% 27.2% 6.9% 31.0%
Portugal 9.8% 25.7% 12.0% 30.8%
Ireland 10.7% 26.5% 13.0% 29.0%
Greece 8.7% 27.4% 17.4% 47.2%
All EU 8.0% 21.1% 8.5% 22.1%

Source: Eurostat via Google Public Data. Seasonally adjusted. *October 2009 represents highest unemployment rate in the U.S. during current period.

Many Europeans may not have noticed the slide. The EU's anemic GDP growth rate collectively nudged above 1% just once in the past decade and suffered a shallower plunge by far than the United States in 2009. The EU recession has been one wrong step away for years. Now that a recession is imminent, the effect on global commerce might be more of a glancing blow than a knockout punch.

Endgame
So what comes next? The long-term consequences of a possible Sarkozy defeat are uncertain. Events in France could cascade across the continent until leaders decide to emulate the evident success of American stimulus efforts instead of tightening the austerity vice. Or little may ultimately change. Political rhetoric rarely survives whole once the heat of campaigning gives way to the reality of governance.

Whatever happens, the EU is in no shape to be the engine of future global growth. Its birth rates are too low to support population expansion. Abysmally high unemployment isn't likely to encourage immigration. The economy may face recession for a period of time or bounce back toward mediocrity. The consequences of systemic unemployment at this scale take years to fully play out.

The markets don't really care about any of that for the moment. Many Greek stocks have bounced to the moon since the start of the year, with National Bank of Greece (NYSE: NBG  ) up 94% and DryShips (Nasdaq: DRYS  ) up 58%. It may be many months before the full measure of Europe's efforts can be known, but investors can still try to make that dead cat bounce.

American markets might fall when Europe accepts its harsh reality, but probably not for too long. 1997's Asian Contagion dropped the Dow (INDEX: ^DJI  ) 1,100 points in October from highs set that summer, but new records were set by the following February. The Mexican peso crisis offered barely a speed bump. Russia's 1998 default set the Dow back all of four months before it resumed its march toward five-digit territory. If Europe had followed this familiar script, the Greek crisis would have been resolved a long time ago, quite possibly with fewer riots and less extended pain.

Granted, the eurozone has greater global economic importance than did the Asian nations, or Mexico, or Russia. Things may decline more sharply than most expect. But the eurozone has been more a rusty machine cranked by -- and feeding into -- Germany, and less a long-promised engine of continent-wide economic growth. If one of its many gears pops out, we might not notice as much as hysterical headlines might have you believe.

Today, Greece burns and the market celebrates. Maybe the endgame is finally coming. We can only hope.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On February 13, 2012, at 4:01 PM, NARW wrote:

    What Id like to know and see is how these European unemployment numbers compare to the US U-3 and U-6.

    Are the U-6 numbers more apples vs apples when comparing Spains' unemployment for the unemployment in the USA.

    Or maybe U-6 is still lacking?

    Im certain that Europeans are not as dishonest as Americans, so they would never use something like the digusting U-3 numbers.

  • Report this Comment On February 13, 2012, at 5:58 PM, edit4u wrote:
  • Report this Comment On February 13, 2012, at 6:01 PM, Percheron1 wrote:

    "Greece Is Burning and Nobody Cares"...sorry to say, but poor people and/or poor nations do NOT seem to garner the proper concern of rich people and/or rich nations...unless it is a way to make a BUCK off them...:(

  • Report this Comment On February 13, 2012, at 6:03 PM, Hawmps wrote:

    On February 13, 2012, at 4:01 PM, NARW wrote:

    "What Id like to know and see is how these European unemployment numbers compare to the US U-3 and U-6.

    Are the U-6 numbers more apples vs apples when comparing Spains' unemployment for the unemployment in the USA."

    These are very good questions... two thumbs up.

  • Report this Comment On February 13, 2012, at 6:08 PM, Percheron1 wrote:

    Unemployment numbers between the US and Europe really tend to be an apples and oranges comparison because European nations have WAY MORE people employed in their governments than the US does even though the GOPers will always claim we have too many...:rolleyes:

  • Report this Comment On February 13, 2012, at 6:17 PM, TMFBiggles wrote:

    @ NARW and Hawmps -

    According to the helpful chart Morgan Housel put together last week in this article:

    http://www.fool.com/investing/general/2012/02/09/more-on-the...

    U-6 (purple line in the first chart, and corroborated by BLS stats here: http://www.bls.gov/news.release/empsit.t15.htm ) has been dropping for months, and now stands just over 15%. I'm not sure if this is a true apples-to-apples comparison with the EU, but at least ours is declining.

    - Alex

  • Report this Comment On February 13, 2012, at 6:48 PM, bake69 wrote:

    Historically, in times of crisis, Greece has been subject to a military coup. Not too far out in present circumstances. We watch and wait. Bake

  • Report this Comment On February 13, 2012, at 7:16 PM, sheldonross wrote:

    Maybe no one is specifically concerned about their well-being because they are seen as getting their just desserts.

    If even half the stories of tax-evasion, laziness, sloth, and entitlement mentality are true, then it's hard to be sympathetic.

    Of course - like any national issue - not everyone there is to blame, but you will get lumped in with your peers.

  • Report this Comment On February 13, 2012, at 8:44 PM, Merton123 wrote:

    Germany Unemployment Rate is a stark contrast to the rest of the EU. They must be doing something right. What are they doing right and can we adopt successful German policies?

  • Report this Comment On February 13, 2012, at 9:21 PM, Shy001 wrote:

    Your readers fail to know that the USA was awarded alot of contracts 3 months prior to the Olympic games in Athens, also the USA received orders for 16 F16 Fighter jets and got paid up front for these which are yet to be delivered..

    These are some of the reasons Greece has a $500billion Euro debt problem..unfortuinately.

    True Greeks do not pay taxes if it was an Olympic Sport they would gold every time..

    Unfortunately alot of things a wrong ith Greece's public sector but no one is willing to fix anything and blame everyone else when it fails...

    Sad but true..

  • Report this Comment On February 13, 2012, at 9:21 PM, NOTvuffett wrote:

    Europe is on the precipace of recession, it could go either way.

    Merton123, Germany is a country of smart, industriest people that has an export driven economy.

    Everbody knows about the PIIGS. One of the "I's" is Italy. It is considered to be in trouble because their debt to GDP is about 120%. The USA is about at 107% now. The administration has proposed a budget with a 1.39 trillion dollar deficit for the coming year. The CBO has projected trillion dollar deficits for a decade or so.

  • Report this Comment On February 13, 2012, at 9:58 PM, ryanalexanderson wrote:

    > Germany Unemployment Rate is a stark contrast to the rest of the EU. They must be doing something right. What are they doing right and can we adopt successful German policies?

    Easy. Share the $USD with a set of countries whose lack of fiscal discipline will help keep the currency valuation artificially low. Then export to said countries.

    Of course, finding a country with significant economies and substantially worse fiscal discipline than the US may be difficult. Ah, the devil is in the details.

  • Report this Comment On February 13, 2012, at 10:07 PM, mm5525 wrote:

    Burning buildings sure makes a lot of sense to facilitate growth. I look forward to the next indicant of how smart the Greeks are.

  • Report this Comment On February 13, 2012, at 10:28 PM, MichaelDSimms wrote:

    Who burning it? The Greeks.

    Why should we care, if they don't.

  • Report this Comment On February 13, 2012, at 10:38 PM, dawsonsmith wrote:

    Wow. Riots in the streets?

  • Report this Comment On February 14, 2012, at 12:02 AM, joandrose wrote:

    If you ran your private finances the way the Greeks have run their country's finances, you would have been thrown into a debtors prison long ago. They have lived high on the hog by borrowing/spending money from Germany, France - and any other country in the Eurozone which has practised financial discipline. They have spent money they did not have - simply put - the birds have come home to roost !

  • Report this Comment On February 14, 2012, at 6:47 AM, steveat wrote:

    I share no sympathy or empathy for Greece. The government brought this on themselves and the people want hand-outs. Sorry, but if all you're doing is complaining and relying on the government to take care of you..you have zero ambition at all. there are MANY ways to make a living. Suck up your pride and get a minimum wage job and go from there. Yeah, you, the people got screwed..so what..it happens all the time. Adapt and move on.

  • Report this Comment On February 14, 2012, at 8:04 AM, TMFGortok wrote:

    "Once the monkeys learn they can vote themselves bananas, they'll never climb another tree." -- Robert Heinlein

    There are no more bananas.

    For the sake of argument, let's say the stimulus worked. Greece's problem is that they've absolutely blown any chance of investors lending them money. They have spent their way to prosperity, and no wants to loan them any more money.

    *This* is the long run of Keynesianism. Sooner or later, you can't spend anymore because no one will lend you anymore. If you create your own currency, and inflate the money supply, you'll eventually end up like ZImbabwe.

    Greece does not need any more bananas, they need to learn how to plant their own banana trees again.

  • Report this Comment On February 14, 2012, at 8:12 AM, JustSharKey wrote:

    In 2011 China's GDP increased by $1.4 trillion, to $7.3 trillion. Greece's economy is somewhere between $300-$350 billion. Given China's 2011 growth rate, China created the economic equivalent of another 1/2 of Greece in the first six weeks of 2012. Frankly, greece just doesnt seem important enough to care. The EU (or not) will survive without them.

  • Report this Comment On February 14, 2012, at 8:35 AM, gkirkmf wrote:

    @ Merton123 One interesting thing about Germany. They have a lot of small and medium sized companies which are owned by a family or one person. They tend to never lay off workers, with the workers sharing in downturns by taking shorter hours. I gleaned this from a recent 60 Minutes show.

  • Report this Comment On February 14, 2012, at 8:37 AM, steveat wrote:

    Greece represents about 2% of the entire EEC community which is why people aren't caring anymore what happens to them.

    The countries we need to worry about are Italy and France. Italy represents about 17% of the EU economy and I can't remember France, but it's about as big as Italy .maybe a bit larger.

  • Report this Comment On February 14, 2012, at 8:45 AM, JeanDavid wrote:
  • Report this Comment On February 14, 2012, at 10:31 AM, setht23 wrote:

    The Greeks may be on to something. If we burn down all of our buildings people will have to rebuild them, which would help the contruction industry. If we burn enough down GDP will pick up as everyone is forced to build new houses, offices etc. It'll be like how Hurricane Katrina helped our GDP numbers. And that didn't hurt anyone, so what do we have to lose. Burn it all down!!

  • Report this Comment On February 14, 2012, at 10:50 AM, PeteysTired wrote:

    Seth23, that was hilarious. I have been inspired. I am going to go out now and torch my car and watch my personal GDP go through the roof. Then I am going to encourage my city to burn down all the schools so we can build new ones and create more wealth.....

  • Report this Comment On February 14, 2012, at 11:00 AM, ETFsRule wrote:

    "Greece's problem is that they've absolutely blown any chance of investors lending them money. They have spent their way to prosperity, and no wants to loan them any more money."

    True.

    "*This* is the long run of Keynesianism."

    False. It seems that you are just associating "spending" and "debt" with Keynesianism, without understanding the issue.

    Greece had a debt-GDP level of more than 100%, and an enormous deficit, long before the economic crisis ever began.

    Since the economic crisis started, Greece has decreased its gov't spending, not increased it. They are slashing spending, and in return they are getting bailout packages, to pay for their previous spending (during non-recessionary times).

    There is no possible way to associate their

    policies with anything that Keynes ever advocated. In fact, this scenario is the furthest thing from Keynesianism that I could ever possibly imagine.

  • Report this Comment On February 14, 2012, at 11:08 AM, TMFHousel wrote:

    <<*This* is the long run of Keynesianism. >>

    That's just pure nonsense.

    Keynes argued running surpluses during the good years so that they could be spent during the bad ones. Somehow that's been twisted into "spend always and liberally until you explode."

  • Report this Comment On February 14, 2012, at 12:09 PM, CrowdKnowsBest wrote:

    I understand everyone is making a big stink over Greece, but hasn't this been news for the past 2 years? How are headlines still controlling the direction of markets (equity, forex, and possible debt derivatives)?

    Riot and burn buildings go for it, that isn't even the most ridiculous news today.

    [Annalisa Piazza, economist at Newedge Strategy in London said: "All in all, a good auction for Italy. Demand was robust. This is a sign that the government's efforts to make significant changes in the Italian economy are actually buying confidence amongst investors."]-an article in the Guardian written by Julliete Garside

    Italy and Greece are both enjoying lower interest rates because of "significant changes in their economy...leading to investor confidence". Really? Is it that people are gaining confidence in Greece and Italy, or is it that you are getting free money when you buy Italian and Greek debt versus the safer German debt (German yields are lower than Italian/Greek)?

  • Report this Comment On February 14, 2012, at 12:58 PM, peterwolf wrote:

    Why should we care it's burning? The Greeks themselves don't care. How many of their hundreds of thousands of useless public employees have volutarily agreed to pay cuts, let alone layoffs? Instead they riot and vandalize their own country at the mere suggestion of 'sacrifice'. No, we should not care, anymore than we should care about California when it arrives at the same state.

  • Report this Comment On February 14, 2012, at 3:39 PM, Darwood11 wrote:

    @Merton123. "What are the German's doing right?"

    Check their education system. It provides a path for those not equipped or inclined to go to college. The German economy has a substantial manufacturing component, and the students not equipped for the rigors of college are sent there. Don't get confused by this; the German education system emphasizes math skill and so on, necessary for manufacturing.

    On another note, I suggest that we consider the information in the article and compare it to the U.S. this way. We have about 75 million "boomers" who will be retiring within 10 years. The "20 somethings" who are in the U.S. unemployment rolls will be "30 somethings" by the time the boomers have retired.

    It seems, the U.S. demographics may be a lot like those in the chart, by 2022.

    My questions include:

    1) Will the 20-30 somethings have the skill set to take over the jobs of the retiring boomers?

    2) Or, will our aging population and employment situation mirror that of 2012 France?

    3) What should the government and our esteemed policy makers be doing about this?

    Simple questions for the great, and arrogant, minds in Washington.

  • Report this Comment On February 14, 2012, at 8:18 PM, Hawmps wrote:

    @ PeteysTired - February 14, 2012, at 10:50 AM

    That was priceless.

  • Report this Comment On February 15, 2012, at 4:22 AM, foolishlycuriose wrote:

    Food for thought about the German economy:

    - 12 million people are living on or below the edge of poverty.

    - 20% of all kids grew up in poverty.

    - Ten thousand people that work full-time cannot support their family with the money they earn and need state support.

    - 1.2 million people work for less than €5month (in some call center cases 2-3 euros).

    - Germany has more than 2 trillion euros of debts.

    - Hundreds of communities have to close down public facilities (pools, sport fields, youth centres) due to money shortages?

    - There are areas with unemployment rates up to 20% (e.g Gelsenkirchen, Dortmund).

    - Every German still pays a 5.5% solidarity tax to cover the costs of German unification.

    Greeks v. Germans:

    - In Greece, 80% own a house or flat compared to just 40% in Germany.

    - Since 1991 the public sector in Germany has been reduced by more than 2 million people while in Greece it went up from 300,000 in 1981 to around a million today.

    - Despite the best efforts of the Greek Finance Minister, tax rates are still much higher than in Germany than in Greece.

    Final thoughts:

    The article states that no one cares about Greece burning except perhaps the 25% of Greeks who have and continue to pay their full share of income taxes amongst a slew of additional and most would argue illegal tax hikes (according to their Constitution) in spite of falling wages and pensions.

    Additional reseach would indicate that there are basically two categories of Greeks:

    The (roughly) 35% of the population that have benefited from their political ties, exchanging votes for job security. All have been overcompensated for years and are now having to face the new reality although it is worth noting that they have had to pay their fair share of income taxes on their full wages.

    The remaining half is nearly evenly divided amongst entrepreneurs, including the ship owners, and those that work as employees in the private sector. While it is true that many of the self-employed have engaged in various forms of tax evasion, it is surely not the majority. Many in the private sector work 2 or even 3 jobs in order to provide a better life for themselves or families.

    One could argue that Greece is probably the best example of how a corrupt and dysfunctional political elite can destroy an economy and the national psyche of an entire nation by their collective irresponsible and irrational behavior and decisions. Simply by changing the political landscape, Greece can emerge from this darkness and demonstrate how its strategic geographical location, biodiversity, thousands of km of coastline, and very pleasant climate can lead to long term economic growth and sustainability.

    The question before them is also simple: do they, as a nation, have the will to do so? Let's hope so for their sake.

  • Report this Comment On February 16, 2012, at 7:16 AM, eeibbay wrote:

    foolishlycuriouse

    Can you provide a source for your stats. At least one is clearly wrong or misreported. ( 5 euro a month????) I would also question 20% growing up in poverty in Germany. Perhaps clarifying your source would lend crediblity to the rest of your post.

  • Report this Comment On February 16, 2012, at 7:22 AM, joandrose wrote:

    @foolishlycuriose - I don't know where you got your "facts" about Germany from - but if I were you I'd check them again ! Germans working for 2 euros a month? - you need to lay off the weed bro !

  • Report this Comment On February 16, 2012, at 1:33 PM, foolishlycuriose wrote:

    In response to the requests for data sources regarding Germany, please feel free to look into the matter further through the following links:

    http://www.toytowngermany.com/lofi/index.php/t10577-30.html

    http://www.toytowngermany.com/lofi/index.php/t136046.html

    http://www.time.com/time/world/article/0,8599,1900649,00.htm...

    http://www.wirtschaftsfoerderung-dortmund.de/en/standort/dat...

    http://www.reuters.com/article/2011/11/16/us-eurozone-german...

    http://www.bbc.co.uk/news/business-15748696

    http://www.nytimes.com/2011/08/19/business/global/many-germa...

    http://www.spiegel.de/international/germany/0,1518,562237,00...

    http://www.wsws.org/articles/2005/sep2005/hart-s15.shtml

    http://blog.ifm-sei.org/christine/poverty-in-germany/

    http://gesd.free.fr/paper441.pdf

    http://www.iaq.uni-due.de/aktuell/veroeff/2011/20110706_bosc...

    http://www.wsws.org/articles/2011/jul2011/wage-j25.shtml

    For the record, I could not find a single online source that could verify the Euro 2-5 per month incomes but the data came from a German gentleman who lives in Greece. I still suspect he may have meant wage earnings per hour since Germany has no minimum wage but my point in presenting the information was to demonstrate that Germany itself is facing economic headwinds and is not the economic miracle it is sometimes reported to be in the press. In like manner, Greece is not the delinquent child of the Eurozone.

  • Report this Comment On February 16, 2012, at 5:25 PM, DJDynamicNC wrote:

    Interestingly, unions play a dominent role in the German economy.

    Even if you refuse to accept that they play a postiive role in German economic success - and I think that's a difficult claim to make - then at the least you have to accept that the omnipresence of unions and their deep integration into management practices throughout the country does not hinder economic development.

  • Report this Comment On February 16, 2012, at 9:04 PM, Sunny7039 wrote:

    Did the Greek people ever chose to indebt themselves the way they did? Was this ever presented to them, explained to them, and then offered up for a vote? Uh, no . . . ?

    What I think they should do is conduct a thorough investigation of exactly how they came to this place, and for every act of financial fraud, hand over a warrant to Interpol for the arrest of those responsible -- including, of course, the investment bankers. Then see what happens.

    Why won't they do this? One reason is that most of their political class is compromised. But this would be a good start, and who knows, if they do default (when they do default), it may actually come to pass.

    It is true that Greeks don't pay their fair share of taxes. No one can fairly dispute that; it's simply true. But what are we talking about here? Olives, olive oil, cheese, etc., etc. Just think of all the tax revenues that are not collected in the States . . . on cocaine, methamphetamine, designer drugs, steroids, etc. etc. etc.

    Things are bad enough in Greece that it is not merely "lifestyle" that's at stake, but life itself. Exactly what would you suggest they do? Roll over and play dead, as practice for the real thing?

    Great point, DJ Dynamic, BTW. I love logic, it's good for all occasions.

  • Report this Comment On February 16, 2012, at 10:13 PM, lukem5 wrote:

    @narguy LOL yeah let them be culturally rich, I hope it helps them get out of their financially poor system.

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