The symptoms of Greece's current fiscal crisis tell a story of such inept economic management and performance that few should be surprised. Only those with their heads up the short term goals of financial markets (and so untrained and uninterested in the wider context), the proponents of the Euro, and what appears to be most of the Greek political class (and bureaucracy) didn't notice the progressive bankruptcy of what was the cradle of European civilisation.
The roots of the political culture behind this go back to World War 2 and the Greek Civil War. After the Nazis were pushed out of Greece in 1944, the Greek government in exile faced the communist "Democratic Army of Greece" supported by the Soviet Union through communist Bulgaria, Albania and Yugoslavia.
The subsequent five years of fighting (which played no small part in encouraging Greek emigration to the likes of Australia, New Zealand and the USA) divided Greek society enormously. The communists lost in part because of the split between Tito and Stalin that saw the Greek communists side with Stalin, which spelt an end to Yugoslavia's ample support.
However the cost of the civil war was immense in slowing reconstruction after the previous Nazi occupation. Between the civil war and EEC membership in 1981, Greece was politically divided. The military coup in 1967 was due to some fears of a far-left wing takeover by some forces, that junta was one reason Turkey gave for invading and occupying northern Cyprus in 1975, even though the junta was overthrown some months before.
Greece's governments have been dependent on aid since the end of the civil war. The influence of leftwing politics has been strong, with the communist party coming 4th in 1974 and 1977 and 3rd in 1981 with between 9 and 11% of the vote during this time, with more moderate socialists winning power in 1981. Since then the socialists have won a majority of Greek elections, and the communists have come third in all but one of the elections in that time. In other words, Greece is used to being governed with the principles of big government and socialism. The current Prime Minister, George Papandreaou might consider how his father, Andreas, when he was Prime Minister, ran enormous budget deficits in the 1980s when he was PM. Greece has been living beyond its means for a very long time.
When it joined the then European Economic Community in 1981, it was one of the poorest new members. Its membership ushered in a period of 20 years when it, along with Spain and Portugal, got the bulk of the subsidies for infrastructure and development that the EU now lavishes upon the likes of Romania and Bulgaria. Greece was one of the biggest recipients of Western European aid. This helped to bolster Greece's addiction to debt and budget deficits.
With membership of the Euro this gave Greece a high value currency with low European Central Bank interests rates that it could borrow with. It took advantage of the ability to issue sovereign debt in Euros to continue spending up large.
Now the chickens have come home so to speak.
The current government is starting to face fiscal reality by announcing spending cuts, and of course, on cue in a country beset with socialist attitudes, the public sector is going on strike. It doesn't think it is to blame, yet it might look at how its wages and operations have been getting funded for decades - it's been a lot of borrowed money.
However, Greece's problems are not just about spending too much money. It is about the deliberate lying about its accounts, and the lack of transparency of many areas of public spending. For example, Greece has long claimed its expenditure on defence to be a "state secret". The truth is that to placate the army, and evade a risk of a coup, Greek government have taken a blank cheque approach to defence. The current level of spending might have been justified in the Cold War, when Greece was very much on the front line with Bulgaria on its doorstep (Yugoslavia and Albania were not Soviet aligned from 1948 and 1960 respectively).
The airforce has 33,000 personnel and 477 aircraft, the navy 30,000 personnel and 84 warships, whilst the army has 100,000 personnel. This is similar in number to Israel, although Greece has a smaller population. The Netherlands, another NATO member, with higher population, has only 68,000 active members of the military. 5% of GDP is spent on defence it is estimated.
Furthermore, according to Spiegel Greece rigged its accounts to hide its budget deficit, with help from Goldman Sachs, by excluding some military spending and hospital spending. Similarly, Goldman Sachs participated in off balance sheet lending, by using fictional exchange rates to engage in sovereign debt swaps. These are the actions you'd expect of a tinpot sub-Saharan dictatorship, not an EU member state in the Eurozone. Right?
This sort of behaviour should be punished, the politicians who have been a party to it held up for all to see, but also the snivelling useless public sector managers who have ignored basic practices like double-entry accounting, and have participated in enormous fraud, should be shown up for what they are - the shysters that have borrowed and wasted money on behalf of Greek taxpayers.
However, some of the EU wont want that, because they want to protect the consequences of their own failures.
When the EEC accepted Greece, Spain and Portugal it was about looking forward to countries that had only recently turned their backs on military dictatorship, with the European project to pour mountains of European taxpayers' cash into lifting their incomes to levels commensurate with others in Western Europe. The same happened with the former Warsaw Pact countries, most recently with the inclusion of Bulgaria and Romania, both countries still besotted with corruption, organised crime and distinct paucities of transparency in their government accounts. European taxpayers are plundered to subsidise enormous EU funded infrastructure projects and of course the massively inefficient and environmentally disastrous Common Agricultural Policy.
The single currency across a range of economies with wildly varying levels of wealth and development has been a disaster for the poorer economies, who face a highly valued Euro which makes their relatively lower value commodity exports (and tourism sectors) relatively expensive, whilst now also making their mountains of debt unaffordable. Greece's sovereign debt is barely above junk status. Bear in mind that France and Germany have both run budget deficits beyond the Euro rules, but then they set the rules don't they?
So there are strong expectations of some credit being offered to Greece to avoid a default, it will no doubt be at the expectations of massive reductions in the budget deficit (Greece is claiming to cut the deficit from 12.7% in 2009 to 2.8% in 2012, but none of its plans show any sign of meeting this), which will mean accepting strikes, possibly riots and enormous political cost - the cost Greece should and would have faced in the 1980s and 1990s had it not been propped up by EU aid.
Of course what SHOULD happen is that Greece should default - its foolish creditors, who took a risk on a series of lies should suffer for their foolish decision to take up Greek debt. The Greek government, unable to borrow, will then face confronting the socialism and incompetence that has bankrupted itself. The Euro would rightfully suffer, as it should bear the devaluation of one of its participants failing to meet its obligations.
Allister Heath in City AM puts it plainly:
"Regardless of which plan is agreed upon, a rescue would fill the City with joy in the short-term – but would cause huge damage over time. There should be no bailout: it is high time that countries and investors learn to live with their mistakes."
Unfortunately, when you have the ability to plunder the pockets of future generations through taxation, there isn't much incentive to do that.
That, you see, is when the phrase "taxation is theft" so clearly comes into its own.
Unless the role of the state is constrained so that it cannot ever be used to bail out foolish investments or the governments of liberal democracies that vote themselves bankrupt, the easy option - which politicians never truly even start to face the cost of (what is being voted out when you put people in debt for years?) - will be used and the only loser is the taxpayer.