Greece stopped working to produce wealth (de-industrialized) and then continuously borrowed money (actually they printed new paper Bonds and sold them, emulating the USA economic policy) instead of raising taxes that they needed to pay for their government expenditures. They increased their bureaucrat payrolls, state and local payrolls, and put as many people into tax supported jobs as possible (to buy political votes). Now they cannot repay the money that they borrowed.
The Greeks will now have to drastically reduce all of their government expenses at all levels, and maybe also re-industrialize to create an income flow of wealth through exports to pay off their Greek bonds. Greece needs to emulate the third world nations that have industrialized in the past couple of decades in order for Greece to accumulate wealth in addition to the Greek tourism.
I do not know why economists refer to or compare national (sovereign) debt as a percentage of Gross National Product. This GNP has nothing to do with the ability of a nation to repay their national debt. What if the majority of the GNP activity was government tax funded bureaucrat payrolls, state and local tax funded bureaucrat payrolls, unemployment benefits, welfare, retirement pensions, providing free medical, housing, social services and other tax funded bureaucrat jobs that do not produce any national wealth that the nation could use to repay national (sovereign) debt?
Gerald R. Spencer, P.E., President
Spencer Engineers, Inc.
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Posted May 9, 2010 at 3:00 pm, in Free Speech Zone