Greece; a Coming GreXit?

As the Greek Government battles for the last of the Bailout Funds (approx. $90 Billion) won in 2015, they still face a series of seemingly intractable issues that added debt will not cure. A $7 Billion payment due its creditors in July 2017, austerity reforms that are sending the Greek economy further into the abyss, tax reforms so severe that the average business/worker keeps a mere 30 percent of their gross income and an unemployment rate of 23 percent that shows no sign of fatigue.

Then, if the E.U. enforced measures aren’t sufficient enough, there is the law of unintended consequence. The need to survive has forced citizens, in ever rising numbers, to the Black Market; the growing segment of the Greek economy estimated at a staggering 25 percent of the Country’s $206 Billion GDP. This dark economy includes tens of thousands of citizens now off-the-Government-books registering companies in Bulgaria, Cyprus, Luxembourg and other low-tax countries to avoid paying the higher tax bills at home the net effect of which means less revenue for Greece’s coffers and creates unfair competition for tax-paying entrepreneurs who could potentially play a bigger role in the revival of Greece’s economy.

What this all means is this: While the E.U. and the International Banking system talk debt-restructuring the reality is that there is no chance that the Greek Micro-economy will ever be able to settle the Nation’s outstanding debt-load of $371 Billion. Yes, reckless spending and massive government pension and entitlements by a Government sitting on top of $206 Billion per year GDP is a clear exhibition of liberal orthodoxy however, far worse is the predatory banking system that licensed the cycle by shoveling boatloads of capital into the coffers of the Greek Treasury. The Banks are, inevitably, going to take a hit for it and given the diminishing number of Greeks able to pump blood-money into the collapsing veins of the Greek economy already suffering under the crushing weight of,  the mix of austerity and reform demands of the E.U./Creditors, an average tax rate approaching 70 percent which outcome, of the many options available, seem most likely.

Will the E.U. let go of Greece? Likely so however, that event is a mere trifle in the E.U.’s greater battle for survival as the European Confederation faces the lingering consequences of Britain’s exit from the Union, security concerns, increased NATO Spending Demands, the fiscal threats from Portugal, Spain and Italy and the rising tide of Populism across the European sphere and the growing contempt for the accelerated impositions pouring out of the E.U. headquarters in Brussels.

For Greece, in the end, if they depart the E.U. two serious question remains; what becomes of the Greek infrastructure pledged as security for the Bail-out loans? And, upon return to the Greek Drachma (as its currency unit), who will be willing to “back” the currency? The U.S., the U.K. or perhaps the IMF? Good questions!

Curtis C. Greco, Founder

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