Many have seen the riots in the streets of Athens, as the government tries to pull back on benefits which can be summed up in one word -- lavish. The average government job pays almost 3 times the average private-sector job. The national railroad has average revenues of 100 million euros against an annual wage bill of 400 million euros, plus 300 million euros in other expenses. The former Minister of Finance, Stefanos Manos, pointed out that it would be cheaper to put all of Greece's rail passengers into taxi cabs. By the same token, the Greek public school system is the site of breathtaking inefficiency. One of Europe's lowest ranked, it nonetheless employs four times as many teachers per pupil as the top ranked system in Finland. The retirement age for most of the jobs in Greece is 55 for men, and 50 for women.
But the lack of fiscal sobriety is not confined to just Greece. Ireland, Portugal, Spain, Italy, and even France are drowning in debt obligations that they need help with to prevent a default. The Germans are about the only ones who can help. They just need to suck it up, work harder, and pay for everyone else. It's either that, or the Euro Zone is dead.
We see these trends now manifesting itself in the US. The fiscal debt of $16 trillion by the Federal Government is well known. But more and more governments on the local level are already throwing in the towel with an inability to pay off their debts. The only solution is to declare bankruptcy. Once thriving San Jose, California has done just that. Through the years, the police and firefighters had worked out deals by which they earn more in retirement than they ever made while working. Take sick leave. It is good to give workers a paid day off when they are ill. But we have gone from that to letting workers accumulate it and cash it in for hundreds of thousands of dollars when they are done working. Is this what public service is really about? What finally put San Jose over the edge was when pensions and health costs reached $245 million which was exactly half of the total annual budget. If this were to continue, the city would become nothing but a vehicle to pay retirement costs for its former employees.
Back to Greece....is it the canary in the coal mine? Governments globally, and at all levels, need to re-think the concept of debt, and what they can afford. When the canary dies, the miner will immediately do an about-face, and get out of that mine. Governments likewise need to take a sobering look at the warning signs around them.
