Despite the stormy relationship with his son, Phillip of Macedon would have been awfully proud of his boy. 

The young Alexander was tutored by the great philosopher Aristotle who conveyed the secrets of medicine, philosophy, morals, religion, logic, and art.  

Upon his ascendancy to the throne of Macedon, many of the Greek city states revolted against his rule.  Through a clever combination of diplomacy and force, the revolts were put down and Alexander consolidated his rule over the Greek people.  

What followed were some of the most spectacular military campaigns in history as Alexander expanded the Macedonian Empire into Asia Minor, the Levant, Egypt, Persia and finally to the gates of India itself.  There his army stopped, not because they were defeated, but due to the sheer exhaustion of his troops.   

Alexander’s military accomplishments, although great, were eclipsed by longer lasting cultural effects.  Greek thought and culture were brought to the East and cast a significant influence on the peoples of the empire for generations.  

Man, it’s a good thing old Alex isn’t around today to see what has become of his once mighty Greece.  

Those that are temporarily able to peel themselves away from the popular circus of televised talent shows, know that Greece is currently embroiled in a severe fiscal crisis.  

The background?  Roll the tape as they say.  

Over the past years, the Greek economy went through a boom period of rising property values and increased consumption.  During this time private sector debt ballooned, or simply stated, individuals and businesses took out loans.  

As the boom gave way to the predicable bust, public sector debt increased precipitously.  Why did the Greek government go into so much debt?  There are two reasons: 

• As tax revenues fall the government closed the budget gap by borrowing. 
• The government chose to bailout and/or backstop private institutions (banks) 

Greece accumulated so much debt that the government’s ability to make the payments is in serious question.  

So Greece is reduced to groveling before the European Union (EU).  Various plans to raise taxes and cut spending are submitted by the Greek government and coldly scrutinized by the bureaucrats at the EU. 

Wait a second…..the EU?  What do they care?  How are they related to this?

Ah, yes the good old EU.  The former magical answer to every poor European country’s problems.  

Greece joined the EU years ago and in doing so, gave up its dear currency (the Drachma) and adopted the Euro.  Of course, a common currency requires a common monetary policy, so the Greeks gave up control of monetary decisions to the European Central Bank.  

I hear the peanut gallery screaming, “English please!!” ….OK…so here is the rub 

If Greece were in control of their own monetary policy they would probably do the easy (and stupid) thing; print money, devalue their debt, cause an inflationary period followed by an economic collapse.  

A sad course of action, but at least the Greeks would be responsible for their own decisions.  By the way, anyone know another country that’s doing this? 

Unfortunately for the Greeks, they do not control the Euro.  So what are the choices (and the consequences): 

• The rest of the European Union could bail out Greece.  (The message to Spain, Portugal and Italy would be, “Why pay your debts when the union will bail you out?”  This would set the stage for many more bailouts.)
• The Greeks could print Euros on their own without consulting anyone.  (This would open the door to all member states to begin printing paper currency, making the Euro worthless.)
• Greece could cut government spending and raise taxes in an attempt to honestly pay the debt.  (The current Greek plan is wildly unrealistic, about 75 percent of the deficit reduction plan comes from raising taxes rather than cutting spending.) 

The whole situation is problematic for the entire European Union as the whole idea of the Union is predicated on economic solidarity and cooperation amongst member states.  If Greece is bailed out, or defaults, the entire idea of the European Union is called into question.  

For what good is a union if some members pay their debts and others do not.  The very idea of coordination and discipline becomes laughable.  For now the EU is projecting solidarity.  Take a look at this:

“The fate of one is the fate of all,” European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said at a press conference today after a meeting of EU finance ministers in Brussels. “This situation in Greece is having effects on other countries.”

Will Greece be bailed out?  Will they force a fiscal austerity plan upon their citizens? 

We don’t know.  

We do know; however, that underlying this entire situation is another morality tale.  How did things get to this point in Greece?  Why wasn’t there any fiscal discipline? 

Modern Greek culture has been one of entitlement.  All gain and no pain.  Something for nothing.  University students rioted in the streets in late 2008 and nearly shut down the capital.  These young people caused nearly 1.5 billion Euros in damage.  According to some accounts, the students regarded the vandalism as a “fun social activity” and a legitimate way to communicate their grievances.  

What do they really want?  Writer Aya Burweila summed it up best in this quote from a recent article about Greece: 

“At the end of the day, The Greek dream has always been to graduate from a university you can’t get expelled from to getting a job in the civil service that you can’t get fired from.” 

In many ways the Greek government had the same hopes when they joined the European Union.  The Greeks gave up their collective destiny to some faraway union and expected a carefree life in return.  

Given their history it’s amazing to watch Greeks forget that a strong prosperous nation requires a long term outlook, cohesiveness and productivity from its citizens.  In economic terms, saving, building and investing are all actions that demand delayed gratification and are entirely unsuitable when your time horizon is very short and you have a “something for nothing” mindset.  

But there is always hope.  

Alexander’s genes have not entirely been extinguished.  To again quote Aya Burweila’s article, there does seems to some hope that some people in Greece still hold themselves accountable for doing their jobs and understand the responsibility they have for the future of their country.  

However, amidst the violence and vicious cycles, there is an enduring and rare inspiration in those charged with protecting The Tomb of the Unknown Soldier. Dressed in the traditional kilt worn by the men who fought the rugged and relentless resistance against Ottoman rule, the Evzones stand completely still at their posts, impervious to all threats and provocations—including cowardly terrorist attacks. Remarkably, even when they were warned of an imminent explosion, three Evzones guards refused to abandon their posts, an action for which they were given presidential recognition.  

It’s a cliffhanger for sure.  We’ll have to wait and see what becomes of Greece, and the European Union for that matter. 

As for us, thank heavens we do not have any of the troubling attitudes and circumstances that plague the Greeks.  A something for nothing culture, rampant government deficits, massive national debt….whew.. I’m sure glad there’s none of that stuff around here!

Have a great week,  

Michael Bechara, CPA

Managing Director

Granite Consulting Group Inc.

mbechara@consultgranite.com

www.consultgranite.com