The Greek People and the Greek Government Are Committing Economic Suicide

Here’s a riddle. What industry accounts for 16.5% of Greek GDP, 20% of all jobs, and is about to sound the death knell for the country?

Tourism.

Unfortunately, the death of the industry, or at least its near-death experience this year, will be at the hands of the country itself!

It’s no secret that Greece is in trouble. Its government needed a euro zone bailout, the country can’t borrow on the international markets, its banks are experiencing the closest thing to a depositor run, few pay their taxes, unemployment is rampant and there is no ruling government coalition at the moment.

But the problems run deeper…

Many countries, particularly Southern European countries, have political and fiscal troubles. This is not unique. What is uncommon is for these situations to get so far out of hand as to result in chaos in the streets.

We recently had one of our long-time associates, Endre Dobozy, visit Greece. His report was chilling. Boarded up stores, idle taxis, non-existent service in restaurants and stores. Add to this the recurring theme of protesters and you get a wonderful tonic that is sure to keep the tourists away.

But wait! Just like one of those annoying infomercials on TV at night… “There’s more!”

Turn-Coat Greece’s Scape Goat…

In this rather odd story of national suicide, the country not only has failing institutions, population protests and dysfunctional businesses, it also has a scapegoat, that necessary ingredient for any good fear-mongering and hate.

In this country, the object of derision is Germany, the stalwart economy to the north.

Now, Germany is the largest economy in the euro zone and the European Union. As such, Germany has agreed several times to bail out Greece. It’s provided hundreds of billions of euros in loans. It’s assisted in a debt write-down program that shed over 100 billion euros of debt from the books of the Greek government.

However, Germany also exacted a price for its assistance – austerity.

This forced diet of lower spending and higher taxes has enraged the Greek population, to the point of forcing a showdown with the euro zone countries and the European Central Bank. It has also given the Greeks a focal point. Apparently in the eyes of many Greeks, Germany is once again trying to dominate Europe, and it must be stopped!

Given the current Greek view of Germans, it should come as no surprise that the latter have booked less vacation travel to… you guessed it… Greece. Bookings are off 30% from last year.

Now, as I noted above, tourism is a very important part of the Greek economic engine, and many of the tourists that typically visit the idyllic country are Germans. This means that the Greek people are spewing venom, not only at the people who agreed to bail them out and assisted in paring their debts, but also the people who typically fill their coffers with tourism dollars… brilliant!

The Greek people are running – not walking – down the path to economic suicide. As the high season for European travel approaches, the Greek people and the Greek government are watching in horror as their overall holiday bookings come in well short of any projection.

This of course means that the country’s GDP forecasts for the year are also over-optimistic, and therefore they will not meet the austerity requirements of… you guessed it again… the Germans!

It’s going to be a long, hot summer. Stay away from the euro, stick with the U.S. dollar.


Rodney

 

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In our new infographic What Killed the Middle Class?, we take a look at some shocking numbers to show how bad it’s become and what has been fueling this middle-class revolt.

 

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Categories: Economy

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.