Collective punishment.

In a final throw of the dice the President of Greece, Karolos Papoulias has invited the heads of all the political parties to form a coalition government to continue with its promised austerity programs so as not to miss the next tranche of EU bailout money but it is looking increasingly unlikely that this will happen. This will precipitate another general election in June but by this time it could be too late and Greece could have crashed out of the Euro. Greek people are fed up with austerity which is hitting them hard. The economy shrank by 8.5% last year, 54% of young people are out of jobs and poverty is increasing. Hundreds have committed suicide and mothers are giving away their children because they are unable to buy food for them. Greece has been living beyond its means since it got a democratic government in 1974 and successive governments have been borrowing money to pay for the generous social schemes they devised to win elections. Greece joined the Euro by hiding its accounts and, for a time, enjoyed borrowing at low interest rates until the debt became too huge to service and then it fell apart. The EU, led by Germany, has forced stringent cost cutting measures to reduce public debt in return for lending money to pay off maturing debts and pay for running the government. Private lenders have had to take a haircut and write off part of the debt which is a partial default. The problem is that as the economy shrinks and unemployment increases the government earns less in tax revenue which means that Greece will be paying off its debts for decades. If austerity had been accompanied by some measures to increase growth people could have borne the pain because it would be finite but German Chancellor, Angela Merkel is adamant. She wanted Greece to cut its budget deficit from 15.8% of GDP in 2009 to under 3% by 2014. When the then Greek Prime Minister, Papandreou asked her for gentler terms she replied that the program had to hurt. " We want to make sure nobody else will want this," Mrs Merkel told him. Famous words but is she sure that she will not have to bail out Spain, Potugal and Italy if Greece falls? Being from the old East Germany Mrs Merkel may have been brought up in austerity and may be wondering what the fuss is all about but she should not forget that following German Unification in 1990 West Germany transferred 1.6 trillion Euros to the East to pay for the transition. If new elections are held in Greece opinion polls show that Alexis Tsipras and the left coalition of Syriza will win a majority. Germany and the EU are putting up a brave front saying that the firewall around Greece will prevent the contagion from spreading. But already yields on Spanish government bonds are rising. Excessive government spending, ill-considered social schemes, borrowing ever more to run government business, very high tax rates, rampant tax evasion, corrupt politicians, government lies to cover up its problems, a corrupt pampered civil service - sounds exactly like India doesn't it? When, not if, will it catch up with us?