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Greek protestors: clueless in Athens

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Kostas Tsironis/AP

(Read caption) Communist party affiliated protesters shout slogans during a rally against the government's latest austerity measures and plans to sell off state enterprises, in central Athens, June 18, 2011. Greece has seen near-daily protests against the belt-tightening that has slashed salaries and pensions. The protestors seem to be clinging to the illusion that the state can somehow avoid these difficult cuts.

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One of the most bizarre aspects of the Greek mess is how completely out of touch with reality the Greeks who protest the reductions in government spending are. There is simply put no other option when you have a large primary (excluding interest payments) deficits and no one wants to lend to you unless you agree to cut spending.

Defaulting is not a solution because that doesn't reduce the primary deficit (indeed, given the havoc it would create it would probably increase it).

Leaving the euro and re-impose the drachma wouldn't eliminate the deficit either, unless you start to directly finance it with "the printing presses", but that would create a massive inflation that would bring about the very reductions in real wages that the protestors are protesting against.

Raising taxes on the rich can at most cover only a very small part of the deficit, especially considering that the rich are likely to take measures to avoid these tax increases.

And the strikes and protest themselves only increase the need for spending cuts because they by weakening the economy reduces tax revenues. The Greek unions strikes are therefore as stupid as expressing dissatisfaction with the fact that you freeze by reducing heating further or taking off your shirt

So how could people be so unbelievably clueless like the Greek protestors? I think this is really a case of them being under Frederic Bastiat's old dictum "the State is the great illusion where everyone thinks they can live at the expense of everyone else". The Greeks have for years wanted and gotten from the politicians lavish social benefits but have refused to pay the taxes needed to finance these benefits, creating the large budget deficits.

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