“Greek Debt Rating Cut to ‘Junk’ Status” goes the headline of the New York Times; “Die Schuldenkrise verschärft sich” the German Frankfurter Allgemeine; “Griechenland wankt immer mehr” the Swiss Neue Zürcher Zeitung, “Grecia declassata a livello ‘spazzatura’ Portogallo trema sotto il peso del debito” the Italian La Repubblica, faithfully echoing ‘Junk’ status.
As per April 27, 2010, the long and short term Issuer Credit Rating for the Hellenic Republic are rated BB+ and B, respectively, by Standard & Poor’s. A more accurate description than ‘Junk’ status is “considered highest speculative grade by market participants” for BB+ and “more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitment” for B. While this might not sound like complete ‘Junk’ it doesn’t sound good, especially given that we are talking about sovereign debt rating. But then, one might wonder how valid S&P ratings are in first place.
I have never been to Greece for holidays and I never moved to Greece for work. Therefore, my knowledge about Greek government, its structure and functioning, the Greek economy and the people of the republic is to be considered zero. Further, I have not studied the recent events in depth. As such, I should perhaps not comment at all. That said, I would like to leave a thought. It is actually not specific to the Hellenic Republic.
I consider financial responsibility to be an imperative, for individuals, corporations, sovereigns, or supranational. An entity on the brink of default to me signals first and foremost failure to meet this responsibility. Actually, I consider default the last stage of not meeting financial responsibility. Not being able to zero debt monthly equals to not meeting the responsibility. Though, my view might be a bit too strict the apparently widespread nonchalance w.r.t. financial responsibility, starting at the level of individuals, is distressing.
You might argue that meeting financial responsibility requires different sacrifice by individuals living in different countries. True. A good example is a US student who struggles with tuition fees vs. a Finnish student with no such fees, a few hundred Euro each month pocket money issued by the government plus subsidized housing and lunch. Very different realities, indeed. Though, I still argue, it doesn’t actually matter. No matter how the conditions, it is your personal responsibility to meet financial liabilities, at least in an economy where this is theoretically possible.
From my perspective, going on strike because the seat belts might feel too tight under dire circumstances equals to not having understood that financial responsibility is an imperative. Whatever the reason for the circumstances, I think there is no other way out of debt than fasten the seat belts. Yes, possible misconduct at sovereign or corporation level eventually drips down to the individual level which might be unfair, awful, wrong, mad, inhumane, unethical, amoral, whatever. However one may feel, nothing changes at the basic reality, whether as individual or as individual citizen of a country.
Unless proven wrong, I don’t think bailing out corporations or governments is the right thing to do. It is not the responsibility of Germany or any other country to clean up the mess by pouring billions into a failed entity even if for decades countries have been housing funds of massive tax evasion, a practice that might not have been blocked but is decided and carried out by the tax evader who rests alone responsible for his or her actions. Pointing at Goldman Sachs for having the ultimate tricks to pull white rabbits out of black top hats might not be completely wrong but not complete either as the magician was most likely hired to perform the tricks.
Finally, I don’t think this is a Greek only problem but increasingly so an eurozone concern and from there, you bet, it becomes in a matter of minutes a global issue. (Just consider the DJIA today at the close: -213.04 (-1.90%).)
For the records. Though I had no exorbitant tuition fees, covering costs in Zurich required a yearly income of roughly $25k which implied one or more part-time jobs throughout the years leading to a delayed graduation by a few semesters to make sure I do not fall into debt. Currently, my wage is as low as 10 years ago and it was clear to me from day one that I had to scale back in everything to meet financial obligations. Of course, the real cost to society of my existence likely exceeds total balanced liabilities but one can only balance what is actually measured or measurable. As such, I consider a balance sheet to be positive when all liabilities are met, typically when there is no unpaid check left at the end of the month. With this I don’t want to claim I’m better. I was just lucky to have had an upbringing where financial responsibility and savings were almost sacred.