Poor Greece is on the verge of defaulting on its bills and declaring bankruptcy. Credit rating agencies S&P, Moody’s, and Fitch long ago downgraded Portugal, Italy, Greece, and Spain (the PIGS) and gave them negative outlooks, with Greece getting Cs across the board. (Cuba, Pakistan, and Burkina Faso are a few of the nations with better ratings than Greece.) If Greece runs out of money and fails to pay €14.5 billion to service its debt on March 20, European markets could be badly shaken.
Greece’s financial woes are the result of its unsustainable social welfare entitlement state, whereby working adults are promised generous pensions and early retirements, and younger generations must cough up the money to pay for these goodies, though they won’t receive similar benefits when they retire. (Sound familiar?) The government has been borrowing to subsidize these pensions, but it’s not enough—partly because Greece has one of the lowest birthrates in the world, and partly because swaths of young educated Greeks are fleeing the country and emigrating elsewhere to find work. read more »