Sunday, February 7, 2010

Dimitris Damianidis Is On Strike

Mr. Damianidis is a high school teacher in Greece, expecting to retire soon on a government pension of 28,000 Euros annually. He is on strike because the Greek government is going broke and threatening to make cuts in his salary and pension.

You might wonder what Mr. Damianidis job was like before retirement and at what age Mr. Damianidis is retiring. As the New York Times puts it in this morning's story:

"Like many public-sector workers and civil servants in Greece, Mr. Damianidis has led a comfortable middle-class life over his 34 years working for the state. His house is paid for, he can afford to go away for a two-week vacation every year, and he has a daughter in private school. His job is protected by the constitution, and the pay of public sector workers has doubled over the last decade."

Not bad. Please note that Mr. Damianidis is retiring at the official retirement age in Greece -- 60 years of age!

But, Mr. Damianidis is now angry because this cushy deal is threatened by a Greek government that hovers on bankruptcy. Not surprising, no one wants to buy Greek government bonds anymore. Who is to pick up the tab for Mr. Damianidis? That is now the interesting question.

Greece has been following the plan of most countries in the world: provide massive government benefits and finance these benefits with debt. That works until it no longer works. For Greece, it no longer works.

Greece is a member of the European Union, so all eyes are on Germany. The German and French economies are the only EU nations that are experiencing any real economic recovery. For the EU to do a bailout, Germany would have to provide the wherewithal. That would work -- for a while. But, then Germany has the same problem as Greece, so, in time, that won't work either.

Greece is a harbinger of the future in two respects: 1) public sector jobs, protected by union political activity are ultimately not affordable by Greece or any other society (see California and New York, if you are looking for American examples); 2) the practice of promising benefits to large parts of the population without providing any means of funding these benefits other than debt will eventually fail (think social security and medicare in the US).

Now Greece is looking to the IMF (think USA) to bail out these protected characters like Mr. Damianidis. Why? Mr. Damianidis should go get a real job and Greece should go bankrupt. If not, the contagion will spread to other countries. The US is not too far down the chain.