On Tuesday morning, July 5, fifty-two percent of the Brits gave a quiet fist pump and issued a silent “YES” that they, in fact, got it right when they voted to exit the European Union. There was probably another substantial percentage of those browbeat by the politicians and press into voting against Brexit for fear of being branded racists or anti-Islamic that joined in that collective sigh of relief.
You see, shortly before the Brexit vote, European officials had voted yet another $8.4 Billion bailout for Greece.
That came one short year after they had authorized a $95 Billion bailout for Greece. All of this despite the fact that Greece juggled its books to give the appearance of financial stability as a condition for admission to the European Union and the other members looked the other way because increasing the size of the European Union was more important than adhering to the financial requirements. And despite the fact that Greece has repeatedly promised economic reforms that they have repeatedly failed to produce.
Greece’s reaction to its worsening economic conditions is akin to Wimpy (from the Popeye cartoons) noting:
“I would gladly pay you Tuesday for a hamburger today.”
And while Wimpy and his friends in Italy, Greece, Portugal, Cyprus and elsewhere continue to devour the hamburgers, Tuesday never arrives for payment.And now, following on the heels of the Brexit vote, Italian and European officials began to bemoan the crumbling underpinnings for the Italian banking community. The Wall Street Journal noted:
“In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly traded banks in the eurozone, Italian lenders account for nearly half of total bad loans.
“Years of lax lending standards left Italian banks ill-prepared when an economic slump sent bankruptcies soaring a few years ago. At one major bank, Banca Monte dei Paschi di Siena SpA, bad loans were so thick it assigned a team of 700 to deal with them and created a new unit to house them. Several weeks ago, the bank put the bad-credit unit up for sale, hoping a foreign partner would speed the liquidation process.”
Italy’s banks are second only to Greece in the percentage of bad loans with Greece’s bank holding nearly thirty-five percent of their portfolios in non-performing loans.
Great Britain is a net contributor to the European Union – that is the polite way of saying that the people of Great Britain are subsidizing the governments of other members of the European Union – most notably, Greece, Italy, Portugal, and, until recently, Ireland. Great Britain’s debt to Gross Domestic Product (GDP) ratio is, like Germany’s, about ninety-eight percent. Greece’s ratio is over one hundred and seventy-five percent while Italy is experiencing a continuing rise to nearly one hundred forty percent. And while the debt/GDP ratio is increasing for Greece, its actual GDP has been declining dramatically since 2008. (For those of you forced to endure a teachers union led education in the Portland Public Schools, a debt/GDP ratio in excess of one hundred percent means that the nation does not provide sufficient annual revenue from all sources to cover the debt that it has incurred.)
In Great Britain the unemployment rate is about 5.4%, while in Greece it exceeds 25.0 percent, and in Italy, 12.5 percent. And all of this is about to be compounded as members of the European Union are absorbing over one million new refugees from the war torn areas of the Middle East who possess little skill, even less income and steadfastly refuse to integrate into the existing European communities. The welfare burden of Europe is increasing dramatically while two nations have been forced to bear the lion’s share of the financial burden – Great Britain and Germany.
And while the financial conditions of many of its members continues to worsen – or at best stagnate – the unelected bureaucrats of the European union continue their mindless efforts to centrally manage the economy while simultaneously encouraging unsustainable migration – both internally and externally. It is little wonder why the common sense citizens of Great Britain voted to leave that mess behind. (That despite the ruling elites almost universal conclusion that Great Britain will still have to subsidize sloth, corruption and incompetence in the rest of Europe as a price for trade with those nations.)
Quite frankly Great Britain has the upper hand in trade and economic discussions and if they are wise they will once again ignore the ruling elites and force the end of free lunches for the welfare states of Europe. In the end, someone has to remind the world that if there is no penalty for sloth, there is no reason to avoid it.
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