Greece follows Zimbabwe in debt default

Every newspaper and economists have watched Greece’s debt default with inquisitiveness, why? Why is it that in every report they compare with Zimbabwe, when Zimbabwe is in Africa far away from the Greek fiscal turmoil?  Firstly Zimbabwe is the only country in the world to have defaulted for the past decade, having done so in 2001, and since then no other country on earth has done so, whether poor or rich, secondly Greece will be the first West European country to have defaulted since 1932. A comparison with Zimbabwe with unemployment rate of over 90% and a spiralling vendor economy, any economist will tell you is the worst fiscal nightmarish, because Zimbabwe has never recovered from its debt default and instead has been the case study of ill governance, financial turmoil and economic stagnation. For any post graduate economist in the world to pass you need to study the Zimbabwe case study, as it is the only country to have defaulted in the past decade, scholarly it is imperative to review what is already known and what is not known, as to lay a basis for critique. Zimbabwe study has a multiplying effect negatively, economically, ill governance, and toxic politics, both asunder by despot and inherent structural ignorance.

I had a discussion today with my fellow Lecturer at University who comes from Greece, he was trying to convince his audience that Greece will not and cannot go the Zimbabwe route, any suggestion that Greece can be an economic failed state like Zimbabwe’s Robert Mugabe never crossed his mind and was pensively in denial, well I can understand but why logical comparison with Zimbabwe would attract an unwelcome posturing? Well as he made it clear Greek people are philosophers, well I had forgotten about it that Socrates was Greek and so were Plato and the rest of the first scholars. Yes further more he explained in Zimbabwe you don’t change governments even if they are useless in Greece we have just changed a government and we have changed many governments before, well well, he was damn wrongly right, wrong because we have voted ZANU out before and it refused to go, right because we have been unable to remove the losers, what argument can you make? Greece goes to the referendum this Sunday 4 July to vote on No or Yes to accept the Austerity agreements with EU funders.

Greece:

GDP: 246 billion

Public debt of GDP: 175%

Unemployment: 26%

GDP National Saving: 14%

Revenue: 120 billion

Expenditure: 128 billion

Zimbabwe:

GDP: 13.7 billion

Public debt of GDP: 181%

Unemployment: 95%

GDP National Saving: -15%

Revenue: 3.7 billion

Expenditure: 4.6 billion

Why do countries borrow money?

Just like individuals borrow money so is governments for as long as the debt is sustainable. A country’s debt is said to be sustainable if it can meet todays’ interests and other payment obligations, and it can do this if its debt stays at a reasonable proportion of GDP. As long as its economy expands there is no problem in a country taking more debt, the problem arises when the share debt to GDP is so high that the government is unable to repay, what Zimbabwe and Greece are now infamous of. There is another side to it and that is the Keynesian multiplier effect by allowing more consumption today, while less gets invested, hurting future generations which eventually cripples and throttles the economy.

Have you learned something?

 Let’s debate; Elliot Pfebve is a Lecturer at Coventry University, in the UK, political commentator and MDC Ambassador to Europe.