New Brunswick, fiscally considered, is not Greece. But are we getting there?
Canada’s second-smallest province, by population, endures a long-term- debt-to-GDP ratio of 32 per cent. That means dunning, theoretically, every man, woman and child in this province roughly $15,000 a year (more than $35,000 if you consider the federal shortfall).
Greece, in contrast, is Europe’s 14th-most populous country. Its debt now stands at an astounding 180 per cent of annual economic production.
For a while, this nation was relatively robust: Its tourism trade was second to none in the world; its agricultural and resources sectors were among the strongest in the Mediterranean region. Now, it is all but bankrupt.
Last week, the country’s government ordered the banks to shut down (to prevent a run on deposits); this week, the national treasury defaulted on a critical loan repayment to the International Monetary Fund; and just yesterday all heck broke loose on international stock markets as fund managers and moneyed investors around the world sent exchange prices tumbling by triple digits – all because a middling nation with unsustainable leverage couldn’t pay its bills.
The factors that contributed to the “Greek Crisis” (now in its fourth year) are complex. They include socio-economic mismatches involved with merging trade agreements and currency standards into the European Union, and political and fiscal traditions within Greece, itself, which have not tolerated high capital streams from public sources of revenue. (English translation: Though the country maintains comparatively high marginal and progressive rates, Greeks, themselves, are expert tax avoiders).
According to an article in The Economist two months ago, “Greece emerged from recession in early 2014, but its escape from contraction was short-lived. Figures released on February 13th showed the Greek economy still growing year on year, but shrinking in the final three months of 2014. Since 2008, the Greek economy has shrunk by about a quarter. Although not quite as deep a downturn as America’s Depression, Greece’s recession was more prolonged and is likely to take more time fully to recover from. Recent downturns in the euro area seem like minor hiccups in comparison.”
In fact, Greece’s pre fiscal-crisis conditions appear troublingly familiar to residents of New Brunswick, struggling to reconcile their own ambitions with backward circumstances. In Greece, The Economist states, “Even before the crisis struck, (the country) was a laggard. In 2008 only a third of households had the Internet, the lowest share in Europe. Levels of youth unemployment and government debt were already among the continent’s highest. Since then, the gap between Greece and the rest of the euro zone has grown. Unemployment has more than tripled to 26 per cent, and three-quarters of the jobless have been out of work for 12 months or more. Over a third of Greeks are considered to be at risk of poverty.”
The degree to which a country, region or province is a victim of forces beyond its control is a subject for bitter debate. But people who buy the proposition that individual initiative makes no difference to the health of the polity are very often the same ones who expect unchanging standards of public services long after the state has run out of money.
That is certainly the case in Greece, where the leftish government has resisted all efforts by its international lenders to impose austerity measures, while keeping its outstretched hands, palms up.
New Brunswick’s annual deficit and debt are absurdly high for a province of its size.
The question remains: How long can we afford to flirt with our own Greek problem?