Merryn's Blog

Greece proves there are no free lunches

Greece's bail-out hasn't just been conjured up out of thin air. The money has to come from somewhere. Unfortunately, it's coming from you and me.

Just further to the latest developments on Greece, I got a note in from US investment expert John Mauldin earlier today. Mauldin puts out a weekly email which is always worth a read, and he's none too happy about the whole bailout. Why?

Because it's costing him money not because he's invested in Greece, but because he's a US taxpayer.

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"It now looks like almost 30% of the Greek financing will come from the International Monetary Fund, rather than just a small portion. And since 40% of the IMF is funded by US taxpayers, and that debt will be junior to current bond holders (if the rumours are true), I can't tell you about how outraged that makes me.

"What that means is that US (and Canadian and British etc.) taxpayers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks and funds reduce their exposure to Greece while taxpayers all over the world who fund the IMF assume that risk."

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Mauldin's making a basic but oft-neglected point there's no such thing as a free lunch. Somebody always pays. Any time there's a bail-out, someone had to fund it, through taxation or inflation. And when you look at it on those terms, it becomes much harder to justify rushing to the aid of Greece given the state that most of the rest of the world is in.

By the way, we're collecting the best stories we hear about Greek public servants' perks. We've heard a few corkers such as the story that they get 14 monthly pay cheques a year (one extra month as a Christmas bonus, the other at Easter), and tales of bin-men on €60,000 a year. Is it all a hideous over-exaggeration? Or are there even more ridiculous stories out there? Feel free to add your take in the comments section below.

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