Have you been reading the news about the Greek debt crisis?

Well, the Greek government has announced an austerity program. (Oh! I remember that word during Marcos years!) Greece froze pensions, cut salary of government employees and increased taxes in order to meet its financial obligations. Sounds like some of us financially handicapped Pinoys di ba? We all have our own austerity programs to save for future Meralco billings.

Now, how in the world did Greece came into such a financial quagmire, you’d ask. Well, pretty much like Iceland in a lot of ways. Uncontrolled spending and too much long-term obligations, like government bonds. Applied to Filipino, it’s called uncontrolled corruption – nah! I’m not referring to Greeks.

Bonds?! Yes, like sovereign debt? Sovereign? Yes, like those debts incurred and guaranteed by the government? You know, like those bonds issued by our country with a sovereign guarantee so that you, me, your kids, your kids, will have to do some community togetherness in paying the interest, against the world. Something like that.

Anyway, I read that their national deficit is equivalent to about 12.9% of their GDP and with austerity measures, it should bring it down to about 8.7%.

But part of Greece’s headache is that Germany had indicated that it would not agree to an IMF bailout. But I doubt if Germany would block a bailout given that if Greece defaults, this would be a problem for much of the European Union, so there’s the bigger reason to say, ok! ok! Let’s do it!

Now, Spain is also having its own Ay! caramba moment! Some of the financial news I read says that they has just ended seven consecutive quarters of negative growth, but still, they have the highest unemployment numbers in the European Union.

Iceland? Financial troubles since early 2009.

This may all sound so high-flying to non-financial people but if you look closely at the root of all these financial troubles – you don’t need a Wall Street guy to explain it all to you. For the most part its uncontrolled borrowings and spending thinking that sovereign guarantee is such a safe wall to lean on.

Now, here’s a nice read to understand sovereign guarantee.

SOVEREIGN GUARANTEE
The CBCP News Site.

TIME and again, Mang Andoy hears the enigmatic and now even seemingly hallowed phrase “Sovereign Guarantee”. He and the common tao are led to believe that they should jump for joy when the government is said to have given a “Sovereign Guarantee” here and there, to this or that bank, corporation and the like.

But simply put, the jargon as merry as jumping for joy: One, it is merely getting a loan, borrowing money, or simply making “utang”. Two, it is the government that gets the money, spends it as it sees fit, for whatever purpose it likes. Three, it is however the people who actually pay the loan made, the money borrowed, the “utang” incurred by whoever rules the government.

In other words, “Sovereign Guarantee” is in reality nothing more than an exploitative government doing the following:

1. First, it is the government that officially seeks and gets one big loan after another from this or that foreign or local sources.

2. Second, it is the same government that gives the solemn promise and assurance that the Filipinos are the ones who shall make full payments for all the loans made plus the interests incurred.

3. Third, it is precisely the same government that thereafter directly gets the money and gleefully spends it according to its design and desire.

4. Fourth is precisely the same government that imposes and collects heavy and continuous direct and indirect taxes from the people, young and old, rich and poor, oligarchs and beggars alike to pay the borrowings made. Fifth is definitely the same government that again seeks and gets more loans—and the same cycle goes on and on.

There would be no problem with a government that gets loans, that gives “Sovereign Guarantee”, that spends the money if those in government, especially the leading figures, are known for their honestly and integrity, and not infamous instead for the long litany of gross graft and flagrant corrupt practices.

The payment of taxes by the citizens to the government is a standard and acceptable practice if the public officials concerned, particularly the highest authority in the land, enjoy credibility and has the trust of the people.

But there is a huge, throbbing and disconcerting socio-ethical problem when a government with its chief executive is categorically and continuously rated as corrupt, very corrupt, and most corrupt. And this is exactly the case of the Philippine Government today, under the present national leadership that is engaged in continuous big borrowings of money that has made even the unborn Filipinos already in big debt—with “Sovereign Guarantee”!

Related articles:
1.) Timeline: Greece’s debt crisis
2.) Economy of Greece

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reynz is one Uragon and a Filipino-American, has many years of public accounting & auditing, broadcast investments, housing tax credits and equity investments as his background. Based in the US, he maintains his personal and humor blog at reyna elena dot com. A graduate of Aquinas U, he went to GWU and Temple U in the United States.