Greek drama will make compelling viewing

Every adult in Ireland should learn to read Greek. They should also tune their internet radios to listen to Greek stations and take a ridiculous and disproportionate interest in all things Greek for the foreseeable future.

Here is why. The Greek people, exercising their full democratic rights, have elected a government to take a radical and extreme approach to managing the debt that hangs over their country.

The popular lines about burning the bondholders, sticking it to the troika and other plans to directly challenge the national debt in Greece are now part of the everyday narrative there.

I’m delighted with this because instead of the Punch and Judy show that masquerades as political debate over Ireland’s economic choices, we now have a real living example of Plan B.

Plan B is the opposite of the Plan A which Ireland has now pursued for a number of years. Plan A proposes to take its people through the ringer on pay and taxes.

It induced a spurt in emigration and caused economic contraction as government spending was sharply reduced to help balance a broken budget. It was the hard yards needed before economic and employment growth resumed.

Plan B is now open and available for full unalloyed viewing in Greece. The early reviews are not so encouraging. Start with sovereign bonds, always a good litmus test of a nation’s standing in the world economy. Ten-year bonds in Greece are today trading at a yield of almost 11%.

Put another way, if the Greek people want to borrow €100,000 10-year money from the world’s pension funds and insurance companies, they have to cough up €11,000 in interest each year, or just short of €1,000 per month.

If the Irish Government want to borrow €100,000 from the global money market today, it will be charged 1.14%.

That means it has to produce, on behalf of you and me, €1,140 a year in interest, or €9,860 less for money used to pay for nurses, teachers and other important pieces of the cog that is Irish society. That’s what happens when countries take tough decisions.

The shares in banks are another way of checking out an economy’s health. We know all about this as our banks imploded around 2008 and have gone through massive restructurings before recent significant improvements in profitability.

Bankers are as popular as Dublin 4 students in Thomond Park but they are needed for a functioning economy. Try buying a car or house without a bank involved.

Having healthy banks is a good thing ultimately for any economy and we now have, albeit after heavy surgery, banks that are getting healthier.

In Greece, one of the largest banks, Eurobank, has seen its share price fall how much in the last 12 months? 76%.

That cannot be doing much for confidence in the domestic banking system and all reports suggest deposits are flowing freely from Greece as people lucky enough to have savings make rational decisions.

Don’t be under any illusions on this matter of economic choices. I can paint a quick and dirty scenario that tips Irish bonds over the cliff and drives Irish banks in to sharp reverse.

You don’t need a PhD in economics to figure out how that might occur. But you do need to carefully analyse the economic choices we make as planning begins about what type of society is being promised here over the next five or 10 years.

I’ll put my hand up straight away for prudence, being conservative and having a deep degree of cynicism about anyone who suggests two fingers to Ireland’s debt providers is an easy option.

I’d normally be used to debating this topic with others but now those who agree and disagree can watch a reality show about Greek economics that plays out in front of our eyes. Happy viewing.

Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.