Pat Hoyos: Barbados not so far from a Greek-style meltdown

Barbados euro_2007

WHENEVER I ENVISAGE GREECE, lurching around in circles with a debt of 175 per cent of GDP on its shoulders, I see, not too far off on the horizon, little Barbados, walking with increasing shortness of breath with its own load of debt, now at 133 per cent of GDP.

In the Budget debate, Opposition Leader Mia Mottley called for a re-financing of the country’s debt in order to give us some fiscal breathing space.

Re-financing, if we could achieve it to a significant degree – remember, we have a debt of over $11 billion at present and rising by around a $1 billion every year – would certainly help us, as it would lower the amount we have to pay back every year, but for a far longer period.

Of course, it is just kicking the can debt down the road a few more years, so that not only our children and grandchildren will have to deal with it, but their offspring too, most likely. But, I wonder, could we get some sort of massive roll – over of our national debt that would bring it down to manageable proportions? Would we not have to go to the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank for such a massive financial undertaking at rates we could afford.

Now, if that is the case, Greece is instructive…

… continue reading this article at the Nation News: A looming fiscal tragedy of Grecian proportions

10 Comments

Filed under Barbados, Economy

10 responses to “Pat Hoyos: Barbados not so far from a Greek-style meltdown

  1. de castro

    Geeks will be refinanced with “never never” loans.
    Next two generations indebted.
    Their central banks failed to control their internal banks spending/lending.
    Now no one trust the banks or the political class…..so withdrawing their
    money to bank elsewhere in euroland. Why ? Because of the political
    uncertainty.
    Guarantees by their central banks and new government that their savings were secure/safe would have stemmed the rush to withdraw their savings.
    Now the horse has bolted too late to stop the train.
    Now they must go “begging” ECB IMF WB for a bail out.

    Sad fact but they can only blame their banking institutions and their politicians for misleading public/people.
    Am sure Merkel or Cameron would love to kick them out of EU but
    don’t think that’s way forward. A deal will be struck to accommodate them.

    Kamtan

  2. Party Animal

    Can anyone tell me the difference between Greece and Barbados ? Financially ?
    I have been saying for the pass three years, we need to shut the Country down, like the St. Lucians did some years ago, are we waiting to follow Greece ? Bajans wake up.
    Mia had several meetings, anything come out of them ?
    700 million to build a Sugar Factory, to grind WHAT ? It will just sit idle for the rest of its life. 700 million for a waste to energy Plant, ” WHAT WASTE” will we have to import other peoples garbage ?
    I wonder if Sandy Lane and Sunset Crest know what will flow down the hill onto them in the rainy season.
    Wake up St. James ! Your two cents worth might go a far way.

  3. Me too!

    It really is coming close, isn’t it? Sometimes I am frightened, not concerned but frightened, for my children and their future.

  4. Take a look at July 5th Sunday Sun, Dr Evil Worrell has full page Ad that massive Foreign Reserves do not mean a country is necessarily doing well… Is he trying to do a Pre-Ponzi before the well runs dry? When do the descendants of 1816 and 1937 wake up?

  5. Nobody's business if I do!

    If we don’t get something happening to bring in more revenues in all sectors, we will be sunk. Tax burdens on business are massive at the moment, so the only way to get more is to increase business. More taxes will kill many businesses that are on the edge, and that’s a whole lot of businesses right now.

  6. de castro

    The way forward is to renegotiate your loans…..if you cannot upkeep your payments. Brazil defaulted twice in as many decades on IMF WB loans.
    Interest rates were over 26% PA. This was unsustainable…
    They could not even repay the interest.
    Today Brazil is a money lender…..member of IMF WB.
    Barbados is too small to survive/exist. Political dilemma.
    Not sure of soltion ! Move habitat ?

  7. Party Animal

    de castro, the way forward is to change the Government, with all the Tax burdens we already have, which is crippling every business and the people.
    If this Government was to borrow nuff money where will it disappear to.
    Politicians don’t seem to realize the more burden they put on the People the worst things will get.
    We the People don’t have the opportunity to tief money like it going out of style.

  8. Green Monkey

    What Greece, Cyprus, and Puerto Rico Have in Common (Not to mention Barbados too /GM)

    by Gail Tverberg

    We all know one thing that Greece, Cyprus, and Puerto Rico have in common–severe financial problems. There is something else that they have in common–a high proportion of their energy use is from oil. Figure 1 shows the ratio of oil use to energy use for selected European countries in 2006.

    (Fig 1, a chart showing percentage of energy derived from oil for European countries in 2006 goes here and was omitted – see original for chart)

    Greece and Cyprus are at the bottom of this chart. The other “PIIGS” countries (Ireland, Spain, Italy, and Portugal) are immediately above Greece. Puerto Rico is not European so is not on Figure 1, but it if were shown on this chart, it would between Greece and Cyprus–its oil as a percentage of its energy consumption was 98.4% in 2006. The year 2006 was chosen because it was before the big crash of 2008. The percentages are bit lower now, but the relationship is very similar now.

    Why would high oil consumption as a percentage of total energy be a problem for countries? The issue, as I see it, is competitiveness (or lack thereof) in the world marketplace. Years ago, say back in the early 1900s, when countries built up their infrastructure, oil price was much lower than today–less than $20 a barrel (even in inflation-adjusted dollars). Between 1985 and 2000 there was another period when prices were below $40 barrel. Back then, the price of oil was not too different from the price of other types of energy, so an energy mix slanted toward oil was not a problem.

    Oil prices are now in the $60 barrel range. This is still high by historical standards. Furthermore, much of the financial difficulty countries have gotten into has occurred in the recent past, when oil prices were in the $100 per barrel range.

    Big Snip

    Given that the world economy runs on “cheap” energy, adding expensive energy production, no matter how “green” it may appear to be, does not solve a country’s financial problems. In fact, it likely tends to make its financial problems worse. There is no way that high-priced energy will produce goods and services that are competitive in the world market. In fact, it is doubtful that high-priced energy will return a high enough “profit” to pay its own way, in terms of having the ability to pay suitable taxes to support required government services, such as schools and roads. High-priced energy is instead likely to need government subsidies, both for initially building the devices and for helping citizens pay the ongoing cost of electricity.

    Greece clearly has a lot of problems besides its high-energy cost, including excessive pensions and inefficiently operated state-owned companies. To some extent, I expect that these other problems reflect the difficulty of creating goods that can compete profitably in the world economy. If there is no way businesses can successfully compete in the world economy, I can see why leaders would do whatever they could to keep the system operating. This might mean adding more debt, keeping staffing at government-operated companies at higher levels than needed, and providing overly generous pension programs.

    http://ourfiniteworld.com/2015/07/08/what-greece-cyprus-and-puerto-rico-have-in-common/

  9. de castro

    Let me try to explain the Greeks dilemma.
    They were encouraged to join the EURO.(currency).
    It means they cannot raise/lower their central banks interest rates as before.
    To regulate/control their economy……
    They have no control over their central banks interest rate as they must
    do what ECB decides to do with interest rates.

    Fluctuations in oil prices is a concern….but interest rates has a more profound effect on inflation/growth/businesses etc.in its economy.

    Am sure a solution will be found to resolve the Greek crisis but it will
    be painful for the Greek people….not long before that solution.

    Que sera

  10. Recipe for disaster

    Like the UK; Greece, Portugal, Spain and Italy should have had their own Euro to reflect there different and varying economies.

    In spite of cooked and absent books via Goldman’s who couldn’t make enough monies between fees and shorting the currency ( small conflict of interest ) Germany now has their fourth Reich.

    Its all about power over sanity and substance

    Good Luck!