Athens on the St. Lawrence? Not yet

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Quebec, like Greece, has generous social programs and an ominous public debt. Quebec, like Greece, has a government that has persistently lived beyond its means. Quebec, like Greece, has a population that feels entitled to its entitlements and responds coldly to appeals for restraint.
Fortunately for Quebecers, the close similarities stop there. But there is an important lesson for us, all the same, in the Greek crisis.
Greece's current turmoil over the public debt and how to reduce it has spread far beyond that country's borders. Demonstrations and fatal rioting are domestic, but the financial repercussions from decades of feckless fiscal policy have rocked markets and agitated governments across the Euro-zone and around the world.
Greece's basic problem is simple: The government has been spending more than it takes in, and making up the difference by borrowing. Now it's having trouble making payments on the growing debt, and lenders have become querulous and demanding. And yet much of the Greek public persists in blaming the crisis on "history, or banks, or the weather" (in W. H. Auden's phrase) or anyone but themselves.
But with their generous civil-service pay and perks, widespread tax evasion for the rich, early retirement, years of deliberate understatement of the public debt, and all the rest, the Greeks are in truth the authors of their own misfortunes.
Quebec is still mercifully far from a crisis like the Greek one. For one thing, Quebec is not a country, but part of a stable federal state with a strong currency, a country in which the federal government and most other provinces have relatively light public-debt burdens. Also, Quebec receives an $8 billion annual subsidy from the rest of Canada, in equalization payments. It's enough, or it should be, to make any Quebecer a federalist.
Still, this province has undeniably gone some distance down the road Greece has taken. We need to turn around. In March, Finance Minister Raymond Bachand reminded us that the Quebec debt, as measured by the OECD standard method, stands at a dismaying 94 per cent of gross domestic product. Among developed countries only four jurisdictions have higher figures: Greece, Iceland (another basket case), and Japan and Italy, both economically stagnant even before the recession. (For Greece the figure is 102 per cent; for the OECD as a whole 79.4; for Canada just 69.7.)
Yet the same minister, in his March budget, chose to raise both taxes and spending, resolutely pumping still more money into social programs that are already far more generous than those across Canada. Quebec's debt, as a share of GDP, will grow again this year.
When Quebec borrows, by selling bonds, it must pay an interest rate higher than the federal government pays. That's because lenders are happiest when debt loads are small and easily manageable, and Quebec's is neither. Still, the spread is only about one percentage point. Compare the situation in Europe: When Greece borrows, its bonds must offer nine-per-cent interest, triple the rate for bonds from the financially-sound German government. One point vs. six points: That's a measure of the difference between Quebec's situation and Greece's.
But the principle is the same for us as for the Greeks and everyone else: Ultimately the consequences of living beyond our means cannot be avoided. Too much borrowing for immediate gratification brings big problems later. The larger and more protracted the bender, the worse the hangover. This is no time for Quebecers to be calling for one more round.

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