DEALING WITH HARD TIMES

April 6, 2010

By Al Doyle

Lithuanians are confronting their nation's financial problems soberly and with an awareness of reality. Public sector spending has been slashed 30 percent, and wages for government employees have been cut by 20 to 30 percent. Pensions are now11 percent lower, and Prime Minister Andrius Kibilius took a 45 percent pay reduction.

Unemployment has risen to 14 percent, and soup kitchen lines are much longer, but Lithuania isn't avoiding the truth and the need for drastic measures. Could America’s government at all levels resort to even a modest amount of cost cutting in the face of hard times?

Indio, California may provide the answer to that question. The city of 84,000 has racked up $805,000 in credit card bills. Indio's response to the problem is to limit purchases to $5000 per month for all employees who hold municipal credit cards. In another "austerity" measure, Indio is warning applicants for the city manager vacancy that they shouldn't expect to receive the same $300,000/year plus benefits paid to the previous holder of that position.

U.S. business bankruptcies rose 20 percent in March as compared to the previous month. "There's no indication whatsoever that the trend is slowing," said Georgia State University bankruptcy law professor Jack Williams. "The pace is picking up, and that was off a major filing year in 2009."

Reuters reports the U.S. office vacancy rate has hit a 16-year high of 17.2 percent, which means that more than one-sixth of all property in that sector is generating no income for its owners. Detroit had the highest vacancy rate of 26.2 percent in the survey of 79 metropolitan areas.

Greece is having a difficult time finding buyers for government bonds, and those with assets are quickly moving funds out of the country. An estimated $11 billion was withdrawn from Greek banks and deposited in foreign banks or Greek branches of foreign banks in January and February.

"Most bankers say they are worried about the stability of Greece and Greek banks," according to John Raymond of the British firm CreditSights. "This combined with the tax issues are making people nervous about keeping their money in domestic banks or within the country." Greece remains the most popular pick for a financial meltdown, but many other nations are just marginally better off.