Greece joined the Euro in 2001. To meet the criteria for membership, the country had to demonstrate a certain level of financial stability. Having done this, how did their economy then go down the toilet so quickly? It didn’t, it was substantially in the toilet before 2001, the Greeks just fiddled the statistics to gain access to the Euro, and then continued to massage the numbers in subsequent years, aided by the lovely people at Goldman Sachs. Each year, over many years, the budget deficit was “recalculated” and published as being an acceptable 3% of GDP.
The house of cards collapsed in 2009 when a new government calculated the real numbers and discovered the budget deficit was 14% and the total government debt exceeded one trillion dollars. Greece was financially fucked, and had been for some time; and the underlying reason was not the banks or a financial crisis; it was the Greek people.
For a start, nobody pays taxes unless they have to. It’s standard practice to cheat, and as tax inspectors are demoted if they investigate too thoroughly, and can be bribed if things get sticky; there is no pressure to pay tax, so nobody does (including government ministers). And for a little extra help, the government suspends tax collection during election years; which probably doesn’t make much of a difference to revenues.
So, government revenues are not up to much; how about expenditure?
The average public sector salary has doubled in the past twelve years and the average public sector job pays three times an average private sector job. The state railway has an income of 100 million Euros and a salary cost of 400 million Euros (thanks to an average salary of 65,000 Euros a year), plus 300 million Euros in other costs. It would be cheaper to put everyone in taxis than to run the railways. The school system is one of the lowest ranked in Europe, but employs four times as many teachers as the highest ranked. The retirement age is 55 for people who work in what are classified as “arduous” jobs; people like hairdressers and waiters, at which time they can enjoy a generous state pension.
The Greek people currently out on the street protesting against austerity measures, are protesting to protect their lifestyle that involves cheating on their taxes and the routine bribery of officials, whilst receiving salaries and pensions way above the ability of their government to pay them.
Is there any hope for Greece? No there isn’t. Do I feel sorry for them? No I don’t.
Gosh Spike, how do you know all this stuff? Are you a secret economist, or what?
No, I have just read Boomerang: The Meltdown Tour by Michael Lewis, an informative, scary, hilarious book about the impact of the last few years on a variety of countries. If you want to know what really happened in Iceland, Ireland and Greece; and understand the German response; then there is no finer read than this. There are no charts or heavy financial explanations; just revealing conversations with key players and ordinary people, and many, many giggles.
And when you have read that, read The Big Short: Inside the Doomsday Machine by the same author; by far the best explanation of the sub-prime crisis. It is also informative, scary and hilarious; and reveals the monumental stupidity of some banks; and how some very smart people made a shitload of money out of the crisis.
And once you have consumed those two most excellent books, you can finish off with Liar’s Poker, Lewis’s story of how be became a “big swinging dick” at Salomon Brothers in the 1980s.
Here ends the Pattaya Days book selection for today 2012 this century.
Courtesy of @pundamentalism
Comments 🔗
2012-05-17| Mike N says“For a start, nobody pays taxes unless they have to. It’s standard practice to cheat, and as tax inspectors are demoted if they investigate too thoroughly, and can be bribed if things get sticky; there is no pressure to pay tax, so nobody does (including government ministers)”
Uhmm…..remind you of anywhere ?
But more seriously, I do not feel sorry for the Greeks either, but I’m scared what they are going to do to the rest of the world economy.
2012-05-17| Jan saysI read a book once - sorry to spoil the suspense but the butler did it - he was probably Greek………..
2012-05-17| Clive saysGreece are definitely “reaping what they sowed”, there’s no doubt about it - and they probably don’t deserve our sympathy, but I’m inclined to stop about there…
Why? Well, Berlusconi was every bit as irresponsible in Italy [and seemed to have quite the party in the process] and just got up and walked away when he realised the party was over - absolutely “Scott Free” as the saying goes. I’m not sure of the relative “direness” of the straits of those two nations, but suspect they’re both in a bit of a pickle.
But I’ll reserve my scorn for the European Commission, and for France, Germany, Britain and possibly Belgium, Holland and the other Nordic member states. Why? Because they have known this was going on for years, and done nothing. The Commission’s Auditors have refused to “sign off” the books now for year after year after year, yet we do nothing about it.
I just think it’s a bit hypocritical of the “northern European” states to b1tch about the likes of Greece and Italy when they did nothing even knowing there were issues. So why did they do nothing? Simple: they were blinded by their dream of a European super-state with all nations locked together, national parliaments weakened and diluted, a central bank controlling fiscal policy. Never mind that the economies of member states were starkly different and diverging, or that the basic mechanisms of government are riddled with corruption.
So Merkel, Sarkozy, Cameron and the rest got exactly what they deserved. Just a shame that we’ll end up paying for it.
Oh, and while I’m on the ranting box… a comment for Mike N… The departure of Greece from the Euro won’t really impact anyone but Greece. The markets have already priced in the fubar that is Europe and when you think about it, there’s not much difference between the exit of Greece and the way that Norman Lamont pulled the UK out of the Exchange Rate mechanism the day that he [Lamont] gave George Soros about £2 billion quid by announcing publicly that the Bank of England would buy Sterling to “shore up the pound”. [ Soros gleefully sold Sterling short in vast quantities, and in essence the Bank of England paid him to do it ].
Sadly, the real damage is already done. Greece now has the economic credibility of some of the former European states, and that’s about it. Give them a few years and they’ll start digging themselves out of it with tourism. But the important thing - as Spike’s article shows - is that they need to be left on their own to do it. At the moment the “parental umbrella” of Europe has left Greeks feeling that’s it’s an all-year party. It isn’t, and the sooner they realise this, the better for all concerned. Bitter medicine, but necessary all the same.
2012-05-18| Craig saysyanis varoufakis - Greek Economist worth listening too if you find economics interesting. Nobody is as enjoyable as Michael Lewis though
Speaking of Waters-ports - New SUP surfing movie out! - <a href="http://www.youtube.com/watch?v=reBGx8kylt8&feature=youtu.be
2012-05-18| Chang Noi says@Clive …. Sad but true …. what me bothers the most is that the EU (and other likes) commissioners are still having a ball with huge salaries and retirement funds. And that all for flucking up the EU (and the rest) economics.
2012-05-18| Jan saysHave you noticed you are interested, angry, coherant - getting a bit better ??
2012-05-18| Jock saysThe ´all-year party´ I like the sound of that … even I could probably get elected :-)
Spike I hope you´re at 100% soon … maybe I should threaten another visit so you can build up your strength to cope with it.
2012-05-18| Spike saysMost perceptive; Billy scared me into it.
2012-05-18| Spike saysYou’re too clever. I must stick to photos and musings on my bowel movements in future posts.
2012-05-18| Spike saysPlease; no. You would set back my recovery fifteen years.
2012-05-18| Spike saysyanis varoufakis is an anagram of Sauna saki for Ivy.
2012-05-18| Jan saysShared your Greek tragedy with several - best comment “what they couldn’t achieve with the jackboot they will with the Euro” watch this space …………………………………………
2012-05-19| Clive saysHmm… One of us is working his arse off in Blighty, not yet able to afford to cut and run… The other enjoys Skyrim, windsurfing, polo and the like.
And the after-polo-match parties. Musn’t forget those…
I think you got it about right. :)