July 15, 2015
The Greeks forget Economics 101: There is no such thing as a free lunch
by Suzan Sommer (via-email)
If you are a normal citizen and you owe the bank, you do not go around accusing the bank of being a Nazi for setting conditions on you. Of course your creditors will set their terms and conditions to get some of their money back. Are the terms and conditions suffocating? Of course, compared to the freedom you had before you started owing money and your creditors know you are bankrupt and have no intention of reforming your ways.
Reasons for Greece’s debts:
Greece’s problems started in 1984 when it started massive economic expansion, then they cooked the books in 2001 (thanks to Goldman Sachs) to get into the Eurozone.
Everyone knows but no one dared to challenge Greece. To do that, you will be sticking your head out and accused of being “unEuropean”. As a German, it will not do you any good on the world stage to keep your head down or stand accused of being a Nazi (still happening in the UK whenever UK does not agree with Germany. By the way, Waterloo would not have been won without the Prussians’ aid.
The Greek crisis is due to massive tax evasion, irresponsible public spending and corruption. From 2001, Greece’s “GDP per capita nearly tripled, from $12,400 in 2001 to $31,700 in 2008” (World Bank Data). Public spending soared and public sector wages doubled while benefits rose. Greece was living like a first world economy when it is actually has a third world economy.
In 2004, Greece spent USD 11 billion for the Olympics. Money they do not have. Greek taxpayers were on the hook for €7 billion, which did not include the cost of extra projects such as a new airport and metro system.
Greece is also infamous for tax evasion.http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-their-taxes-1424867495 Tax debts in Greece equal about 90% of annual tax revenue, the highest shortfall among industrialized nations, according to the Organization for Economic Cooperation and Development.
Shipping magnates do not pay tax. Somehow, this is enshrined in their constitution. Strangely they have tax collectors who physically collect taxes from small businesses. High level of bribery means the government hardly get to see any taxes. Businesses are often done in cash and tax evasion is made easier.
In Greece, their pension system is highly complex. There are 580 occupations that have special privileges allowing for early retirement, for example, a hairdresser, because he uses chemical to dye hair, can retire at the age of 45.
A civil servant’s spouse and unmarried daughter (irrespective of age) can inherit his/her pension which is 90% based on last 5 year’s salary. In Germany, we have to work 45 years or until the age of 67 to be able to retire with full pension based on all our years of working life and only 60% of net average. Spouse receive 60% on the demise of the pensioner. If he has his own pension, deductions are made. Children do not inherit their parents pension’s.
Record keeping is terrible in Greece. About 120,000 long dead pensioners are still collecting pensions.http://www.dailymail.co.uk/news/article-2048385/Greek-finance-sham-120k-families-claiming-ghost-pensions.html
Until the crisis hit in 2008 and the EU came in to question, the Greek government did not know how many civil servants they have on the payroll, and their monthly expenses. Answer: 768 544 recorded staff for a country of 11 million. Sixty percent of Greece’s civil servants apparently do not know how to use the computer.
“Underlying cause of the situation is that, in order to secure electoral support, Greek politicians have traditionally viewed the provision of public sector jobs and benefits as an important way to grant favors. In order to do that, Greece continued to borrow heavily from international capital markets to finance public sector jobs, pensions and other social benefits. Government expenditure has therefore been extremely high, billions of euros higher than government revenues.” (http://www.academia.edu/8272839/The_Greek_debt_crisis_Causes_Timeline_and_Bailout_Programs)
Until today, Greece do not have a complete land registry so no taxes on a lot of home owners. Eighty seven percent of Greeks have homes (even 2nd homes) compared to 53% in Germany.
According to Transparency International Greece’s National Integrity Assessment 2012, the problem of corruption in Greece is the confluence of many factors, including a weak enforcement of the law, a lack of audits, the absence of codes of conduct, the non-transparency of government activities, an inefficient bureaucracy, government impunity and broad discretionary powers and a lack of public awareness.
Transparency International’s Global Corruption Barometer 2013 showed that 90% of surveyed households consider political parties to be corrupt or extremely corrupt—ranking Greece as the most corrupt . Furthermore, 39% of the surveyed households believe that the level of corruption has increased a lot, and 46% of surveyed households find government efforts in the fight against corruption to be very ineffective.[” (https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece)
Since the crisis and the injections of money from the Eurozone, notably Germany with 68 billion Euro, there has been no change to Greece’s structural reform despite promises after promises upon receiving the bailout. Everyone has good reason not to trust the Greek government to initiate any reform based on past 7 year’s experience and the new government.
(As a side: Tsipras and Varoufakis upset the punctual Germans when the Greeks arrived 45 mins late for a meeting that was called up again and again in Brussels to help solve Greece’s problems. Both of the Finance Ministers of Greece came twice without any proposals but lots of rhetoric and presentations. Varoufakis thinks he is a great economic lecturer who had to teach the other “stupid” Finance Ministers a thing or two about economics by lecturing them instead of concentrating on a good proposal for Greece.).
What sovereignty can you demand if you are bankrupt and depend on your creditors to help you? Why is your country in worse shape after 6 months of your rule if you are capable of turning your country? Why have you done nothing good for your country the past 6 months?
As a proud nation, start paying taxes, stop asking for more money from your creditors but help yourself instead if you are humiliated and asphyxiated by them. Creditors may make mistake but it is to their detriment if their debtors come out worse because of their action as then they will not be able to recoup their losses.
Germany is certainly not unreasonable in its demands to Greece. Germany does not want a Grexit but Germans must also think about their own future. We could certainly use the Euro 68 billion ourselves. Our autobahn, schools, bridges etc. are falling apart in our drive for austerity. Our salary has been kept back the past 15 years so we can compete globally. We have suffered and we are not happy to give our money to others who are not willing to be as frugal and willing to accept pain to succeed as we have..
Take home pay for ordinary citizens in Germany after various taxes (health insurance, solidarity tax to help former East Germany, health care insurance etc. ) is about 60% of gross pay and we have VAT on goods and services too, even tax on profits we made from our after tax savings above a certain amount.
The Eurozone is not a transfer union that is we should not have to prop up weak countries financially. As such, Merkel and Schäuble have to be very careful what they can do after so many of the Maastricht agreements have been bent to breaking point to save Greece. The Eurozone consists of 19 countries but Germany is the paymaster and yet abused. Is this reasonable?
Greece could sell its gold to finance itself but it prefers to use other people’s money rather than its own sweat and money (assets). Its time Greek government tells its people the truth and stop the propaganda blaming other for their situation. It is time for the Greek people to face the truth.
Greece is not the only democracy in the Eurozone. It may be the oldest but its contribution to the world was 2,000 years ago. Nobody owes the Greeks for their living. We Germans work hard and live frugally. If we were to have a referendum in our respective countries,citizens will vote for “NO” to further financial assistance to Greece. We may be sympathetic to the poor Greeks,and are willing to help from citizen to citizen on a voluntary basis. Someone calculated that each citizen in the Eurozone now has a debt of Euro 47,000 on our loan to Greece forced on us by our government .
Yes, the banks should bear their losses but not our expense.They took their profits but, why must be left holding their losses. Germans are not against ordinary Greeks. We feel for them and we are the biggest contributor in sending assistance to Greece but we want the Greeks to help themselves and show some appreciation, not to condemn us for the sins of our grandparents.