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Sunday, September 9, 2012

Greece: the pain behind the beauty

A very moving article about current hardship cases in Greece was published by the BBC. The following statement comes from this article:

This is happening in a European Union country - a place of unparalleled cultural richness, of beauty, of history. How has it come to this?

To me, Greece has been a case of very uneven wealth/income distribution even before the EU/Euro. My wife's parents, retired tobacco farmers, had to get by with a pension of about 300 EUR (in Drachma equivalent at the time) while only half-an-hour's drive away in the city of Kavala the living standard could not be differentiated from the living standard in a Central European country and the residential areas, particularly along the beaches near Kavala, surpassed much of what I could see in Austria at the time.

The EU and the Euro have only seemingly narrowed that gap because of all the debt-financed growth. With that growth gone, we are back to an even greater gap than before the EU/Euro (it seems to me).

I keep reading in the Greek media how much more income the government would have if only the upper class of Greece would pay their fair share of taxes. Some of these estimates even suggest that Greece would not have a budget deficit in that case.

So the question asked in this article is valid: how could, in a member country of the EU, there be a situation where the upper class takes such brutal advantage of the others? The issue, to me, is not Greece in toto. Greece has undoubtedly as many hard-working/clean-living people as any other EU-country; possibly even more. Mind you that those are generally people who cannot even cheat on income taxes because they are taxed at the source.

What Greece seems to have more of relative to other EU-countries is an upper class which has no qualms whatsoever to take the rest of the country on a ride. How that can still happen in an EU-country is indeed a very good question!

18 comments:

  1. Well, nobody likes to pay taxes(take the US as a prime example). The difference is what the state is willing to put up with. Other than that the US upper class is no more willing to pay taxes than the greek upper class(notwithstanding some criminal figures that are in the greek upper class). But they know you don't wantto mess with the IRS!

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  2. Taxes are a very real problem. Socially, the UK, US and others have not taxed in as rigorous manner as the "Nordic" countries. I am sure that Germans do not like being taxed, at least they get to see the benefits of it.

    Remember that the US would have no deficit either, were it to levy sensible taxes. The level of taxation required for this would not be onerous - it is more an element of perception on the part of the rich that their hard earned money is theirs. What they forget is that their hard earned money is also earned because there are motorways, bridges and a postal system. All of this needs paying for.

    The Germans are attempting to establish a tax gathering system in Greece that actually works. That is no easy task in a country that has avoided this difficult task for as long as anyone can remember. Add disgruntled people whose attitude is that of the Americans and you begin to have a real problem. On top of all this is infrastructure that was built in order to "stimulate" the economy. That the economy did not want to be stimulated means that the money must be paid back somehow.

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    1. I note that your comments tend to come twice. Is that Google or is it you? I would prefer Wordpress, too, but I am on Google and I don't know how to transfer a blog.

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    2. "The Germans are attempting to establish a tax gathering system in Greece that actually works"
      ...except by the time they may achieve that(if that is indeed the goal) there won't be anyone and anything left to tax!

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    3. That, I am afraid to admit, is a valid point! It's like closing the barn doors after the horses have left.

      However, there is one thing one can still accomplish through good capital controls: one can make sure that "black" money can never be used in larger amounts domestically (only outside Greece). This can be accompolished by measures which make sure that an foreign Greek funds repatriated to the country are subject to fully declaration of the source of the funds. If they come from an offshore company, the beneficial owner of that company must be declared before a Greek bank can accept the funds. If they come as loans, the Greek borrower can only take the loan if he authorizes his foreign lender to declare all collateral/guarantees that may be behind the loans. And if it comes in cash, one can control that at the borders.

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    4. Not sure you get the point: Making everyone poorer(except those responsible), even those not connected with the public sector and actually feeding the public sector via taxes, and doing it in an outright fraudulent way, i.e. blatantly voiding existing contracts that in some cases the state even encouraged people to enter and invest, means that in order to be 'credible' to its debtors, the internal troika(the 3 coalition parties) are outright fraudsters with their own population. So right now, Mr. Tsipras or even Golden Dawn looks like the lesser evil.

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    5. Listen, everyone! [and sorry for the late response!]

      Closing the stable doors after the horse has bolted is **all we can do!!** Greece has neglected its duty since the Ottomans left (whenever that was).

      Joining the eurozone was a massive opportunity for Greece.

      They could borrow serious money extremely cheaply. That meant industry and commerce could get a real boost. That they flagrantly misused this opportunity just as they wasted the last half century shows how deep the problem is in Greece.

      Is it any wonder that there are so many successful Greeks in Australia and America? The question is: will they come home to help Greece out of its problems? I would not need to ask any one of them twice for their emphatic "no!" would be clear enough. If a Greek cannot do business in their own land, who can????

      Is it any wonder that the Germans have stepped in to sort this all out? Sure, they are not Greek, but someone needs some backbone. The Germans for all their faults do not lack that.

      What Greece needs is a system that is rigorous and crystal clear. The very clarity of such an administrative system would mean fraud and bribery were wholly unnecessary in order to get the system to work.

      Let's face it: a bureaucracy only becomes corrupt because there is no other way that it can work. Just look at China!! When a bureaucracy functions properly, there are no opportunities as the paper simply makes its journey without difficulty. The corruption in Greece is so endemic because their system has never worked. There is far less in Germany because it always has.

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    6. Gemma, what has combating bureaucracy or corruption have to do with intervening to change **private** contracts? Which of the measures proposed much less implemented have been even directed in a 'rigorous and crystal clear' system? In fact quite to opposite is true, i.e. people pay taxes, social security, pension money and it is anything but clear what if anything they will get in return or when. Almost daily there is a new measure effectively turning things upside down. I do not mean the risk of currency change. I mean that even without that, if I want to start a business I do not know how I will be taxed, what hidden taxes there will be, whether a court can decide that pigs can fly and affect my business and so on. If I am a skilled professional and the state can intervene to change my contract or agreement with my employer(this particular one was a **troika demand** ), I really do not want to work in that country. Would you?

      Mind you, I am not blaming the Germans. Just pointing out that some of the troika measures add gasoline to the fire. Btw, corruption in Greece is what it is because the state tolerates it: COurts rule for the corrupt ones(while the troika focuses on court speed, not quality which is untouchable) and the state sits on the sidelines when not taking the side of the corrupt ones, leaving citizens to fight their own means, money, time and risk. The plan of 'destroy the middle class and the private sector which is not a sweat shop' looks insane: How can the german loans be repaid when everyoe is made poorer? This means less direct and indirect taxes.

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    7. To the anonymous contributor above.

      Thankyou for your considered response.

      Much of what you say is at the center of the problem. It is uncertainty; however, when was it different in Greece? Has Greece ever had a stable economic environment **at all?** Most successful Greeks live in Chicago, or Melbourne. You don't need telling why.

      As to the state tolerating corruption? Surely it is that the state is unable to do what it should. That means that with a broken system (just like in 1950s China) the only way to get things done is by oiling wheels (with cash).

      The problem is trying to re-organize Greece's administration at a time when other pressures are greater. The essential problem of a dysfunctional government was present when Greece joined the eurozone. That was when the Troika should have marched in - and that is their biggest mistake. Whatever they do now, it will be too little too late. That does not bode well for Greece - or those who are currently paying bailouts.

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    8. "Has Greece ever had a stable economic environment **at all"?
      If stable means the laws and rules of the game don't change when the wind blows, surely the 70s, either with or after the junta qualify. I was abroad in the 80s and half of the 90s and cannot tell, but I would say it was also pretty stable up until the last 2-3 years. The greatest instabilities have appeared in the last 2-3 years.

      Greeks generally do better abroad because the environment is of course much better: Much less red tape and a lot more opportunities. The german, american or say norwegian who finishes university say can be picky about job offers. The corresponding greek will grab the first job in sight because opportunities are scarce. Why not form one's own company? Here is an example: A friend of mine worked in a large company who was going to buy a new system for 1mil euros plus 15% support per year. He built that, 10 times better than specified, in his own spare time and home, alone, tested it and presented it to the company(who also had holdings in other countries and could actually market it). There was no interest. In fact they did not bother evaluating it, although they had evaluated a preliminary version and said that could do the job. Why? Management woudl get a commision for buying staff or they just did not want anyone except themselves becoming important. His point though was : If they do not consider getting it for free, what would be my chances of setting up a company and trying to sell it?

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  3. I do get your point (but I am afraid you don't get mine). In fact, I agree with you that Greek government(s) have failed the Greek people for decades, particularly since the beginning of the crisis. I agree with the criticisms which you mention above.

    Those are clearly domestic issues. For some reason it often sounds like Greeks are making foreigners responsible for their domestic problems.

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  4. I also get yours(I think). And of course regarding repatriation, the new leaked government plan is to accept everything, no questions asked for a 5% tax. That means for example that if you made a fortune through bribes and you transfered it abroad, bring it back and launder it with a 5% tax, no questions asked. Needless to say this means that a) everyone who did not do these things realizes he has been an idiot and b) the target group will have to trust the government assurances to bring back the money. Given the way the government has behaved towards those who were absolutely clean, what do you think the chances of the target group trusting the government are?

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    1. What do I think the government's chances are to gain credibility with the Greek public? Pretty close to nil, I would say.

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    2. True, but the point is that credibility is not a switch you can turn on and off as you wish and depending on who you are talking to. So even the people who moved their money abroad will not trust them

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  5. Klaus - if you do a search for "can i transfer a blogger blog to wordpress" there are lots of articles telling you how to do that. I suspect there are services that will do it for you, for a fee of course.

    On closing barn doors and horses - first you need a barn with doors - the Greek barn either never had any, or they blew away decades ago, if not centuries.

    The Greek expats I talk to have very sympathy for the Greeks in Greece, and not many signs of patriotism, many of them left Greece 30+ years ago or their parents did.

    Earlier this week spotted some attractive octagonal jars on the very bottom shelf at one of my local proprietor owned and operated supermarkets. So I bent down and grabbed one, the glass was very dark red so it was difficult to determine the contents. So why not read the label, well it was "all Greek" to me. The picture looked like a marble dipped in sump oil. There was a locally applied very fine print label, that I could read with a jewellers magnifying glass - Cherries.

    When I buy similar things produced in countries they almost always have multilingual labels put there by the country of origin. The main label on the jar of delicious preserved გარგარი I bought the same day told me they were "Apricots from Georgia", they were on a chest-high shelf above the Greek ¿ κεράσι ?.

    If Greeks want me to buy there stuff then they should take lessons from the Georgians - even Iran lets me know that their aluminised packets contain "Figs".

    CK

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  6. Interesting. Almost all products you find in supermarkets in Greece are at least bilingual if not english only. That includes any major greek producer. So it sounds to me like this was a very very small producer of these cherries(probably not even cherries, sour cherries perhaps, as cherries do not end up in jars, sour make great syrup. Why were they labelled cherries? Probably because that is the google translation :). So it looks like your local supermarket got these from a very small producer. Nobody has any issue with english labels or even english only label.

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    1. Maybe I should buy a jar, they cost about twice what I paid for the Georgian Apricots.

      If they are not Cherries then I will report the importer to the authorities, labelling rules are taken very seriously here, just ask Big Tobacco.

      Incidentally the supermarket is owned by an Indian.

      That a small producer can export goods to the other side of the planet without any apparent assistance from the likes of Branding Greece & Grower Coops... speaks volumes to his/her ingenuity - for that alone he/she deserves my custom.

      Having an interest in a small organic farm I know how hard it is to overcome the power of major brands when they mate with big supermarket chains - you end up with a hyena/vulture hybrid - ugly monsters.

      CK

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    2. sour cherry (βυσσινο), which is google translated as 'cherry' is a dark red fruit that is not great to eat, but makes great syrup(try it on icecream, especially gum/mastich icecream 'kaimaki'). I do not know of anyone ever putting cherries in jars. So my guess is that the indian guy is a victim of google translate.

      As for the rest, I agree with you, with companies/producers bigger does not mean better. Perhaps it's someone who never hoped to sell much outside his own town, but you never know, the world is not that big after all.

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