How Greece Got Here

May 31st, 2010 at 8:55 am | 9 Comments |

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Greece’s fiscal problems did not start with adoption of the Euro in 2001.  They started 30 years earlier with the Socialist government of Andreas Papandreou who began building an unsustainable civil service, with benefits that liberals in America can only dream of.

This required borrowing back then as well.  Papandreou kept winning elections by putting more and more Greeks on the payroll and abused power for personal benefit (he and his cabinet made lots of money manipulating Greek banks). He changed the culture for a new generation of entitled young Greeks, leading by example that it is OK to not work hard, retire at 50, leave the wife and hang out with the mistress in public.  When the right-wing finally took over, (Konstantinos Mitsotakis and later Kostas Karamanlis), they played the same game — spend, spend — and did not collect taxes.

In fact, the very few that actually get audited for income taxes in Greece are civil servants.  The reason: the government does not go after Greeks who evade paying their income taxes, which is a surprisingly large number of Greeks. If the Greek government actually collected what was due, they would triple their tax revenues. As for the tough measures, remember, it is only civil servants and pensioners that are affected and demonstrating.  The majority of Greeks are not in the streets and they have a standard of living that the average American would be jealous of.  Most Greeks families own their own home, free and clear of any mortgage.

And finally, the violence on the street is exaggerated.  Greeks like to complain and demonstrate (strike). The three people who died in the rioting were victims of a fire, not intentional killings.

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9 Comments so far ↓

  • mlindroo

    May 31st, 2010 at 8:55 am by Peter Tolias:

    > Greece’s fiscal problems did not start with adoption of the Euro in 2001.
    > They started 30 years earlier with the Socialist government of
    > Andreas Papandreou who began building an unsustainable civil service,
    > with benefits that liberals in America can only dream of.

    > This required borrowing back then as well. Papandreou kept winning
    > elections by putting more and more Greeks on the payroll and abused
    > power for personal benefit

    The implication here seems to be that “Socialism” (i.e. social democracy) brings corruption. If this were true, countries such as Sweden, Finland and Denmark would be as corrupt as Greece. Furthermore, they ought to be considerably more corrupt than the United States since we all know that “[big government] power corrupts” don’t we… Here is the actual list, though: http://www.infoplease.com/toptens/leastcorruptcountries.html

    > The majority of Greeks are not in the streets
    > and they have a standard of living that the average American would be jealous of.

    Er…that’s an interesting claim.
    Compared to northern/western Europe, Greece does not exactly have a reputation for being rich.

    MARCU$

  • thijsvn

    Still, this article is a big step up from previous articles on this topic, in that it at least acknowledges the role of corruption.

  • sinz54

    mlindroo: The implication here seems to be that “Socialism” (i.e. social democracy) brings corruption. If this were true, countries such as Sweden, Finland and Denmark would be as corrupt as Greece.
    When a country is badly run or in socialist stagnation, its currency depreciates against gold and more stable currencies; because international investors find other countries to be a better bet.

    That was true in Britain in the pre-Thatcher era.

    What killed Greece was that by all accounts their currency needed to be devaluated significantly, to make their money and exports and native labor more attractive to overseas investors. But they can no longer do that, because Greek currency is now tied to the euro.

    Will that happen to Sweden at some point? Possibly. In the last few years, the Swedish krona has depreciated about 20% against the euro. And Denmark devalued its currency in the past as well.

    Finland had a socialistic depression in the early 1990s. Since then, Finland has been privatizing some businesses and cutting taxes as well.

  • ottovbvs

    sinz54 // May 31, 2010 at 12:27 pm

    “What killed Greece was that by all accounts their currency needed to be devaluated significantly,”

    …….that wasn’t what killed Greece…..what killed Greece was a ludicrously generous set of social programs most of them installed by the previous conservative govt and a failure to collect about $30 billion a year in taxes…….all that membership of the Euro did was shut of a an easy option escape route whereby they would have devalued their currency probably by at least 25% thereby wiping out 25% of the savings of the Greek middle and upper classes……..I keep trying to teach you Sinz but you won’t listen…….since when has wiping out the savings of the middle and upper classes been conservative doctrine?

  • forgetn

    Sinz54

    So I guess that the US experiment was also a failure, because between 2001 and 2008 the dollar fell from 0.88 to the Euro to 1.45 to the Euro. If the variation in exchange rate is a measure of failure, then the increase in the value is success, Canada saw its currency appreciate from 0.65 to the US dollar all the way to parity a few weeks ago.

    BTW, we Canadians don’t feel that successful.

    Exchange rates are a measure of the terms of trade, and change in productivity — as the U.S. productivity over the past 2 years has exploded, so has the currency.

  • Smarg

    If you replace “Greece” with “America” and “Greeks” with “Blacks” in this piece, then you have an apt description of the United States.

  • How Greece Got Here - Hip Hop Republican

    [...] Karamanlis), they played the same game — spend, spend — and did not collect taxes. Read More: http://www.frumforum.com/how-greece-got-here Share [...]

  • Rockerbabe

    What really hurt Greece is not the social programs that everyone wants, but the inability of the duly elected politicans to lead. It is all good and well to offer social programs, but the Greeks, like the Americans think there is a free lunch. The inability to balance a checkbook is the root cause of the problem and the desire to remain in power only exerbates the financial problems.