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I have spent a lot of time comparing Greece to the rest of European countries in the Eurostat records.

From looking quite closely, it was apparent that the tax evasion story was a bit overblown. I don't know where the tax revenue is coming from, maybe corporate taxes, but Greece was averaging 9.7k per capita in taxes, which was on the high side. maybe Greece has high tax rates, so that evasion of what should have been paid but wasn't rises as a %. Nonetheless, a lot of tax revenue was collected.

Based on the averages of salary and pension, numbers of gov't workers, number of pensioners, I had a very hard time getting to the %s of pension/gov't worker salary that was reported to Eurostat and also mentioned in the IMF report. I couldn't even make it to 50% of gov't expenditure. But yet, Greece was showing 75% going to pensioners/gov't workers, which is by far an outlier.

After thinking about this, I concluded that a lot of the corruption happens in the relationship between patrons in gov't and their cohort, that a lot of money is siphoned from the political hires in homage to the bosses who hire them. It's the only way to account for 75% of 125 billion euros going to gov't workers and pensioners in a country of 11 billion people.

Some news sources have noticed: http://www.reuters.com/article/idUSTRE64A2J520100511

I also saw that investigators had uncovered a bill for 26 million to pave the parking lot outside of parliament. Apparently, the approval for that expenditure was rescinded recently, and the parking lot was indeed paved. For 26k euros. When you couple this sort of behavior with arms purchases, Olympics, etc., one wonders how Greece is not in even greater debt.

I do think Greece is going to have an orderly restructuring in 1 to 2 years from now, and that the debt will be reduced in negotiations with creditors.

But those negotiations will only take place after the IMF has proof that the austerity measures have taken hold.

Even if all goes smoothly in this negotiation and Greece's debt is reduced to say 80% debt to GDP, I don't think it will matter much if there is a pan-European economic policy that keeps those austerity measures in place for the next half century. Isn't that what is implied in all of this? You have to have wage deflation so that the private firms make enough profits to create a surplus that allows you to compete against other austere and devalued Europeans, a surplus that the banks can squander at the casino gambling table?

Even though I would be a bit more optimistic than most about the Greek economy turning around rather soon, I would not be optimistic at ALL if I were a Greek worker. The future of the Greek business world may be brighter if the public goes through with the austerity measures in the next year, but if you stay in the eurozone under the new dictats coming from the Bundesbank, I think it's implied that the austerity measures are more or less permanent for the foreseeable future. And it's not because of Greek debt. It's about the concern shown by many financial heads over the competitiveness of the economy.

by Upstate NY on Thu May 13th, 2010 at 11:36:41 PM EST
Even if all goes smoothly in this negotiation and Greece's debt is reduced to say 80% debt to GDP, I don't think it will matter much if there is a pan-European economic policy that keeps those austerity measures in place for the next half century. Isn't that what is implied in all of this? You have to have wage deflation so that the private firms make enough profits to create a surplus that allows you to compete against other austere and devalued Europeans, a surplus that the banks can squander at the casino gambling table?

Even though I would be a bit more optimistic than most about the Greek economy turning around rather soon, I would not be optimistic at ALL if I were a Greek worker. The future of the Greek business world may be brighter if the public goes through with the austerity measures in the next year, but if you stay in the eurozone under the new dictats coming from the Bundesbank, I think it's implied that the austerity measures are more or less permanent for the foreseeable future. And it's not because of Greek debt. It's about the concern shown by many financial heads over the competitiveness of the economy.

And they call this preserving the European social model? Who are we Europeans competing with? Each other in yet another race to the bottom (the story of the past 10 years was not only of a business bubble, but of a tax race to the bottom to attract said business) as we collectively lose out to China by allowing our domestic businesses to outsource employment?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Fri May 14th, 2010 at 04:20:51 AM EST
[ Parent ]
Leave it to the Germans to engineer a more efficient race to the bottom.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 14th, 2010 at 07:44:49 AM EST
[ Parent ]
to be fair, it's a bit more complex than that.  You are correct, especially from a worker's perspective.  But we (i can say we, i suppose, as a german taxpayer), we also do the heavy lifting.

And there is the small beginnings of a move to put risk back onto the bondholders etc.  Please remember that financial institutions control many governments, not just in Germany.

We're all in this together.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Fri May 14th, 2010 at 10:05:33 AM EST
[ Parent ]
From looking quite closely, it was apparent that the tax evasion story was a bit overblown. I don't know where the tax revenue is coming from, maybe corporate taxes, but Greece was averaging 9.7k per capita in taxes, which was on the high side

I'm not sure about the absolute number, but on a per capita basis, Greece has the lowest tax revenue as a % of GDP of all EU15 members and quite a few EU27 members. This is due to both large tax evasion and a low and diminishing corporate tax and a skewed tax structure. Note too that (I can't find the stats right now, but take my word for it!) indirect taxes are not so lagging as per the EU (although VAT theft is an issue as well).

I'm not sure about the numbers regarding pensions and public sector wages either. The numbers I've seen are at 9% of GDP and that is close to 35% of public expenditures, 45% if you only count primary expenditures which I think some do, but never mention... anything beyond that requires statistical alchemy AFAICS. The numbers don't add up otherwise. This is the budget for 2009 (in greek!).

As for working in Greece: the pay and the conditions used to be horrible. Now they will be intolerable. I expect (and I am seeing already) a huge exodus of young, talented and highly trained people...

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Fri May 14th, 2010 at 04:58:36 AM EST
[ Parent ]
superb diary, thanks Talos. Looking forward to pt 2!

Italy will probably look like this within a year or two, barring a miracle...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri May 14th, 2010 at 06:22:16 AM EST
[ Parent ]
Indeed. Structurally, I don't quite understand how it is that Italy hasn't been targeted by the wolf pack yet (it is in a much worse position than Spain, in many respects)

Best guess : it's because il padrone is one of the meanest m*****ing wolves in the pack.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Sat May 15th, 2010 at 01:22:30 PM EST
[ Parent ]
I've been very interested in the stats, but I'm about to give up since the OECD/Heritage Foundation numbers differ from what is on the Eurostat pages.

Eurostat has gov't worker pay at 29.5 billion, or 33% of the budget. The IMF says gov't worker pay and pensions is 75%. And yet the OECD numbers diverge.

http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/publication?p_product_code=KS-EK -10-001

by Upstate NY on Fri May 14th, 2010 at 08:26:46 AM EST
[ Parent ]
I think what is happening is that the oecd table includes social contributions as budgetary  revenue and social benefits as budgetary costs - while the Greek government tables exclude the costs and the benefits from their calculations in the main table - possibly because government has no direct control of these revenues, and theoretically simply "guarranties" most of the social benefit costs. The IMF then counts all social benefits as part of the wage bill, which is quite a trick IMHO. Hah, talking about cooking up numbers...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri May 14th, 2010 at 08:53:43 AM EST
[ Parent ]
Maybe I just don't know who handles it, but it shouldn't be this difficult to find reporting on Greek finances.

Do the EU and/or national laws not require governments to produce CAFRs or other audited financial statements for the public?

You shouldn't need to go digging through Eurostat or the OECD to find out how much they're spending on this or that.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 14th, 2010 at 09:21:19 AM EST
[ Parent ]
Well, Talos provided the Greek figures.

The problem isn't that the figures aren't readily available, it's that they differ.

Right on the page for Eurostat statistics you'll find a Eurostat report dated January 10, 2010 that explains the Greek statistic situation. The short of it: Greece gave bad predictive statistics each year, and then Eurostat conducted a methodological review (each year) that gave the actual statistics.

by Upstate NY on Fri May 14th, 2010 at 10:06:20 AM EST
[ Parent ]

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