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Two comments:

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 Apparently, the approval for that expenditure was rescinded recently, and the parking lot was indeed paved.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

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