But a few things are wrong here as well:

-”faceless ECB technocrats”: They have faces ad names too. The writer just didn’t bother to get to know them. By the way, Greece invited the inspectors and asked for help.

- The crisis was “imposed on Greece”: No. Greece joined the Euro voluntarily, knowing that they had provided falsified data, knowing that they had cheated to circumvent the Maastricht criteria.

- “You cannot have a surplus in one country without there being a deficit elsewhere.” You can easily have a German trade surplus without a Greek budget deficit. German exports don’t need to be paid with taxes, they are supposed to be purchased by consumers. This might lead to a trade deficit (although many Germans spend their money on Greek islands on holiday), but it doesn’t explain the fiscal deficit.

- “cheap credit for the south”: And who forced the poor Greek government to take up this credit? Nobody. Again, the writer confuses consumer debt with a structural deficit.

There would be more to say, but I am on the way to work now. Because I am German, I have to finance a few more countries now than my own.

The vilification of Greece as being lazy and corrupt may be wrong, but we hear they are a country of tax evaders. Is that totally wrong, too?

And if they are in such debt, yet work as hard as Germans, what have they spent the money on? Doesn’t add up.

Answers on a postcard…

(If you’re going to write about John Humphrys, who deserves all he gets, at least take the trouble to spell his name right!)

This is a particularly late rearguard action by the deniers on the Left (led by one G. Brown) who don’t want to ever concede that irresponsible state spending has consequences. Nice try but we won’t get burned again.

1) Greece spends less on its public sector, as a share of GDP, than the EU average.

But that is not the point. Greece’s tax rate is much lower than almost anyone else’s. They spend massive amounts of money they do not have. That is not a myth. It is a simple fact. They need to spend less and raise more tax. Or just spend less.

2) Greeks work amongst the longest hours in Europe, and retire later, on average, than Germans.

Reported by whom? You mean official statistics? Yeah. They have been ace haven’t they?

3) Greek public pensions account for roughly 11% of GDP, around the same as Germany and France.

But a much larger percentage of their spending and even larger of their revenue.

The creation of the euro fixed relative exchange rates across member countries. Germany entered at a low rate. Greece, like Portugal and Spain, entered at a high rate. German exports became cheap for southern Europe.

German exports became cheap for the whole world. Really? How long has the Euro been in existence? Only now you have noticed? The Eurosceptics were right all along weren’t they? They pointed this out how many years ago?

You cannot have a surplus in one country without there being a deficit elsewhere. So, surpluses in northern Europe were matched by deficits in the south. Blaming the debt crisis on Greek deficits makes no more sense than blaming it on German surpluses.

I am not sure that is true. Suppose the Germans decide to work, to save, to export, and not to spend. They will export to someone. But somewhere, someone has to decide that they won’t work, they will spend and above all they will borrow. That is a choice. It does not follow that because the Germans are disciplined it follows the Greeks won’t be. They could have chosen to be too. Now they are being forced to.

The hardships now being visited on ordinary Greeks are not punishments for past sins, despite Humphries’ moralising. They are carrying the burden of a European economic system that is fatally flawed. It remains to be seen how long they will tolerate being made its scapegoats.

It is amazing how you admit the reality – the Greeks did not work hard and they consumed – while denying it. The hardships being visited on the Greeks are precisely a direct result of their choices over the last few decades. They decided they would have a Northern European life style based on a Balkan economy. Greeks should be about as rich as the Bulgarians – instead they are twice as rich. All fuelled by borrowing that no one forced them to take. Now their credit binge has come to an end. The Germans are no more to blame than NatWest is for giving a stupid girl a credit card which she then uses to go shopping. At some point the bills have to be paid for both parties.

“No. Greece joined the Euro voluntarily, knowing that they had provided falsified data”

“Greeks” didn’t lie, the right wing New Democracy party lied. The moment Papandreou took office he found the deficit wasn’t 3% like they said, it was a staggering 13%. The party of the wealthy fudged the numbers for eight years, not the Greek poor. That’s why no matter how badly PASOK does, NDP is not exactly romping home in the polls. NDP lied and everybody knows it.

“The vilification of Greece as being lazy and corrupt may be wrong, but we hear they are a country of tax evaders. Is that totally wrong, too?”

The greek poor don’t dodge taxes, the Greek rich do. Imagine if Britain needed a loan and Bild said ” you’re a bunch of Lord Ashcrofts, you cheating scum!”.

I had to listen to Jeremy Paxman on Newsnight snidely remark how 90% of Greeks report an income below £30K like that’s a dirty lie. Guess what: Greece gdp per capita is in fact that low. Everybody knows Greece is actually that poor and they get to be called tax cheats for the privilege.

This is weak stuff. It really serves only to make a few people who wish things were otherwise feel a bit better.

Andreas @1 is right, the Enronomics used by Greece when it joined the Euro are entirely responsible for what happened when the global economy stalled. Once that happened the Basel Committee criteria for bank lending became shaky. Govenment bonds cannot be defined as sound under all circumstances as the extremes we are now seeing prove.

It may not be entirely the fault of the banks that they lent so much, but now we are faced with the choice of who pays. We are told that the only option is austerity for generations, quite likely over the whole Euro zone and affecting trading nations such as the UK. Would the alternative damage to the banking sector be worse? That’s a question nobody seems to be asking.

Looks more like the Greek politicians dropped the ball than the Greek people. I mean, do we presume they have more personal responsibility for the actions of their government on the European stage than we do? In Britain we have no say at all about how the government handles EU politics, so it seems unlikely the average Greek had much say either.

As far as the idea that Greeks don’t pay tax is concerned, what would people say about the UK, where we’ve let corporations off the hook for billions recently? Apparently it’s quite difficult to get tax out of people, and given that Greek workers are among the lowest paid in Europe I’m not sure how much tax they’d even be able to provide.

It looks a lot like the Greek people are being made the scapegoats for the crimes of the financial sector and their own government. And let’s not forget that they are not alone. Italy is on the brink of a similar collapse, with vastly more debt, and there’s no telling where it will end.

The culprit doesn’t look to me to be the Greeks, but the Euro. A single currency for multiple states run in different ways was always a bad idea unless you were Germany. At best it was totally misguided, at worst a long con.

James,
I have little knowledge about the Greek economy and the antecedents which brought it to it’s current situation, what I do know is that the ordinary Greek people are not responsible but, like in the UK, it will be those who have to pay and bare the burden.
As for Humphrys and the BBC, he and it appear to be in denial, even the Occupy movement has, so we have been informed on LC, removed the banner that capitalism is in crisis,and though the movement has been termed ‘anti-capitalist’ it appears that they are not.
The Greeks serve as a good example for the new propaganda, it’s the people not the system, you are appealing to deaf ears, although you may have thought that writing a piece on a left-wing blog would elicit some empathy for the majority in Greece.

@5 – “The greek poor don’t dodge taxes, the Greek rich do.”

If you’d spent any time in Greece you would be rather less likely to believe that. The vast majority of Greeks dodge taxes as much as they possibly can. In part this is because they view politicians as dodgy bastards running a corrupt outfit, I can’t imagine where they got such an idea but there you go.

@9

90% of Greeks report an income below 30k – because that’s what they earn.

Two thirds of Greeks of doctors report an income below 12k – the rich are massively dodging taxes.

There are 14,000 swimming pools hidden from the taxman in Athens – the population of Athens in 3 million.

The rich are cheating and their New Democracy party let them.

Libertorytrolls, look at this way – If Gordon Brown faked a budget surplus in 2010, are you volunteering to take the blame?

Splem – I didn’t deny that the rich dodge taxes, the point is that they all dodge taxes. Even if you managed to get all the “rich” paying every penny due, that would be nowhere near enough because it would be too narrow a tax base, on account of everyone else not paying any tax they can evade, (note not avoid).

“If Gordon Brown faked a budget surplus in 2010, are you volunteering to take the blame?”

Blame? Obviously not. Would we still be the ones stuck with dealing with it? Yes, sadly we would.

OK, so now it seems that Greek people are honourable taxpayers like the rest of us (!), work at least as hard as the Germans and for longer hours, yet get paid less.

(Paxman had to be wrong about the average 30k euros salary in Greece, as that’s higher than the UK.)

So, once again, what have they spent the money on? Doesn’t add up.

Who has accrued the debt? Someone mentioned ‘living a big economy lifestyle while on low Greek pay’, so maybe that’s the answer.

What I do know is that whenever I travel to Greece, Spain, Cyprus, etc., all the people are driving around in new Mercs, BMWs, VWs, and Japanese 4WD pickups. Where has all that money come from if the Greeks are so poor?

Anyone see the Channel 4 programme ”Go Greek for a Week” last night?

http://www.channel4.com/programmes/go-greek-for-a-week/episode-guide/series-1/episode-1

It was pretty lowbrow reality TV, and I can imagine some Greek people being a bit annoyed at some of the stereotypes, but it does sound like dodging taxes is endemic.
Even hiding swimming pools at their homes under tarps so they couldn’t be seen by helicopters or Google Earth, because swimming pools are taxed.

If you really cannot see problems with the Greek economy that orgininate in Greece, you are totally out to lunch. Tax evasion, for sure, but also an inefficient public sector.

Of course surpluses in one country imply deficits in another, but you write as if that fact of accounting makes it impossible for governments to borrow irresponsibly, and put the economy on an unsustainable path where it is reliant on continuing to be borrow to fund public sector expenditure.

@11,

I look at this way, Falco. When the rich dodge taxes, the country goes bankrupt because they are the people with the actual money. The French Revolution started because aristocrats inherited the right not the pay taxes and the bourgeoise bought it from them. So they levied every penny from the poor on starvation diets. Something’s gotta give – squeezing blood from the stone like that isn’t just brutal, it’s fiscally impossible. If a government can’t raise money from people who have it, it is bankrupt – you can’t raise money from people who don’t. Ordinary people dodging taxes because the rich make the government charge them instead is the consequence, not the cause. Certainly not “greek custom”.

how can we blame the Greeks when the Conservatives have Zach Goldsmith in the Commons and Ashcroft in the Lords – that’s one tax dodger for each house of Parliament. They’re trying to run the country and we still can’t get them to pay taxes. Blame the right for sheltering the crony elite. Blame the NDP, not Greece. They fudged the EU numbers too by the way. Merkel’s type is the problem, not the answer.

I’m sorry for making the party political. Truth is, even Roy Bremner spouts the “they partied then skipped the bill” story and as we know Paxman is universal in his contempt. But Karamanlis lied. He lied and lied and lied, Papandreou didn’t, Greece didn’t. Maybe we have to pay Brown’s debt, but is the Bild going around calling Britain bankrupt skivers?

@12, 13

Do you own any of those cars? Does everybody have a swimming pool? If Cameron put his Wisteria on expenses are “the British people” endemic cheats? Do you have wisteria in your chimney?

There are 14,000 swimming pools hidden from the taxman in Athens – the population of Athens in 3 million. Ordinary Greek people are not the problem here.

some info on Greek public owned enterprises

http://www.greekdefaultwatch.com/2010/12/meet-protestors.html

here is an FT article about the oligarchs that run, and cripple, Greece

http://www.ft.com/cms/s/0/618e57d6-0937-11e1-a20c-00144feabdc0.html#ixzz1d6nJmeVJ

And this is something of a must-read from a very well respected international macro economist about the conditions being imposed on Greece and how Greeks democracy has been trampled

http://www.voxeu.org/index.php?q=node/7222

somebody mentioned expensive cars above … I liked this datapoint: there are more Porsche Cayennes than registered taxpayers with incomes over 50k, in Greece.

http://www.athensnews.gr/portal/9/49503

What a load of crap. The Greek government has spent far more than they collect in simples .GDP is frankly irrelevant and this is an entirely misleading article
It nauseates me to think that at each stage of the insanity of the Greek joke fiscal squander there were people like you telling them these lies and now who suffers

The Greeks

continuing my linkfest, here’s an interesting interview making an optimistic case for Greece leaving the Euro

http://www.spiegel.de/international/europe/0,1518,796251,00.html

@15 – The point is that if you want to have the level of state spending that the Greeks have had you need a wide tax base. The rich don’t have that much of the money, they simply have more per person. Odd as it may sound, the total wealth and particularly the income of almost any country, is largely held by the poor and the middle class.

“Ordinary people dodging taxes because the rich make the government charge them instead is the consequence, not the cause. Certainly not “greek custom”.”

I don’t know how well you know Greece but I’ve lived and worked there and I can tell you that however it started, (probably under the Turks), dodging taxes is most certainly “greek custom”.

Re Goldsmith and Ashcroft, I made the point earlier that the Greek problem is evasion, not avoidance.

Lastly we’re hardly in a “let them eat Brioche*” situation here

*mythical anyway, her saying it I mean. I readily accept that Brioche exists.

@1 Andreas -

In order:

1. “Faceless technocrats”: “Faceless” because they are unelected and unaccountable. The face scarcely matters under those circumstances. The Greek *government* – not “Greece” – invited them in and asked for, ahem, “help”. The Greek people, I think it’s safe to say, seem less keen on the prospect.

2. Greece, like other countries, joined the euro voluntarily – and, like other countries (France and Germany, for example), its governments paid little attention to the Maastricht criteria. But the catastrophic – socially and economically catastrophic – austerity measures now being forced on Greece *are* an imposition by the EU/ECB/IMF. Austerity imposed on Greece is an expression of the wider euro crisis. If Greece was not in the euro, austerity could be ended, and it should be.

3. “You can easily have a German trade surplus without a Greek budget deficit”. True: you could, for instance, have very substantial private sector debt instead. This is the situation in other southern European countries, where public sector debt is less dramatic – but Greek households, rather like Italian, hold relatively little debt. You *cannot*, however, as a matter of definition, run a trade surplus without somewhere else being in deficit. That deficit has to be financed. And you can’t run continual surpluses for a decade without creating serious distortions.

4. “Who forced the poor Greek government to take up this credit?” Equally, who forced the German economy to produce massive surpluses? The single currency, by its operations – in particular the exchange imbalance between south and north across the continent – of *necessity* created surpluses on one side and deficits on the other. Some southern countries (Spain, for instance) financed this deficit more through private than public borrowing; Greece was the reverse. There *are* some structural reasons for the form this distinction took – in particular, the unwillingness of the rich in Greece to pay their taxes, damaging government income – but to understand the situation you need to grasp the macroeconomic context.

The tragedy underneath all this is revealed in your last comment. Far from bringing the people of Europe closer together, the euro is driving them apart. It is not Germany “financing” Greece, since the obverse is Greek borrowing helping sustain German surpluses. Rather, it is Greece and Germany locked into an unsustainable system.

This report provides more background: http://www.researchonmoneyandfinance.org/media/reports/RMF-Eurozone-Austerity-and-Default.pdf

Martin Wolf’s latest column is on the topic of how savers need borrowers:

http://www.ft.com/cms/s/0/e71ab1d6-049d-11e1-ac2a-00144feabdc0.html#axzz1d7BRSUvK

But I doubt Wolf would argue this exonerates the Greeks

“You cannot have a surplus in one country without there being a deficit elsewhere. So, surpluses in northern Europe were matched by deficits in the south. Blaming the debt crisis on Greek deficits makes no more sense than blaming it on German surpluses.”

Trade deficits and fiscal deficits are different things. For example, the UK has been running trade deficits for the past 30 years. We’ve also at times had fiscal surpluses and at others fiscal deficits.

“James Meadway is a Senior Economist at the NEF. ”

Figures.

Tim,

actually I think the author is aware of that – but trade deficits must be financed, and as he explains in comment #23, in the case of Greece it was by public rather than private borrowing.

“You can easily have a German trade surplus without a Greek budget deficit”. True: you could, for instance, have very substantial private sector debt instead.”

It’s not true that a trade deficit must be financed by debt at all. It doesn’t have to be either public or private debt. It can be assets that change hands. Each German buying a little house in the Sun finances the trade deficit just as well.

Damn, do I really have to remind a “senior economist” even at NEF that there is a capital account as well?

be more generous in your interpretation Tim – writing “for instance you could have private sector debt” does not suggest the writer has ruled out other means of financing trade deficits, such as selling assets.

I don’t really understand this: “do I really have to remind a “senior economist” … that there is a capital account as well?” Isn’t private and public sector borrowing part of the capital account? [*] http://en.wikipedia.org/wiki/Balance_of_payments

[*] I am risking egg on my face here – I haven’t revised this and my memory is poor.

@22

And as you are quite right to say, ordinary Greeks shun the system because they know it’s rigged. The Greek state is the cause, not the Greek culture. That there is a correlation between elite corruption and popular resistance – not between tax dodging and smashing plates at weddings.

And even if the bulk of wealth is held by most, the bulk of taxable wealth is held by the rich. It hurts if ordinary people won’t pay, if the rich don’t you will have bankruptcy. Common tax evasion might be true, but wealthy evasion is still “the problem”. It’s a good thing we agree the latter causes the former: I owe that knowledge only to the very wise fellow @9.

Who knew a blog called “liberal conspiracy” would attract so many xenophobic conservative readers?

” Greece spends less on its public sector, as a share of GDP, than the EU average. ”

Which is irrelevant. It is not how much you spend as a share of GDP that counts, it is how much you can afford to spend. Denmark spends a lot on their public sector and they pay for it through taxes. In contrast, Greeks have shown no willingness to pay taxes to fund their public sector. Therefore, they borrow the funding and ask others to pay for their public sector. In fact, their public sector tax collectors can’t even be bothered to do their job and collect taxes.

” Germany entered at a low rate. ”

Is not true. Germany entered the EMU at an uncompetitive rate i.e. too high. Hence, why they embarked on policies to repress wages and structural reforms to regain competitiveness. The peripheral nations did no structural reforms to retain competitiveness. They like the UK were mostly following procyclical policies even when their governments had an apparent fiscal surplus. The difference now vis-a-vis the UK experience is the sterling exchange rate is making the adjustment. EMU traps them and prevents their adjustment. Chart here with the German real effective exchange rate vis-a-vis Spain.

http://3.bp.blogspot.com/_ngczZkrw340/THzFZUxvTTI/AAAAAAAARXw/CULEBNM0isg/s1600/reer.png

See how the REER depreciated as the reforms and wage moderation kicked in. The huge current gap between the respective REER is caused by prices and wages in Spain getting out of line to their productivity and not having their own currency that would depreciate in such circumstances.

http://fistfulofeuros.net/afoe/on-the-shoulders-of-giants-how-spain-is-destined-to-follow-in-germanys-footsteps/

Similar pattern with the REER for Greece. They started massively uncompetitive and definitely should not have been allowed to join. The uncompetitiveness has only progressively got worse with the inflow of capital that EMU allowed.
http://edwardhughtoo.blogspot.com/2010/11/greece-is-almost-certainly-on-track-but.html

Of course there is too much moralising and it is nuts to think that a trade surplus is anymore moral than a trade deficit. I would say that this was all an inevitable outcome in the EMU. However, it is not true to say that the German entry exchange rate was low.

Er….

Mr. Meadway, now check the Greek tax system for how much should be collected.
Now check how much IS collected.
Now check this against spending.

Yea, crap!

The greek *tax office* needs disbanding, tax law radically simplified, reforming with new personnel (including experienced foreign ones) and a deacent budget.

Radical? Well, not compared to austerity! Tax evasion in Greece being the national sport is unfortunately close to the truth.

@30 – They can’t let the left have any sensible conversations, yea.

“You cannot have a surplus in one country without there being a deficit elsewhere. So, surpluses in northern Europe were matched by deficits in the south.”

A ‘senior economist’ wrote this?

Strewth.

It’s also a crisis of Thatcherism.

@23. James Meadway is right:
 
When a country runs a trade deficit then there can’t be both a government and private sector surplus. Either the government or the private sector will have to run a deficit.
 
This follows from the sectoral balances equation
http://www.macrobusiness.com.au/2011/01/macroeconomics-101-part-1/
http://neweconomicperspectives.blogspot.com/2011/06/what-happens-when-government-tightens.html#more
 
That puts a country like Greece into a bind because if they tightened up their tax regime they would just push more debt onto the private sector.

Excellent article Mr Meadway, it’s nice to see someone getting to the route of the problem instead of the usual trick of blaming ordinary citizens for having the audacity to want a decent life, the deficit hysterics are out in force as you would expect but like Gavin said you’re spot on. Too many people have too much to say on this issue without even understanding the monetary systems or sectoral balances.

The more people like yourself, Warren Mosler, Bill Mitchell, Randall Wray, Stephanie Kelton, Scott Fullwiler and a few others who are trying to educate people with the facts rather than ideologies and fantasies, then the better it will be for the majority of people.

GO BRITISH FOR A WEEK…..

While the ship of the Old Continent is submerged in the swamp of economic downturn, it is hypocritical and stupid to see the genteel lords of the A Class laughing at the the rogue deck. It is a sad picture of a problematic society to chuckle over the problems of another society through TV trash, making a blind eye to their own mess.

If people in Britain find it funny to “live a week like Greek”, through Channel 4′s new reality show, I’m sure no one would not want to take part in a similar TV program entitled «Go British for a week» .
So let us imagine three Greek families participating in the reality and experiencing unemployment, losing their home and diving into alcoholism for a week, offering plenty of laughter to viewers.

The first Greek family will live in British levels of poverty and their children will be amongst 600.000 children who are malnourished nowdays in the UK and have the opportunity to live as a hero of their childhood, Oliver Twist.

The second family will enter the list of victims of alcoholism that is eating away the innards of the British society and will be within the25% of adult Britons consume alcohol at levels that endanger their health.

As for the third family, the show will live the experience of living under bridges and at parks, with the company of thousands more homeless people seeking shelter even in the most unlikely parts of British cities.

The game show will be based on the hard evidence that by 2013 approximately 3.1 million children, 2.5 million parents, 4 million adults without children and 2.1 million pensioners in the the UK will be living in absolute poverty. A term used in cases where the employee’s salary falls below 60% of median income.

Yet according to a report published by the Information Centre of the British National Health Service (NHS), one in three men and one in six women consume alcohol both at risk of liver damage or occurrence of psychological problems like depression.

Finally, Britain has one of the highest rates of homelessness in Europe is estimated that 4 in 1,000 people are homeless.

«Go British for a week» and have fun …

Leon @32,

@30 – They can’t let the left have any sensible conversations, yea.

Can I resist… can I resist… can I resist… amazingly, yes I can (someone else can shoot into the open goal there).

Mr. Meadway, now check the Greek tax system for how much should be collected.
Now check how much IS collected.
Now check this against spending.

Radical? Well, not compared to austerity! Tax evasion in Greece being the national sport is unfortunately close to the truth.

But in terms of sensible, that seems uncharacteristically accurate. We might be able to agree that the problem was not that the Greek state was too big (apart from obviously in the case of spending versus income) but rather it was too weak – it could not enforce its own laws. It may be shocking to hear, but most right-wingers (including the social liberals like me) would prefer a strong state to a weak one – because the state has roles to perform, and some such as law enforcement (and the collection of taxes to fund this) need to be performed well. Greece has a weak state – people can chose to avoid it, and so it fails to collect taxes, and presumably therefore people are less engaged with its democracy as its decisions affect them less.

mathaios,

Thanks for the critique, but I suspect most on this site are aware of all that. It doesn’t actually help address the issue that it is Greece which has a problem that the UK does not, and this is partially due to structural problems within the country (and, less argued here, partially due to the Euro-self-aggrandising of Greece’s political class).

To be fair, it is wrong to generalise about the Greek population, who from my limited experience seem to be people like everyone else. But generalisations about structural problems like tax evasion (or alchohol abuse) are fair enough.

As to absolute poverty – worth noting that someone earning a wage just under the absolute poverty line in the UK would not be in absolute poverty in Greece – lower median wage. This makes this a fairly useless comparator…

@27, Tim W: yes, you can finance a current account deficit by means other than debt. No, that isn’t what in fact happened. Which is what I was writing about.

@31, Richard W: the point about German competitiveness and wage restraint is well-taken – it’s close to the heart of the problem. The original blogpost covers it briefly (it was edited in the above): http://www.neweconomics.org/blog/2011/11/07/john-humphrys-is-wrong-about-greece

(It’s worth noting that at least on OECD figures, Greek productivity growth over 1999-2008 was substantially ahead of German, but again it’s quite clear structural reforms are needed – although perhaps not in the form the IMF et al appear to believe are required.)

Just have Greece change the law so that their shipping magnates, some of the richest people on the planet actually pay tax, and then a second law that makes everyone’s tax returns public. Thirdly set up a website where you can register every cash payment you’ve had to make for goods or services to be in with a chance of winning a million euros every month. Then sit back and watch the taxes pour in.

Now that would probably work:

> set up a website where you can register every cash payment you’ve had to make for goods or services to be in with a chance of winning a million euros every month. Then sit back and watch the taxes pour in.