How austerity is destroying Greek society: a report from Athens


11:15 am - February 28th 2012

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contribution by Abi Ramanan

Theo has two degrees. “Last year I had a job in commerce and a salary. Now I am selling my possessions on the street and living day-to-day after my wage was reduced to €3 an hour due to cuts. I quit my job due to the degradation of such a low wage but many of my colleagues are still working under those conditions.”

Most of his friends have left Greece for Italy and Switzerland. The government is now calling for a further 22% cut to the minimum wage.

The austerity measures being imposed on Greece are hard to argue for, from a social, political or financial point of view.


[picture of Theo, above]

Hundreds of parents do not have money or food for their children. Four children, including a newborn baby, were recently abandoned on the doorstep of the youth centre, Ark of the World in Athens.

Anna, aged four, was left at her school holding a note that read: “I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.”

Judging by the latest protests and riots, it is clear that if these are imposed on the Greek public, a social explosion is inevitable. Not to mention the possibility of the military, who have been in check since the fall of the dictatorship in 1974, making an unwelcome comeback.

Violent crime is increasing. Recently a girl’s house was robbed during the day and her 17-year old sister’s face was slashed. This is by no means an isolated incident.

The government even switch off the traffic lights at night in an effort to save money and Zoe, a waitress, said they have also stopped all food testing.

Marlena, a store owner, in downtown Athens told me that she is experiencing significantly lower sales, an increase in theft and a lot of drug use outside her shop. I myself saw dozens of people injecting heroin in broad daylight. Ella, an estate agent, paid more in taxes than she earned in the period between December 2011 and February 2012.


[a common sentiment in Greece]

The Communist Party and the extreme-right wing party are experiencing big surges in support, primarily from the youth, over 50% of whom are unemployed.

On top of that, the asylum situation in Greece has now been declared a humanitarian crisis by the UN: a first for Europe. This short documentary outlines just how abhorrent life is for the immigrants.

Ultimately, it remains that huge wage cuts, slashed pensions and multiple tax hikes are not ways to save a failing economy. By defaulting and reverting to the Drachma, Greece would be able to shrink its existing debt to half and increase the competitiveness of its exports.

There would also be a renaissance in Greek industries meaning desperately needed job creation and a boost to public morale.

The transition will not be easy, but for Theo, Marlena, Anna and millions more Greeks – this may be the only option if they are to survive this crisis.

The average taxi driver now makes between €15 and €20 a day – one told me that he has three children and high expenses. With the constant tax hikes soon he won’t be able to cover his families basic needs: “Forget university, I am worried that I won’t be able to keep a roof over my children’s heads in the coming months.”


Names have been changed to protect people’s identities. Abi Ramanan works as a freelance writer

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Reader comments


Whilst the key tenant of the piece above, “The austerity measures being imposed on Greece are hard to argue for, from a social, political or financial point of view”, is clearly true (unless the point of view you take is that the German economy has to be protected…), this would be a better article with statistics rather than anecdote. How does the tale of one violent break in show violent crime is rising for example – unless there were previously no violent break ins in Greece?

This is emotive, but it needs something to back up the examples (anecdotes and statistics together would work far better).

2. the a&e charge nurse

[1] exact statistics may be hard to come by – but statistics are hardly necessary to recognise that ordinary people in Greece are facing serious hardship.

Perhaps there are some stats on the cash exodus?
http://www.guardian.co.uk/business/2010/apr/13/greek-debt-crisis-capital-outflow

3. Torquil Macneil

The situation facing Greeks is horrendous, but what is the alternative to austerity in that country? Where is the money going to come from? Does anyone think that the German population would accept another gigantic tax transfer? If not, what is to be done? Leave the Euro? And then what? Who would lend to Greece then?

By defaulting and reverting to the Drachma, Greece would be able to shrink its existing debt to half and increase the competitiveness of its exports.

Not quite as straightforward as that though is it? Although, if you do have a plan whereby this becomes easy, I believe Lord Wolfson has £250,000 with your name on it.

Just for a start: since, at the moment, Greece is still running a primary deficit, a default/decouple/devalue strategy will lead to more austerity and not less. For a second, since the inevitable (indeed desired) result of the DDD strategy is a collapse in the value of the New Drachma, the cost of imports would spike, leading to a further reduction in the living standards for Greeks.

It’s not austerity that is destroying Greek society. What is destroying them is that the society as a whole is spending so much more than it is producing, that it is running a deficit. Let the country default and get rid of euro.

But just devaluating won’t help. The country also needs to get rid of mindless bureaucracy and corruption. It needs a free economy instead of the regulated cleptocracy (privatise profits, socialise losses) that it has had.

One minor point, but it may show the Greek way of thinking. In the UK, food testing is done by the manufacturers either internally or at privately owned labs. Why would the government want to control it?

If you produce food that is not safe, you get closed down in the UK.

7. Peter Stewert

“What is destroying them is that the society as a whole is spending so much more than it is producing”

Ah yes, the excuse from Goldman [and now] Sachs has arrived.

At present saying that spending is outstripping production is like a kidnapper complaining that their abductees is stupidly breathing faster than the air flow in their “cell”. It isn’t as though Greek people are buying iPads to use as toiliet paper or anything. And to complain about spending in the past is criticise MirrorGroup pensioners because they unknowingly worked for a crook and a liar that no one wanted to investigate.

Greece is a disaster. It is long past time to default and prosecute the living hell out of those that cooked the books and kept quiet. It’s a strategy that has worked a charm for Iceland.

Extremely affective article, we are consistently being provided with endless statistics but less so with such explicit accounts of individual hardship and tragedy. It is important to be provided with these so we can at least attempt to comprehend what Greek citizens are truly experiencing; statistics cannot paint the picture of the girl waiting for the mother that isn’t coming. Really numbers can only ever do so much.

All this damage just to get Merkel re-elected.

@ 7 Peter Stewart

Prosecute those responsible?

Sure, but that would be previous Greek governments and a huge number of Greek companies and individuals who have been playing the national sport – tax evasion.

Austerity is painful, but as people point out above, who is going to lend to Greece without significant reform and fiscal rectitude, and devaluation won’t immediately make life easier for Greeks either. Initially it will make living standards even worse before Greece can regain competativeness.

Greece should be a lesson to all those who think that endless debt fuelled expansion of the state and welfare has no risks attached. Even the UK,insulated as it is with it’s own currency could eventually fall to the same scenario – though fortunately not nearly as easily.

” the national sport – tax evasion”

Perhaps they should move to South Africa instead?

12. the a&e charge nurse

[11] “the national sport – tax evasion” – I thought tax invasion was the main sport for large corporations?

13. the a&e charge nurse

Oops [12] was aimed at Tyler, not Planeshift.

If we’re sending them all this money to pay off their creditors can’t we at least send them some tax accountants to fix their tax evasion problem?

15. the a&e charge nurse

[14] “If we’re sending them all this money to pay off their creditors can’t we at least send them some tax accountants to fix their tax evasion problem?” – don’t send all of them, though.
http://www.bbc.co.uk/news/business-17181213

7: “Ah yes, the excuse from Goldman [and now] Sachs has arrived.”

Oh well, so avoiding the issue by starting to talk about something else?

It was the Greek government that employed Goldman Sachs to mask its deficit. Not the other eurozone countries which now have been issuing loans and guarantees to Greece. It was the Greek government, which did not want to make unpopular decisions, and therefore forged its books to be able to continue lending as long as it can.

Now it no longer can.

“At present saying that spending is outstripping production is like a kidnapper complaining that their abductees is stupidly breathing faster than the air flow in their “cell”. It isn’t as though Greek people are buying iPads to use as toiliet paper or anything.”

The Greek people are still buying more iPads than their export sales, tourism and other income can afford.

On a related note, see
http://joking.of-cour.se/pictures/greece-vs-estonia/

Here you see who’s doing austerity. Why are the Greeks rioting and demanding a socialist revolution, but the Estonians are not? Because the Estonians have experience of life after the revolution.

18. So Much For Subtlety

Meanwhile might there be some other reason for Greece’s problems?

A friend and I met up at a new bookstore and café in the centre of town, which has only been open for a month. The establishment is in the center of an area filled with bars, and the owner decided the neighborhood could use a place for people to convene and talk without having to drink alcohol and listen to loud music. After we sat down, we asked the waitress for a coffee. She thanked us for our order and immediately turned and walked out the front door. My friend explained that the owner of the bookstore/café couldn’t get a license to provide coffee. She had tried to just buy a coffee machine and give the coffee away for free, thinking that lingering patrons would boost book sales. However, giving away coffee was illegal as well. Instead, the owner had to strike a deal with a bar across the street, whereby they make the coffee and the waitress spends all day shuttling between the bar and the bookstore/café. My friend also explained to me that books could not be purchased at the bookstore, as it was after 18h and it is illegal to sell books in Greece beyond that hour. I was in a bookstore/café that could neither sell books nor make coffee.

Nope. Must be those damn Germans.

19. So Much For Subtlety

Let’s see. Any other reason the Greeks might be in trouble?

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_21/02/2012_429208

Starting an online store is no easy business

By Alexandra Kassimi

It took 10 months, a fat bundle of paperwork, countless certificates, long hours of haggling with bureaucrats and overcoming myriad other inconceivable obstacles for one group of young entrepreneurs to open an online store.

As e-commerce continues to gain ground apace abroad, and even Greeks seem to be warming to the idea of Internet shopping, opening an online store based in Greece is no job for the fainthearted.

“An online store is more complicated than a regular store basically because of the way payments are carried out,” explained Fotis Antonopoulos, one of the co-founders of http://www.oliveshop.com, which sells olive oil-based products such as cosmetics, mostly to foreign markets.

“Most stores begin operating after receiving only the approval regarding their brand name, as the bureaucracy involved takes such a long time to complete that it is simply impossible to keep up with the operational costs, such as paying rent on obligatory headquarters, without making any sales,” said Antonopoulos.

Antonopoulos and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.
….

Got to keep all those liberal arts graduates employed doing something I suppose.

@ Planeshift/A+E

You chaps are clearly not quite sure about the difference between tax avoidance and evasion – the former being legal and the latter illegal. Let me describe a few examples.

Moving to SA and avoiding UK tax is perfectly legal – not least because I earn my money and pay tax on it in SA.

Companies minimising their tax bills in accordance with the law is also perfectly legal.

Greek Doctors only declaring part of their real income, the rest being received in envelopes full of cash is tax evasion and illegal. Greek retaurants only accepting cash so they can again try and minimise the earnings they present is also tax evasion.

As another anecdote about the level of beaurocracy and corruption in Greece, let alone of the dead hand of the state, let me tell you about the friend of mine working on the Greek privatisation deals. He told me that the railways were more expensive per passenger/km than the cost of putting all those passengers in taxis instead, and simply shutting the railways down. The only problem being that there wouldn’t be enough taxis to cope as getting a taxi license is now almost impossible because the process is so tortuous and corruption is endemic. Cabbies trying to minimise the amount of competition they have and beaurocrats wanting bribes to issue new licenses.

Whatever the case is though you can’t escape a simple fact. If the state becomes the main engine of spending in an economy, and that spending is fuelled by debt, you can be sure that coiuntry is heading for serious trouble sooner rather than later.

Greece is a pointed example, and has other factors (the Euro, corruption, red tape) which contribute to it’s fall, but those thinking that it could never happen in the UK so we should keep spending and not worry about our debt/deficit are smoking way to much of the good stuff.

Tyler – I couldn’t care less about the legality of things, its the cheek I was refering to. No doubt many of the scams used in Greece are legal as well. Though I am relieved you consider closing down loopholes and punishing those who break the tax law to be an important part of a deficit reducation plan.

Moving on however, these threads usually end up with some kind of consensus that Greece needs to leave the Euro.That’s something I have agreed with, as the evidence frankly supports it.

However I was in Egypt 2 weeks ago, and one of the things that suprised me was the amount of establishments and businesses that not only accepted Euro’s but would actually price things in Euros ahead of Egyptian Pounds. To some extent this can be explained by the fact I was in a tourist area, but equally there were many shops doing this that were not overtly touristy.

It is thus likely a post-euro Greece would end up very similar (more so), with large parts of the economy still using Euro as a medium of exchange rather than the new currency. What implications would this have for the options available to the greek government? What effects does it have when foriegn currency is prefered to your own?

Tyler – I couldn’t care less about the legality of things, its the cheek I was refering to. No doubt many of the scams used in Greece are legal as well.

Nope, the big problem in Greece is outright evasion. More Porsche Cayennes in Greece than registered taxpayers earning over EUR50k for example. <200 'official' swimming pools in Athens (they're taxed too) when an overflight reveals thousands of the things. It's not avoidance, it's out and out evasion.

23. the a&e charge nurse

[20] ordinary families are being ripped apart for something they had no direct control over – Tim J may be right about posh cars, but those in the food queues or handing their kids over to social services are more likely to have driven one of these?
http://files.turbosquid.com/Preview/Content_2010_09_25__08_21_24/zaz_966_001_sm.jpgac3a7047-9b36-4e60-8358-a64437da1262Larger.jpg

Don’t you guys get it – it is the little people who are suffering for the sins of their masters?

After we sat down, we asked the waitress for a coffee. She thanked us for our order and immediately turned and walked out the front door. My friend explained that the owner of the bookstore/café couldn’t get a license to provide coffee. She had tried to just buy a coffee machine and give the coffee away for free, thinking that lingering patrons would boost book sales. However, giving away coffee was illegal as well. Instead, the owner had to strike a deal with a bar across the street, whereby they make the coffee and the waitress spends all day shuttling between the bar and the bookstore/café. … I was in a bookstore/café that could neither sell books nor make coffee.

To be fair to the Greeks, there are rules in the UK – probably in every Western country – pertaining to health and safety in food and drink. I doubt a bookshop proprietor can lawfully simply start serving coffee to customers from his new coffee machine, without having to register with his local authority and/or environmental health officer, obtain a food hygiene certificate etc. I’m sure there are rules about the minimum number of sinks and toilets, too, for staff and customers.

Here’s one such rule:

Plant such as cappuccino coffee machines, high pressure steam ovens and steam pressure jet washers, which generate steam under pressure in an enclosed volume, must meet the requirements for pressure vessel and system safety including inspections by a competent person in accordance with a written scheme of examination.

@ Planeshift

The cheek of it? I’m not sure if you are referring to me moving country and paying my tax there (at almost identical rates to UK taxes) or Barclays using legal tax avoidance measures (though their tax payments have been over 30% of their profits except for the exceptional year of 2009 which Richard Murphy seems fixated on).

Tax EVASION in Greece is endemic. At the same time it does offer Greece some hope, as they don’t have to raise taxes to increase revenues so much as simply collect them. Which in theory at least is easier.

As for a post-euro Greece, it would’nt matter a great deal if the euro was still accepted. Greek workers would be paid in Drachma, which would almost certainly devalue considerably with two major effects. It would reduce living standards in Greece but it would also make it dramatically more competative – hopefully boosting their manufacturing (7% of economy) and tourist (18%) industries dramatically.

One thing you could argue is large foreign currency earnings would make it easier for Greece to fund any hangover euro debt or raise new euro debt, which would probably be cheaper than new drachma debt. Foreign currency earnings/reserves would also probably go some way to helping Greece’s credit rating, again kowering it’s cost of funding.

But ultimately any post-euro/drachma Greece would still suffer a currency devaluation and the associated fall in living standards. You really can’t avoid the need to regain competativeness, either through internal devaluation (austerity) or external devaluation (drachma) – though the external devaluation is likely to be faster and marginally less painful, and would get my vote.

I am trying to be objective here, but Greece’s problems lie in a combination of an overburdening state, corruption, poor competativeness all masked (till lately) by debt fuelled spending enabled by far too low (euro) interest rates for Greece. That this situation is the end result is hardly a surprise, and no country really should consider itself totally immune from similar happening – and I count the US, UK, japan and china in that catagory – with the latter two by far the most vulnerable.

To be fair to the Greeks, there are rules in the UK – probably in every Western country – pertaining to health and safety in food and drink.

It’s really about the ease of setting up a business. In the World Bank’s ratings of countries by how easy it is to set up a business, the UK is 7th. Greece is 100th – the lowest ranked European country bar Bosnia and Kosovo.

In addition to the numerous fiscal reforms, Greece is in desperate need of a supply-side revolution.

Don’t you guys get it – it is the little people who are suffering for the sins of their masters?

I’m not even sure this is true. The collapse of Greece is like the Murder on the Orient Express – everyone was in on it. I’ve linked before to a great Michael Lewis piece on Greece.

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials.

The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.”

The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland’s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something.

There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses. The retirement age for Greek jobs classified as “arduous” is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.

The Greek public health-care system spends far more on supplies than the European average—and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.

http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010

So, you have totally incontinent Government spending. And then, to complete the picture, you have farcical tax collection:

The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.”

One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases. “The one who does not want to pay, and who gets caught, just goes to court,” he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe.

…The first was an Athenian construction company that had built seven giant apartment buildings and sold off nearly 1,000 condominiums in the heart of the city. Its corporate tax bill honestly computed came to 15 million euros, but the company had paid nothing at all. Zero.

To evade taxes it had done several things. First, it never declared itself a corporation; second, it employed one of the dozens of companies that do nothing but create fraudulent receipts for expenses never incurred and then, when the tax collector stumbled upon the situation, offered him a bribe.

The tax collector blew the whistle and referred the case to his bosses—whereupon he found himself being tailed by a private investigator, and his phones tapped. In the end the case was resolved, with the construction company paying 2,000 euros. “After that I was taken off all tax investigations,” said the tax collector, “because I was good at it.”

Greece is a really poor example of evil bankers ruining an economy.

29. the a&e charge nurse

[27] “The collapse of Greece is like the Murder on the Orient Express – everyone was in on it” – even the kids who are hungry or homeless – or the oldies, not all of whom could have enjoyed the same benefits as the rapacious public sector workers?

The greeks failed in debt management – unlike our banks they didn’t have a big enough pot to underwrite the losses – of course focussing all our energies on who to blame doesn’t really help those who are in the ????? – maybe that’s the point?

Tim J,

It’s really about the ease of setting up a business. In the World Bank’s ratings of countries by how easy it is to set up a business, the UK is 7th. Greece is 100th – the lowest ranked European country bar Bosnia and Kosovo.

Sure, I understand that and fair point. I just don’t think a bookstore (a business already set up) trying to give away coffee is a particularly good example.

But the online store, if true, is a good example. Although I’m skeptical that any bureaucrat, no matter how anal, would demand “stool samples”.

But the online store, if true, is a good example. Although I’m skeptical that any bureaucrat, no matter how anal, would demand “stool samples”.

Heh.

But yes, agreed. Pinch of salt with that one I think.

“I’m not sure if you are referring to me moving country and paying my tax there (at almost identical rates to UK taxes”

I thought you’d moved because taxes in South Africa were lower? So my point was basically that you condeming a nation for tax evasion was a little bit like Chris Huhne complaining about speeding drivers. Legality doesn’t come into it – you can hardly criticise Greeks for seeking to minimise taxes in both legal and illegal ways when you’ve done exactly the same, albeit sticking to the legal measures first.

Nope, the big problem in Greece is outright evasion. More Porsche Cayennes in Greece than registered taxpayers earning over EUR50k for example.

That actually isn’t really true – there are something like 150 000 people in Greece with 50 k€ income registered, but only about 1500 Porsche Cayennes (not exact figures but it’s this ballpark). What you mention was a rhetorical hyperbole by some Greek which was then taken at face value. But if you count Porsche Cayennes, VW Touaregs and MB M series together, you’re getting there…

In other words, the number of Porsches in Greece is still way higher than is reasonable considering the official economy. This indicates presence of large-scale tax evasion, particularly by wealthy people. The Greek automobiles are, on the average, newer than those in Finland or Norway, which is not quite reasonable considering the official economic GDP figures (even at PPP) of the countries.

In Spain you can hire people who specialise in navigating through bureaucracy on your behalf. He’s not a solicitor or accountant – they have those too. He is called a gestor and knows what forms you need and the bureaucrats that must be spoken with. ISTM a country that has gestors has too much bureaucracy.

32:

I thought you’d moved because taxes in South Africa were lower? So my point was basically that you condeming a nation for tax evasion was a little bit like Chris Huhne complaining about speeding drivers.

You’re confusing tax avoidance (lawful) with tax evasion (illegal). There’s nothing wrong in moving to South Africa for lower taxes, or better life overall, if you just think you’re getting on there. (If you’re white, it sounds a bit risky, considering recent SA politics, but let’s set that aside.)

So, it’s a bit like Chris Huhne doing 60 mph on a motorway, complaining about people who do 60 mph on a town centre street. Quite a legitimate complaint.

you can hardly criticise Greeks for seeking to minimise taxes in both legal and illegal ways when you’ve done exactly the same, albeit sticking to the legal measures first.

That’s just daft. There’s no reason to criticise people for legally managing their taxes to minimise liabilities, and there’s no reason at all why such people shouldn’t criticise illegal tax evasion. The two aren’t the same.

“You’re confusing tax avoidance (lawful) with tax evasion (illegal).”

Thank you, despite reading this blog for several years I have yet to come accross a comment explaining the difference between avoidance and evasion – if only they had richard murphy articles on here and regular comments from Tim Worstall, I may have been aware of this.

For the millionth time – I don’t care about the legality of specific actions taken to avoid the spirit of tax laws. I’m saying that somebody who moved from the UK specifically to avoid paying a higher rate of tax has no business criticising Greeks for doing their best to avoid tax – even if one was legal and the latter actions have not been legal. They are part of the same spectrum of irresponsibility.

@ planeshfit

There is no 50% top tax rate in SA but up to that point taxes are almost identical. As others point out though, what I have done is perfectly legal – I pay all the taxes that are due. I don’t evade taxes like many Greeks – who are claiming to earn less than they really do for the sole purpose of paying less tax.

@ A+E

You make one huge mistake – Greece isn’t in trouble because they bailed out their banks. They are in trouble because the government was spending far more than they received, and made up the shortfall with massive amounts of debt. When people realised there was no chance that they could afford that debt people stopped lending to them and the government became effectively bankrupt.

Banks had nothing to do with this one, and indeed are on the hook for a lot of greek debt which is likely to default.

38 Tyler:

Banks had nothing to do with this one, and indeed are on the hook for a lot of greek debt which is likely to default.

I don’t think that’s quite right. Some banks, as well as other financial institutions, had something to do with it.

Most prominently, some institutions have collected fantastic profits from lending money to Greece – after all, the interest rates have been rather high, because of the obvious default risk. And in my opinion, if you extract large profits because the investments are high risk, you deserve anything bad that happens to you when the risk materialises. It may then be better for governments to bail out the banks, but that should be done by capitalising the banks and seizing the ownership against that capital. Not by extending the pyramid scam by issuing more and more guarantees for Greece to borrow more and more money.

The Greek government, elected by ordinary and even poor Greeks (which makes ordinary and even poor Greeks responsible also morally) still carries the primary responsibility for the scam they set up.

37 Planeshift:

For the millionth time – I don’t care about the legality of specific actions taken to avoid the spirit of tax laws

Moving to South Africa to do work there – because of tax in Europe, or other reasons – is specifically according to the spirit of the tax laws. There’s just no complaint. This is a very, very weird position: that you shouldn’t have the right to run away from an oppressive (tax or otherwise) regime.

Of course, you could do like those communists in the U.S. and collect revenue from all citizens, even those living abroad, but the U.K. and other European countries have specifically wanted to do it this way. So that people have freedom to vote with their feet (and don’t even need to denounce their citizenship).

41. the a&e charge nurse

[38] “Greece isn’t in trouble because they bailed out their banks. They are in trouble because the government was spending far more than they received, and made up the shortfall with massive amounts of debt” – maybe it wasn’t clear, Tyler, but my point was that a climate of financial irresponsibility has been ENDEMIC throughout a variety of financial institutions, as well as governments, and for some time.

Even though some amassed vast fortunes on the back of national debt culture (although I’m sure profiteers are coughing up what they owe in tax) most ordinary people are learning the hard way that a culture of blame has tended to pervade the post collapse environment.

We all know that this form of economic madness led to the near demise of some of our banks, while key players on wall street also needed bailing out by the tax payer – unfortunately, impoverished greek citizens have not been afforded quite the same level of protection.

The rich get bailed out while the poor are left to eat cake – some things never change?

Most prominently, some institutions have collected fantastic profits from lending money to Greece – after all, the interest rates have been rather high, because of the obvious default risk. And in my opinion, if you extract large profits because the investments are high risk, you deserve anything bad that happens to you when the risk materialises.

The overwhelming majority of Greek sovereign debt is now held by the ECB isn’t it? And there really isn’t much profit to be made in lending to Greece, because the risk of default is so high. If there were fantastic profits to be made, then everyone would be doing it…

“The overwhelming majority of Greek sovereign debt is now held by the ECB isn’t it?”

Which is one of the problems really, as the greek government is under-pressure to adopt measures aimed at keeping it in the Euro, when withdrawl seems to be the least-worst option.

42 TimJ:

The overwhelming majority of Greek sovereign debt is now held by the ECB isn’t it? And there really isn’t much profit to be made in lending to Greece, because the risk of default is so high

Yes, now it is held by ECB and now there are no longer profits to be made. But when the profits were made – that is, when the previous high-interest loans were paid back, along with their interests, with the newly borrowed money from ECB – it wasn’t. That is what really gets me – now the default falls in the hands of ECB, that’s all of us in the eurozone. Greece should have been forced to default right away, and then the losses would have been suffered by those who recklessly bought Greek state loans in the hope of quick profit – and they got to keep those profits.

Greece should have been forced to default right away, and then the losses would have been suffered by those who recklessly bought Greek state loans in the hope of quick profit – and they got to keep those profits

If you’re talking about sovereign debt post ’08, then they’d mostly have been covered by CDSs, which a forced default would have triggered. If you’re talking about pre-’08, then the returns on Greek debt weren’t especially dramatic anyway.

The banks most overwhelmingly screwed by a sovereign default would, obviously, be the Greek ones, all of which would collapse.

46. Abi Ramanan

Obviously leaving the Eurozone comes with it’s own array of problems but this article wasn’t really suppsoed to be just about economics – I wanted to show how austerity is affecting ordinary Greek’s lives and the overwhelming response has been ‘I had no idea that things were so bad.’
We hear the figures all the time: 3.3 billion being cut, 22% unemloyment – this is just a snapshot of what that looks like.
That aside, 3 years into the crisis and the crushing austerity by the EU, ECB and IMF is clearly having a devastating effect (what I wrote above is the tip of the ice-berg) – Greece is trapped between two shit alternatives, avoiding ‘official’ acceptance of bankruptcy and enacting further reforms, that have already killed the market, and are exacerbating recession and pushing the country further into poverty. However, growth (to the real economy) and development, the two things which could provide some form of solution to this crisis have absolutely no place in the austerity agenda, whereas reverting to the Drachma would provide this to a greater extent. Greece has already defaulted. It is not by any means an ideal solution, but further austerity is going to push a country that has been humiliated and bullied to the point of social collapse.
It is unfair to blame the Greek people (not that you were, but in general) for the actions of the institutions representing them who ran up the debts and maintained inefficient and corrupt systems. It has been shown time and time again that Greeks living in other countries are law-abiding, tax-paying citizens who thrive. Anyway, I’m going off on a tangent…

I wanted to show how austerity is affecting ordinary Greek’s lives

It’s not how austerity is affecting ordinary Greek’s lives. What is affecting ordinary Greek’s lives is the end of reckless borrowing and consequences of refusal to understand that you can’t fund your government with loans forever.

Austerity is what would have avoided the situation. This is no longer austerity, it’s that the country is out of money.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    How austerity is destroying Greek society: a report from Athens http://t.co/h5dStJvS

  2. Jason Brickley

    How austerity is destroying Greek society: a report from Athens http://t.co/1grNzaPQ

  3. Kim Blake

    Awful :( RT @libcon: How austerity is destroying Greek society: a report from Athens http://t.co/ZbdlPjcw

  4. Ahmad N

    RT @libcon: How austerity is destroying Greek society: a report from Athens http://t.co/vBaaXbPQ

  5. Kim Blake

    RT @libcon: http://t.co/ZbdlPjcw #Greeks taxed more than they're paid #insanity #injustice #desperation #Greece

  6. Raymond Shemilt

    How austerity is destroying Greek society: a report from Athens http://t.co/h5dStJvS

  7. leftlinks

    Liberal Conspiracy – How austerity is destroying Greek society: a report from Athens http://t.co/Cepys334

  8. abi ramanan

    @willirwin umm i will keep my eyes + ears open – will def holla if i hear of anything. would be nice to see you soon! http://t.co/1ohHFt6h

  9. abi ramanan

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/1ohHFt6h via @libcon

  10. Simon Chouffot

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/1ohHFt6h via @libcon

  11. anna kotzia

    How austerity is destroying Greek society: a report from Athens http://t.co/e33WUubs

  12. D Koutsolioutsos

    How austerity is destroying Greek society: a report from Athens http://t.co/e33WUubs

  13. C.Themelis

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/TGCbNP7m via @libcon v @annakotzia

  14. Stephen Oatley

    Great job @abiyooooo How austerity is destroying Greek society: report from Athens | Liberal Conspiracy http://t.co/yg8tYorP via @abiyooooo

  15. William Irwin

    the travails of Greece and the folly of austerity from @abiyooooo more shocking dispatches http://t.co/mtCCwyB4

  16. Stamp out Poverty

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/ffxEf7zi via @libcon

  17. jusTice

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/ffxEf7zi via @libcon

  18. ???

    How austerity is destroying Greek society: a report from Athens http://t.co/e33WUubs

  19. Alex Snowdon

    How austerity is destroying Greek society: a report from Athens: http://t.co/NtBpShS0 (weak grasp of political situation but worth reading)

  20. Duncan Hugh Reid

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  21. Liza Harding

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  22. Koldo Casla

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  23. Martin Steel

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  24. Pucci D

    RT @leftfootfwd: How austerity is destroying Greek society – @abiyooooo’s special report from Athens on @LibCon http://t.co/mQshIlz6 #fb

  25. Inna Mood

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  26. abi ramanan

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  27. Serena O'Sullivan

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  28. How austerity is destroying Greek society: a report from Athens « SaveTheCrisis

    […] http://liberalconspiracy.org/2012/02/28/how-austerity-is-destroying-greek-society-a-report-from-athe… Share this:TwitterFacebookLike this:LikeBe the first to like this post. […]

  29. TheCreativeCrip

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  30. Rick Thomas

    How austerity is destroying Greek society – read @abiyooooo’s special report from Athens on @LibCon: http://t.co/XqJuqEUk #BestOfTheWeb

  31. Mike Barton

    How austerity is destroying Greek society: a report from Athens | Liberal Conspiracy http://t.co/Rion3aW6

  32. Link Loving 04.03.12 « Casper ter Kuile

    […] How austerity is destroying Greek society: a report from Athens. Abi Ramanan. […]

  33. abi ramanan

    @daniellesspears yes i did! http://t.co/1ohHFt6h I've got a question for ya, will email u soon. hope you're well! X

  34. Greece « holleringabout

    […] How austerity is destroying Greek society: a report from Athens […]





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