Media myths about the Greek public sector are still used to push crippling austerity


3:10 pm - July 18th 2013

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by Tom Gill

The Greek government last night passed a law firing thousands of public sector workers.

Twenty five thousand workers – mainly teachers and municipal police – will be placed in a layoff scheme by the end of 2013. They have eight months to find another position or get laid off.

Why? According to Reuters, “Greece’s public sector is widely seen as oversized, inefficient…”

Lazy journalism, once again. What are the facts? Greece’s public sector may well be relatively inefficient, although there is little reliable data on public sector productivity and the press rarely if ever quote hard evidence. But the charge that it is oversized is nonsense.

The number of state employees in Greece is below the EU average. According to the OECD, “Greece has one of the lowest rates of public employment’ among advanced economies, with general government employing just 7.9% of the total labour force in 2008. Across the OECD area, the share of government employment ranges from 6.7% to 29.3%, with an average of 15%.”

This report also notes that compared to other OECD countries, the Greek government spends a much smaller portion of resources on education (8.3% vs. 13.1%), and only some of that is down to a smaller school-age population. So why are teachers targeted for lay-offs?

Not that there isn’t obvious waste in government expenditure. For example, Greece spends above average – in the EU it is about 2% of GDP – on defence. According to The Guardian, “No other area [of spending] has contributed as heavily to the country’s debt mountain. If Athens had cut defence spending to levels similar to other EU states over the past decade, economists claim it would have saved around €150bn – more than its last bailout. Instead, Greece dedicates up to €7bn a year to military expenditure – down from a high of €10bn in 2009.”

But the Troika is using international loans to force through more cuts to the public sector workforce.

At a time when the private sector is not hiring, this will add to total unemployment. This in turn will further hit the economy as in Greece which is heavily dependent on household spending (74% as against 58% in Germany, according to the World Bank.

More misery, in short, for a country now in its six year of recession and where unemployment is expected to rise to 28% by the end of next year, according to forecasts published this week.

With help by from the media, the myths perpetuate, and Greece burns.


Tom Gill is a London-based writer who blogs at www.revolting-europe.com on European affairs from a radical left perspective.

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Reader comments


Nobody is forcing Greece to do anything.
If Greece wanted to default, it could do so.

2. Churm Rincewind

@ Andreas Moser (1) – Well, no it can’t. Default is not a realistic option. Greece has embedded problems, such as the widely held view that paying taxes is an option not a requirement. It’s hard to know how the Greek Government can address such a problem (given that the Government has itself been complicit in creating this situation) without short term brutality.

This is not a happy situation, and in my view the Greek Government has made a number of miscalculations, but I’m wary of taking a view from the outside.

I don’t think that you can infer they do not have expenditure problems just because their central government employee level is below OECD average. It is all about what a country can afford and that can be inferred from the primary deficit not public sector employment levels. Their public sector can have an below average headcount and still be bloated and inefficient compared to what they can afford. With a few exceptions rich countries tend to have larger public sectors than poor countries because they can afford them. Greece is no longer as wealthy as the illusion of the euro led them to believe.

If they can’t fund even their below OECD average state through taxation, then cutting expenditure or borrowing the difference are their only options. Official sector lenders are always going to ask for expenditure cuts through reducing the public sector before they disburse funding no matter what size the public is.

Firstly, a whole article about Greece’s problems and not a single mention of the Euro????

Secondly, it isn’t always about how much public sector employees get paid, and more so about the total cost of the services they run and the productivity of said services.

For example. A friend of mine works in a merchant bank and is dealing with the proposed privatisation of the railways. He stated simply that apart from the employees being heavily overpaid, the railways simply do not carry enough people and make enough moeny for them to be viable if not for the massive state suport. It would be cheaper by far for Greece to shut down the natioanl rail operators and for people to make all journey’s by taxi. Except that there aren’t enough taxi’s as the licensing system for taxi dirvers is, guess what, run by the state, and between the state’s innefficiency there, and that the taxi firms themselves lobby (and bribe) officials to prevent new licenses being issued very few new entrants to that market ever manage to make it.

5. the a&e charge nurse

[4] ‘Firstly, a whole article about Greece’s problems and not a single mention of the Euro’ – the article is not just about Greece, and certainly not just about the Euro but the perpetuation of lies and misinformation by corporate enablers.

Nowadays disinformation has become so embedded especially amongst our political class that one needs stocks in this company to digest most of what is being said
http://www.plattsminipackages.co.uk/product_images/y/872/saxa2__88235_zoom.jpg

This report also notes that compared to other OECD countries, the Greek government spends a much smaller portion of resources on education (8.3% vs. 13.1%), and only some of that is down to a smaller school-age population. So why are teachers targeted for lay-offs?

How about this?

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.

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

Churm Rincewind: “Greece has embedded problems, such as the widely held view that paying taxes is an option not a requirement.”

Seems to me like that’s a pretty widely held and embedded problem here too, and our Government is very much complicit in that situation, with the endorsement of non-dom status, and happy tolerance of British territories around the world operating as secretive tax havens…

8. the a&e charge nurse

[7] ‘Seems to me like that’s a pretty widely held and embedded problem here too, and our Government is very much complicit in that situation, with the endorsement of non-dom status, and happy tolerance of British territories around the world operating as secretive tax havens… ‘ – indeed, a figure put at some £25 billion by the TUC

Wheezes include shifting income from the person who should really pay tax to someone else, or moving transactions out of the UK while the 50 largest companies almost always pay 5% less tax on average than they declare in their accounts. The average tax rate paid by these companies fell by more than 0.5% a year over a seven-year period to 2006, even though the UK tax rate for these companies was constant throughout that time – as a result, the de facto corporation tax rate for UK companies in 2006 was 22.5% when the actual rate agreed by Parliament was 30%.
http://www.tuc.org.uk/economy/tuc-14238-f0.cfm

@7 & 8:

You are referring to tax avoidance which is perfectly legel. The difference in greece is that a very large amount of income is not declared to the tax authorities which is illegal.

There is a difference between tax avoidance & tax evasion – how many times does this need to be spelled out?

10. the a&e charge nurse

[9] ‘There is a difference between tax avoidance & tax evasion’ – who says there isn’t a difference – but in essence they are simply two routes to the same end point.

More money is lost (for the general good) through avoidance compared to evasion – only corporate enablers would lose sleep worrying about semantic differences.
Tax avoidance: a General Anti-Abuse Rule
Standard Note: SN6265
Last updated: 20 June 2013

Jungle @7 rightly highlights the tendency toward greed as a universal phenomena – he/she is correct to do so.

11. Northern Worker

As I understand it, in a common currency area like the euro, pound or dollar, there must be transfers of wealth. Here in the UK, we have wealth produced in some areas (eg London) and taxation is then used to redistribute to less well off areas like the NE where I was born.

Without redistribution from northern Europe to southern Europe, the south will suffer the pain described in the op ed.

Clearly Greece cannot afford even the relatively small public services it has unless northern Europe pays. Will German taxpayers pay? No chance so Greece has only two options – severe austerity or leave the euro.

I wonder how long Greece can go on with 25% unemployment and rising, and 60% youth unemployment before there is real trouble?

12. Charlieman

@10. the a&e charge nurse: “‘There is a difference between tax avoidance & tax evasion’ – who says there isn’t a difference – but in essence they are simply two routes to the same end point.”

PAYE and personal tax avoidance are two routes to the same end point. In both cases, tax is demanded according to a legal assessment.

13. the a&e charge nurse

[12] The so-called “big four” accountancy firms are using knowledge gained from staff seconded to the Treasury to help wealthy clients avoid paying UK taxes – not illegal of course but driven by greed, and indifference to the consequences of concentrating assets and resources with a small elite.
http://www.guardian.co.uk/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax

Do you employ Deloitte, Ernst & Young, KPMG and Pricewaterhouse Coopers to advise you on how to navigate the various tax fiddles, sorry I meant complete tax returns, no of course not, Deloitte, Ernst & Young, KPMG and Pricewaterhouse Coopers are not for scum like us, they are there to assist the big boys hang on to every penny they possibly can.

Some people think they can wag the finger at the greeks for failing to employ sexy accountants to help them hide money from the taxman but it is a rather specious argument in my opinion.

@13

The big four accountancy firms will accept business from anyone who is willing to pay them. off course it is not likely that it is worthwhile for ‘scum like us’ as we pay very little tax compared to the ‘big boys’.

So you think no one should avoid tax in any way what so ever? Where do you draw the line? Do you therefore refuse to use ISA’s, claim tax deductions for charitable donations? Should everyone simply pay as much tax as they can afford?

Who is wagging the finger at Greeks for not employing accountants, sexy or otherwise? It is more that people are wagging the finger at Greeks for simply not declaring income to the Greek tax authorities.

15. the a&e charge nurse

[14] ‘So you think no one should avoid tax in any way what so ever?’ I’m not sure I’m in favour of starbuckisation of the UKs tax affairs.
http://www.bbc.co.uk/news/magazine-20560359

@15

So do you choose to pay more tax than you legally need to?

Your statement that ‘but in essence they are simply two routes to the same end point’ is true. Yes less tax is collected by people evading tax and less tax is collected by people avoiding paying tax.

But why should people pay more tax than they legally have to?

17. Robin Levett

@a&ecn #10 (&8):

More money is lost (for the general good) through avoidance compared to evasion – only corporate enablers would lose sleep worrying about semantic differences.

Really; have you got figures for Greece then? The impression I have is that complicated tax planning (avoidance) isn’t necessary or widespread there because even if tax is legally due, it isn’t paid.

As for the UK: any organisation that endorses the £6bn Vodafone figure has issues of credibility; secondly, tha figure is calculated by Richard Murphy, and we’ve seen how credible his figures are in threads on here.

18. the a&e charge nurse

[17] for a discussion of the tax ‘arms race’ between avoiders and legislation to combat avoidance see
http://www.parliament.uk/briefing-papers/SN06265
[PDF available].

My comments on avoidance vs evasion related to domestic tax patterns and followed on from comments about how greed is hardly an exception in Greece (see jungle @7).

The European Tax Commissioner Algirdas Šemeta says ‘Greece should consider further strengthening its anti-money laundering regime, as a means of identifying those evading tax, and follow the actions proposed by the Commission against so-called tax havens’.

Perhaps its time the the Greeks sent for Deloitte, Ernst & Young, KPMG and Pricewaterhouse Coopers to advise you on how to navigate the various tax fiddles?

19. the a&e charge nurse

The difference between tax evasion and tax avoidance is said to be the thickness of your wallet?
http://www.youtube.com/watch?v=S6ZsXrzF8Cc

20. awittyusername

So, the a&e charge nurse, do you choose to pay more tax than you legally need to? You are certainly adept at avoiding questions.

21. Churm Rincewind

@ Fungus (14): Spot on.

This OP would have been more appropriately entitled:

“More Lib Con Lies and Distortions about Greece”

23. the a&e charge nurse

[16] ‘But why should people pay more tax than they legally have to?’ People are not being asked to pay more tax, just some tax, the same sort of arrangement that applies to ordinary people, surely that is not hard for you to understand.

Let me lay a little analogy on you.
Big pharma publishes less than 50% of drug trial data – for reasons known only to them they suppress important information on how drugs perform when used amongst certain patient groups.

Now this type of suppression is not against the law even though it has a huge impact on how billions of pounds is spent on health care but following the logic of your position you would presumably be quite relaxed about such an arrangement so long as the sexy pharma lawyers stay one step ahead of those trying to make rational clinical decisions about which drugs are best for which conditions?

24. Churm Rincewind

@ (23) A&E Charge Nurse:

“Let me lay a little analogy on you. Big pharma publishes less than 50% of drug trial data – for reasons known only to them they suppress important information on how drugs perform when used amongst certain patient groups”.

Hmm. I’m not sure the analogy holds. The reason that some clinical data is withheld by pharmaceutical companies is not “known only to themselves” but is because, having typically spent huge sums of money on research, they are understandably reluctant to provide the full data to their competitors who would thereby be discouraged from initiating their own research. The result would be a highly undesirable race to the bottom which would disadvantage everyone. This is a complicated issue, and I can’t see that it’s got much to do with the situation in Greece.

25. the a&e charge nurse

[24] perhaps you should watch this – 100,000 deaths from lorcainide, but fortunately no actual laws broke …. phew
http://www.youtube.com/watch?v=RKmxL8VYy0M

Alternatively you could take a look at BadPharma – if you did you would understand that any ‘race to the bottom’ involves ineffective regulators and complicit academics as well as greedy drug firms.
Is it any wonder important clinical decisions are still based on inadequate, yet legal data.

@23

‘People are not being asked to pay more tax, just some tax, the same sort of arrangement that applies to ordinary people,’

Ordinary people are being asked to pay the tax that they are legally required to, just like everyone else. Why should a company pay tax if it doesn’t make any profits? Should ordinary people pay tax if they don’t earn any income?

You still haven’t answered my question if you choose to pay more tax than you legally have to. I will take that as a no, although you of course expect others to do so.

Your big pharma analogy – if they stay within the law then they have not done anything wrong. If there is reason to suggest that the law should be changed then Parliament should look into it.

27. the a&e charge nurse

[26] ‘Why should a company pay tax if it doesn’t make any profits?’ because adequate clinical services are more important than enriching the bankers.
http://www.guardian.co.uk/politics/2011/sep/01/private-finance-initiatives-tax-havens-public-accounts-committee

Dave Prentis, general secretary of the public sector union Unison, says: “It is a disgrace that many of the PFI investors are registered offshore for tax purposes. They are literally ripping the taxpayer off twice, and making huge profits in the process. It is time to ditch PFI once and for all.”

Still, no laws broken ….. cushty, eh?

@27 No one forced the Government to enter PFI agreement under the terms that were agreed.

Some shareholders are going to be resident overseas for tax purposes – what a surprise!

People and corporations are going to try to minimise their tax bill (just like any other cost). What a surprise.

What do you want to do about it – change the law retrospectively?

29. the a&e charge nurse

[29] ‘People and corporations are going to try to minimise their tax bill’ – you forget to add irrespective of the human cost associated evading £25 billion in taxes.

@30 Tax evasion is illegal. I am opposed to tax evasion.

31. the a&e charge nurse

[30] see 19

@31

What is the relevance of that video? It certainly does not support your question

‘The difference between tax evasion and tax avoidance is said to be the thickness of your wallet?’

Why is it that you seem to think that some members of society should pay more tax than they legally have to but others not?

The rich already pay substantially more tax than the rest of society – around 27% of income tax is paid by the top 1% of earners.

33. the a&e charge nurse

[32] lets just agree to disagree – you are not perturbed by the practice, and consequences of tax evasion and the extreme measures taken by big corporations to circumvent the actual intention of tax legislation – I am – the video illustrates some of the reasons why.

As far as I can tell your argument amounts to no more than everything is permissible providing you have an army of sexy lawyers and accountants to go through the small print with a fine-tooth comb, irrespective of the consequences, such as reduced clinical services in PFI hospitals in order to enrich off-shore bank accounts.


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