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With Only Themselves to Blame...

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Now that the frenzied-whine of Athanasios has subsided, I decided to do some research on the Greek debt crisis. My conclusion? The Greeks have only themselves to blame.

The Vanity Fair article does the subject better justice than I ever could, but among some choice facts:

-The Greek government stopped collecting taxes during election years, so that incumbents would be more popular at the polls.

-Greeks consistently underreported their gross income on their taxes, in many cases reporting as little as 30% of what they actually owed (for many, that meant reporting as little as 12,000 euros a year).

-Goldman Sachs was hired to cook the country's books, in the hope that EU regulators would never notice the country's $1.2 trillion debt.

-In exchange for worthless bonds, the Greeks received $145 million from the EU and the IMF as a bailout.

-The retirement age for Greeks is 55 for men; 50 for women.

-All Greek salaries were vastly inflated. The equivalent of a construction worker made 80,000 euro a year (and, naturally, paid none in taxes).

-Monastaries, the classic "guy on the side of the little guy" in Greek history, were given millions of euros in bribes.

My conclusion? The Greeks earned it. They literally lied, cheated, and stole. As a society. And the best-case scenario is that Germany basically buys Greece at the repo auction. Sure, the bribery and the outright cheating of the EU is the fault of the government: but the widespread system of tax evasion and the sense of entitlement to an irresponsible high-wage/no-tax environment is squarely the fault of an unrealistic (naive?) Greek people. I look back on Athanasios' absolutely infantile "revolution" and I laugh. I laugh hard. ("Athens today, Berlin tomorrow!"). In one sense, it's amazing just how well he "represented" the facts.

But, seriously, in all fairness, this country's behavior (as a government, or as a people, take your pick) was reprehensible. It makes Lehman Brothers look like a model for professional responsibility. The only thing that went wrong was, predictably (though, I guess not to them), the money ran out. And what did they do? Blamed everyone in sight who wasn't Greek.

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I think I remember reading that the Greek Olympics added a lot of debt.

Greek debt spirals after Olympics - September 2004

So looks like the Olympics was second last thing to cause debt overflow (worldwide recession after that hit/exposed anyone with lots of bad debt).

Total cumulative debt, Mr Karamanlis said, was as high as 112% of GDP or 184bn euros - or 50,000 euros for each Greek household.

112% of GDP? damn. The USA is currently at ~85% according to wikipedia, and I'd expect to near 100% in next couple years (I'm pretty sure estimates showed it could go above 100%).

I would agree that Greeks can take most of blame, I mean the debt didn't just appear one day. They refused to take measures to decrease debt until after the recession hit. And now everyone is complaining about austerity measures that should have been in place 10-15 years ago. Canada in early 1990s cut spending because debt was too high, and was one of the leaders (least hit, financially secure government and banks) of this current recession.

Greek population ~12 million, 1.2 trillion debt.

Canada population ~34 million, 0.5 trillion debt

How'd they get past paying taxes? In Canada/US the gov goes crazy for taxes. They have no problem spending hundreds/thousands of dollars just to get some person to pay $5 that they owe due to a miscalculation (with interest!). Some people can avoid it or under report, but eventually either get caught or pay more.

I'll have to read that article later, quite long (I skimmed first/second page)!

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[colour=#005FFF]That was an extremely interesting read. I can say without a shadow of a doubt that I had no idea that the situation in Greece was this desperate; perhaps depraved is a better word for it. If even half of the statements in this article are accurate - and I fully believe that the vast majority are - then I have very little sympathy for the general population of Greece.

Elements of the article do paint a less debauched, more fearful side to some of the population. Perhaps there are many within Greece who are dismayed at the need for bribes, at the state of their public services, but feel powerless to do anything. Given the choice between bribing your doctor or forfeiting treatment, what would any of us honestly choose? Especially given the readily available avenues of exploitation on offer. In effect, the situation in Greece may have forced honest and decent people to turn to these illicit methods; to take the vastly inflated pay, if only to pay for a life in a corrupted country.

For what it reveals, the article is an amazing insight into how Greece got into this mess and how it will need to work to get itself out. But a lot of what the author encounters is hearsay. I am less inclined to believe that every Greek is out for themselves, for example, than I am wont to believe what was said about cooking the books. We all know the legacy of Goldman Sachs; both of those tax collectors had evidence, either in personal experience or documentation, to show the flagrant disregard for the economy. To say that the situation in Greece today is the fault of its people is correct, but put yourself in their shoes. Imagine the sense of injustice you would feel at having the rug pulled from under you like this, with no promises of actually remedying the situation.

This is where the modicum of sympathy that I do have comes into play. Greece is in desperate need of help, but it is prideful beyond belief. It's like a wounded lion, roaring and biting at anyone who tries to get close, while it slowly bleeds to death. Sooner or later, the rest of Europe will be able to come in and place the country on metaphorical life support. But as the author of that article put it so succinctly, will it all be too little, too late?[/colour]

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I recall reading a while ago that the Greeks were essentially wanting to have their cake and eat it. And then getting offended when the rest of Europe imposes standards on helping them out of their rut. The tricky part is that the situation is kind of being hijacked by unrelated (that is, political rather than economic) interests, which rather fogs up any attempt to solve the problem. After all, it's easy to take shots at the guy in charge, but can his opponents promise anything better?

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The tricky part is that the situation is kind of being hijacked by unrelated (that is, political rather than economic) interests, ...

As Rahm Emanual said, a good politician should never let a serious crisis go to waste.

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  • 2 weeks later...

Wolf, I'm not sure your conclusions quite hold.

It may be that a large proportion of the economy was 'off the books' (there are black markets, informal economies, etc. everywhere else too, mind). When this sector grows big enough, it becomes difficult to pretend it isn't there. I would imagine many Greeks would like to live in a country that didn't have many of these problems, but we . I should also point out that there will be significant variation within the country between those who benefitted from underreporting and those who didn't (many working class people won't have such high incomes to underreport, meanwhile they will have been suffering from the food inflation much more), while the austerity is going to be financially most difficult for the people with the least in savings and for those most dependant on public services. As individuals, it's hard to do a lot about that.

"And what did they do? Blamed everyone in sight who wasn't Greek."

I remember listening to someone who'd come to the UK after the protests in 2010. It was fairly clear then that people mostly blamed politicians, and I suspect anti-German stuff is probably noise being generated to deflect blame. Maybe it's working, I don't know.

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  • 2 weeks later...

I am truly shocked - by the fact that the article is absolutely full of sh*t. Let's have a quick overview of what it says, shall we?

1. "Greek public sector workers are corrupt, don't do their jobs, retire too early and get paid more than they deserve." No evidence provided. NONE. The author doesn't even bother to come up with some actual numbers. How much do they get paid, exactly? How does it compare with, say, German public sector workers? (hint: the Greek ones get paid a lot less) How much vacation time do they get per year, on average? (hint: the Germans get more) What is the average retirement age, precisely? I said average, not the special early retirement age for a few workers that is supposed to get you outraged.

2. "There is massive tax evasion in Greece." A little bit of evidence provided, although all of it based on the words of two tax collectors. But fair enough, this is pretty widely known. There is indeed widespread tax evasion in Greece. That doesn't mean everyone does it. It doesn't even mean that most people do it. Just a few tax-evading rich people are enough to leave a very big hole in the state budget. I see no reason to believe that "the Greeks did it to themselves" - I see every reason to believe that some Greeks (some Greek capitalists, to be exact) screwed other Greeks by failing to pay their taxes.

3. By far the largest part of the article is dedicated to narrating in excruciating detail the author's trip to a monastery on Mount Athos, and sharing his ignorant, offensive, xenophobic opinions of the Orthodox Church and its religious rites. He reveals himself to be filled with contempt not only for these particular monks and this particular faith, but for the ascetic life in general. We are told this one monastery is very corrupt, although the author manages to uncover absolutely no sign of the monks doing anything wrong. But fine, maybe they are as corrupt as he claims. So.. what? It's just one monastery. It is utterly irrelevant for the Greek economy in general.

So, in brief, some parts of the article merely restate what was already known (tax evasion is a big problem in Greece), and other parts just give us the author's unsubstantiated - and in some cases borderline racist - opinions. Worthless.

If he were interested in doing some real investigative journalism, perhaps he should try to find out who, precisely, are those entities that hold Greek bonds. Who does Greece owe money to? The mainstream media is surprisingly silent about this.

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The current economic crisis in Greece may be a crisis for the average Greek citizen but for those who “own” the Greek Debt it may be a windfall. Sadly, current world economic situation may be somewhat similar to the economic situation before WWII. Hopefully, history will not repeat itself with a World War following a period of economic instability. The following selection from the book entitled, Tragedy and Hope: A History of the World in Our Time, by Carroll Quigley illustrates how the love of money is truly the root of all evil.

The problem of public debts arose from the fact that as money (credit) was created, it was usually made in such a way that it was not in the control of the state but was in the control of private financial institutions which demanded real wealth at some future date for the creation of claims on wealth in the present. The problem of public debt could have been met in one or more of several fashions:

I increasing the amount of real wealth...

II by devaluation...

III by repudiation...

IV by taxation...

IV by the issuance of fiat money and the payment of the debt by such


Efforts to pay the public debt by fiat money would have made the inflation problem worse.

Orthodox theory rejected fiat money as solutions to the problem. In Britain, the currency notes which had been used to supplement bank notes were retired and credit was curtailed by raising the discount rate to panic level. The results were horrible. Business activity fell drastically and unemployment rose to well over a million and a half. The outcome was a great wave of strikes and industrial unrest. To maintain the gold reserve at all, it was necessary to keep the discount rate at a level so high (4.5% or more) that business activity was discouraged. As a result of this financial policy, Britain found herself faced with deflation and depression for the whole period of 1920-1923. The number of unemployed averaged about 1.75 millions for each of the thirteen years of 1921-1932 and reached 3 million in 1931. . .

Financial capitalism had little interest in goods at all, but was concerned entirely with claims on wealth - stocks, bonds, mortgages, insurance, proxies, interest rates, and such. It built railroads in order to sell securities, not to transport goods. Corporations were built upon corporations in the form of holding companies so that securities were issued in huge quantities bringing profitable fees and commissions to financial capitalists without any increase in economic production whatever. Indeed, these financial capitalists discovered that they could not only make killings out of the issuing of such securities,they could also make killings out of the bankruptcy of such corporations through the fees and commissions of reorganization. A very pleasant cycle of flotation, bankruptcy, flotation, bankruptcy began to be practiced by these financial capitalists. The more excessive the flotation, the greater the profits and the more imminent the bankruptcy. The more frequent the bankruptcy, the greater the profits of reorganization and the sooner the opportunity of another excessive flotation.

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All that shocks me is the apparent intellectual laziness of your post, Edric. Frankly, I'm not even sure you read the article.

1. You jingoistically phrased the question as: "Greek public sector workers are corrupt, don't do their jobs, retire too early and get paid more than they deserve." And then went on to say that the article was a little lacking in its proof: "No evidence provided. NONE. " You felt so strongly about it that you had to italicize, capitalize, and boldface the statement. And then repeat it. One would think you'd know what you were talking about? Right? Well, then you said this: "The author doesn't even bother to come up with some actual numbers." Actually, they did: 65,000 euro for the average state railroad worker. That's not an inference, they said it: "The average state railroad employee earns 65,000 euros a year." Then you said: "How does it compare with, say, German public sector workers? (hint: the Greek ones get paid a lot less) [iNSERTION: hint, don't confuse reported income with actual income, see below, and read the WSJ article] How much vacation time do they get per year, on average?" I don't know what German public sector workers make, because you failed to provide me with any information. That's funny, because that's exactly what you accused me of doing, only you were wrong about that. However, I do know how it compares to the Greek private sector (because the article told me): "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." I also know that it's roughly 120% more than the average Amtrak salary, which I believe is a comparable industry. I've shown you a bunch of numbers, would you like to show me any? Because, if I may, I think your point 1 boils down to "they haven't shown me enough evidence." Well, I think they have. You're of course free to disagree, but if you don't know how it compares to other European economies, or even American economies, then you're just blowing smoke, right? Why don't you find out and tell me, and then we can have a substantive discussion on point 1. Otherwise, I just feel that this paragraph of yours was one of the most capricious and weasely things I've seen you do.*(see below)

2. All you do here is say you aren't convinced by the evidence provided in the article, but then go on to say that you believe the premise because it's basically the word-on-the-street? Okay... I guess I accept your grudging concession? This is a good overview of the Greek "shadow economy," which represents income that's removed from the grid, and is the largest in Europe (representing more than a quarter of Greece's GDP... this is significant, since Greece is anywhere from 1/4 to 1/7 the size of the other economies on the list: it's only 10 million people). I suppose we'll never know who was evading what, but I think it's clear that evasion is widespread. Certainly it includes the super-rich, but according to the Vanity Fair piece as well as the WSJ piece, it includes middle-income earners as well. I think the "word on the street" as I know it is that roughly 55% of Greeks manage to evade the majority of their income tax. From what I know of Eastern European culture, I'm certain that everyone cheats to some degree (Russia, for example, had a 56% tax evasion rate for at least one year in the past decade).

But, whatever. You wanted to make a crack at "Greek capitalists", which is as hilarious to me as it is dubious (In what sense? They live in a market economy, aren't they all capitalists? Oh, you only mean the bad ones? Oh, yeah, I guess that's totally fair of you to do). I'll concede that it's difficult to know the extent of evasion, because the whole point here is that people are moving income off the grid. However, I think there's a lot of evidence that says the evasion is widespread, and, frankly, I think you're just ignoring that and providing no evidence of your own while accusing me of doing the same. I think that's unfair. I think the better argument you could have made here, that was made by others above in this thread, is that, "if everyone cheats, and you have to cheat to survive, is it really wrong?" That's an actual debate. I regret that you denied me that.

3. Yeah, he was pretty fascinated with the monks. I don't know why, and I don't think it was the most compelling part of the article. However, I'll admit that I think he's right about the monastaries being "on-the-take" from the government and that being a big deal. Being moderately educated in history, I do know (and can confirm) that the monks were always seen as the "guys on the side of the little guy" throughout the 20th century. During the wars, the occupation, the depression, etc. It's just sad to see them participating in the fleecing of their countrymen. If you want to call this author's treatment racist, then by all means, please do, but, if you wouldn't mind, could you quote what you think was racist and explain why? Like how I did with Eras way back when? I would really appreciate that, because that might elevate this to something more than merely you sharing your subjective impressions for all their worth.

Looking forward to hearing back from you.

*EDIT: Look, this forum is only useful to me if you guys tell me things that I can't find elsewhere. Sometimes that's opinion, othertimes it's fact. If I give you an article and some data, and you think it's wrong, you can't just tell me you thought it was wrong. Otherwise what I think is good evidence just sits there looking right and I don't know what to make of it or you. What you need to do is tell me why the article is wrong. If you think that German state workers make tons more, then tell me what they make, and tell me why those figures are accurate. If you think that information is relevant to Greece, tell me why: tell me how their wages compare to the German private sector. Tell me Germany's national debt. Do the work. Yes, I suppose I could do it all myself, but I did the first half of the research here, and so far, the only half of the research. I'm not writing a paper that you get to criticize: ideally we are both collaborating on a product. In that sense, making a comment like "hint: it's a lot more" actually looks more and more to me like utter douchebaggery. What? Do you not know and just want to seem like you do? Or do you know, but you won't tell me? Those seem like the only interpretations to me. Come on, do your part. If Vanity Fair is straight-up lying and the world is wrong about the Greek debt crisis, I really want to know. Seriously. Even if every word I said above is wrong, if you fairly demonstrate that, I'm not going to like you any less. But saying that it is and not doing the work obviously will have the opposite result.

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The following global debt clock may provide some data useful for this discussion. In the year 2000, Greece started out with a public debt (PD) as % of GDP ratio of 116.5%. By way of comparison, in the year 2000 Germany had at 59.1 % PD to GDP ratio and the USA had a 31.6% PD to GDP ratio. By the year 2011 Greece has a 134.2 PD to GDP ratio, Germany has a 76.7% PD to GDP ratio and the USA has a 67.7% PD to GDP ratio. Greece is clearly over it’s head in debt as indicated by having an economy over the last ten years where the PD is greater than it’s GDP. If Greece’s accumulated debt has been used mostly to prop up a welfare state then there’s little chance that Greece will recover economically on it’s own. Germany and the USA hopefully have been accumulating debt towards building up infrastructure, technology, and manufacturing sectors which will have the possibility of boosting the GDP of each respective country in the future. Otherwise, Germany and the USA may be following the path of Greece in having a public debt which exceeds the GDP.

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Some estimates have that the Greek 2004 Olympics resulted in a cost of 15 billion dollars, or 4% of Greece's GDP. Luckily, the Greeks were able to have a part of this debt held by French banks. Unfortunately for the French, they are starting to lose money by the inability of the Greeks to pay off their debt.

Societe Generale profits hit by Greek debt writedown

Second-quarter profits at Societe Generale, France's second-biggest bank, have fallen as a result of its exposure to Greek sovereign debt.


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  • 5 months later...

''The retirement age for Greeks is 55 for men; 50 for women''

This at least would appear to be verifiably false. According to the OECD*, the ''normal retirement age'' (I assume that refers to an average or some such) of Greeks is 65.


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Wolf, I believe I've owed you a reply for some time now. As I'm sure you've been able to guess from my general lack of posting since last spring, 2011 has been a rather difficult year for me (not bad, just difficult). But now I'm back, and I'm looking forward to restarting some political conversations in this place.

My post from last summer which you found so objectionable was merely a first reaction to a woefully sub-par article. You are correct that I didn't really take the time to properly explain why the article was wrong. That's because I didn't have the time. But I think now I do. While I write my reply to your post, I invite you to read this excellent report on the eurozone debt crisis, which does a great job of explaining the situation:


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The article does not strike me as being of quality:

''He’s open, friendly, fresh-faced, and clean-shaven, and like many people at the top of the new Greek government, he comes across less as Greek than as Anglo—indeed, almost American.''

I can see how this would come across as racist. Some people may get the idea that he is trying to paint who he considers to be the good guys as non-Greeks.

I also like the picture he paints on the last page (sarcasm). The men of the west ''Spartan warriors''**, outnumbered and courageously defending against Sauron's evil hordes ''the mob''**.

Apparently Greeks are not just particularly lazy, but are also much more prone to general evil-doing than other people.

"if there were any justice in the world the Greek bankers would be in the streets marching to protest the morals of the ordinary Greek citizen"

Ahhhh. Everywhere else in the world the bankers, the proud lords of humans and elves western civilization had somehow fallen and become ring wraiths! involved in dubious deals! But of course Greece was different, if only the unwashed masses who looted and pillaged as soon as the lights went out could have followed the example of these men instead. :(

"The deputy prime minister has told us that they are looking to have at least one death, a former Greek minister had told me. They are looking for blood"*

See, if the deputy prime minister says so it must be true!

The article's language seems (to me at least) propagandistic.

As another criticism, the article appears to be devoid of sound (as in, organizations) official sources. It only has: So and so (if that, sometimes the particular individual remained anonymous) said this. It does at least include some numbers but these are often lacking.

Eg: ''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''

Right, the bolded part at the end is good. a straight up payment figure. However, that's just one job and the rest is just babbling. Knowing that the average government job pays three times as much as the average private sector jobs can only be a source of outrage when we can determine hourly pay and for this we would need to know the average private sector wage and hours worked. If the private workers are sweatshop employees then it hardly seems outrageous if the the government employees are paid 3 times as much.

The article needs lines like these:

''According to Eurostat, Greek workers work on average longer hours than the rest of Europeans. They work a 42-hour week, while the average working week in the 27 member states of the EU is 40.3 hours and within in the “Eurozone” it is 40 hours''

And on top of that, it should then provide the relevant link to confirm that, indeed, Eurostat claims this to be the case. Many articles neglect to do this, but at the very least the article should contain references to organizations so that the reader can confirm the claim for himself.

Finally, the article had too much ''story time'' stuff. I don't care about the fantastic beards of the monks or what his sources were wearing. Some of the stuff may have had some minor relevance, but it could have been provided far more concisely.

All in all, the article seemed like something out of People magazine or some such.

I can say in summary that up to Edrico's last post Wolf, the article, and Edrico have all failed to provide much in the way of evidence for any claims. In the interests of not being annoying, I will assure everyone by repeating that, yes, I did read Edrico's last post and know that he is about to put out something much more solid.

*I only sped-read the article (and ignored the monastery bits entirely) as it was very boring and long-winded. Way too much fluff.

**The author's exact words.

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Edric: I appreciate it, but, I mean, there's really no need. The heat of the moment has passed, and a lot has elapsed since then. The Greek debt crisis has been discussed ad nauseam and I think there's very little doubt that much of the blame really does rest squarely on Greek shoulders. I mean, for Heaven's sake, the country has the world's 23rd largest military but a population of only roughly 10 million. They've got almost as many main battle tanks as Israel for crying out loud and--if I'm not mistaken--Greece ought to be primarily a maritime power. No wonder the Germans are furious.

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What does any of that have to do with the average Greek? I doubt the average Greek would mind a downsizing of their army as opposed to an economic crisis or massive public cuts. Of course, if your going to play the ''modern democracy is representative'' card then its different I suppose.

If we're just speaking about the government being terrible, well most likely I'd be liable to agree, since in terms of serving its people I've very rarely (if ever) been impressed with any government.

p.s: Wow, both Edric O and Wolf. I'm very surprised that anybody was still watching. I guess the will to maintain a place for sensible discussion is still very strong.

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I'm quite interested in the Greek military. On the one hand, it probably should get a downsize - military conflict with Turkey any time soon seems very unlikely. On the other, what would the reaction of the military be to any potential reduction of its power? I remember several months ago there was a shakeup among the highest levels of the military, and several former and current high-ranking military officers publicly and loudly protested any cuts in the defence budget.

I'm not entertaining the thought of a Greek military coup being probable at all, but recent history might explain the reticence of Greece's political leaders to take away money from the armed forces. Perhaps it's an in-grained matter of national pride or feeling of safety - a strong military to guard against potential attack by an increasingly powerful Turkey, the left-overs of the junta now holding powerful posts and holding out against cuts...

I have to agree with Wolf about Greeks - ordinary, regular Greeks - having to shoulder a good deal of responsibility for this. I see parallels with Latvia's boom and bust - easy, cheap credit for many Latvian mortgages(ours was a real-estate bubble) from Scandinavian banks. Sure, the banks "enabled" and encouraged reckless credit-taking, but many people simply didn't think things through. The difference is that Latvians took their punishment quite stoically - only one major riot, when about 1000 people threw bricks at the Parliament and looted alcohol stores in the center of Riga, which was and still is in marked difference to Greece. From there comes news of strikes seemingly every day that bring things to a standstill, a foolish reliance on central government handouts, and a lot of militant posturing by anarchists and communists. What the protesters don't seem ready to do, though, is lay down their lives in pursuit of a revolution or radical change. A few years ago, I lapped up the riot porn coming out of Greece and other places. Now it just seems so tired and worn out. I can't help but notice the differences in protests and activism between Greece and its neighbours across the sea. Egyptians got rid of their dictator after just over two weeks of bloody uprisings... Whereas the Greeks are obviously very angry, but it's just a morass of constant strikes, cat-and-mouse games between student rock-throwers and riot police, and general chaos that rumbles on and on.

Anyway, the Latvian government that came to power in 2009 decided quite quickly that it was going to play by IMF/EU rules and enacted deeply punishing cuts. We had the highest rate of unemployment in the EU, at around 22%, the wages of public servants were cut by roughly 25%... And this was all generally accepted by the public at large. For better or for worse - depends on whether you think meekly submitting to the demands of an institution like the IMF is a good or bad thing. Now, though, we're slowly but steadily recuperating.

I suppose much of it is just a difference of accepted tactics and temperaments, but the Greeks should temper their expectations of a good, easy life and exchange them for something much more unpleasant and realistic... And get on with it. Greece's economy... Well, there's not much of it. Olive oil, shipping, and tourism. Can't help thinking they've been living beyond their means for too long, and the hangover has come around.

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''The retirement age for Greeks is 55 for men; 50 for women''

This at least would appear to be verifiably false. According to the OECD*, the ''normal retirement age'' (I assume that refers to an average or some such) of Greeks is 65.


In Italy was 40, and still both taxes and government cost were lower. God know in which hole they are throwing our money.

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I suppose much of it is just a difference of accepted tactics and temperaments, but the Greeks should temper their expectations of a good, easy life and exchange them for something much more unpleasant and realistic... And get on with it. Greece's economy... Well, there's not much of it. Olive oil, shipping, and tourism. Can't help thinking they've been living beyond their means for too long, and the hangover has come around.

I disagree completely (and since Wolf has made basically the same point, this post is in response to him, too).

There is really no such thing as "living beyond our means," when you think about it. Everything that is bought must first be produced. And everything that was produced yesterday can be produced again tomorrow. Unless some kind of natural disaster or war destroyed factories or land or killed workers or otherwise reduced our productive capacities, there is no objective reason why we need to reduce our consumption.

We are used to thinking of money as the resource that must be expended to produce things. But this is an illusion. Money is just a social convention. The actual resources that must be expended to produce things are human labour and raw materials. And the thing is, although Greece (and others) have no money, they still have the same labour and raw materials as before.

There was no natural disaster. There was no war. All the factories and workers that produced things for Greece three years ago are still there, still ready to produce the same things as before. So why is there any need for the Greeks to lower their living standards? In fact, why is there any need for anyone to have lower living standards today than they did in 2007? All the productive capacity we had in the world in 2007 is still there. There is no objective reason why we couldn't produce and consume just as much as we used to (if not more).

In other words: there is no physical problem. The "hardware" of the economy is doing just fine. The problem is with the "software" - the way the global economy is organized, the capitalist system.

Here is what happened. For about three decades after the end of World War 2, Western Europe, North America and Japan had a mixed economic system with widespread regulation of business, high taxes, high public expenditures, a strong social safety net, free or almost-free higher education, strong unions, and (in Europe) state ownership of major sectors of the economy. This kind of social democratic or state-directed capitalism generated the fastest rise in living standards for working people in the history of the West. This was the period when the modern notion of the nuclear family appeared, because newly-married working class people were able for the first time to afford new homes away from their parents. This was the period when ordinary people started buying refrigerators, washing machines, vacuum cleaners, television sets, and cars. It was the birth of consumer society.

Before WW2, working class people in the West had been a brutally oppressed underclass, not being able to afford much beyond food and basic necessities. Hatred of capitalism was widespread among workers, and even capitalism's defenders generally accepted the idea that the working class would sooner or later rise up against them. After WW2, thanks to state intervention and redistribution, all of that changed. The working class was offered the carrot instead of being beaten with the stick. Working people in the West started believing that capitalism could give them a comfortable and relatively affluent life, and a secure retirement. The capitalists successfully averted a communist revolution.

In essence, the capitalists made a deal with the workers after WW2: "We will give you consumer society and constantly rising living standards, in exchange for you giving up thoughts of revolution."

This deal was put in danger in the late 70s and early 80s, when the age of state-driven capitalism ended and neoliberal capitalism took its place. Countless regulations were eliminated, taxes on the rich were drastically cut, state-owned companies were privatized, unions were crushed (sometimes violently), and the social safety net was gradually shredded. The size and strength of the banking sector grew by leaps and bounds, secure lifetime jobs disappeared, and inequality soared. But the workers still expected rising living standards. And the capitalists knew that they could not afford to abandon consumer society, because (1) angry workers might put revolution back on the table, and (2) without mass consumption, demand for many products would collapse, and profits would suffer. But how could the workers be given rising living standards while their real incomes stagnated or declined? The banks provided the answer: borrow, borrow, borrow!

Debt of all kinds has exploded in the age of neoliberal capitalism. Debt has been used for the past 30 years to prop up consumer demand and therefore the entire capitalist system itself. In some countries, such as the US, most of the borrowing was done by individuals. In other countries, such as Greece, the government borrowed in order to fill the hole created by cutting taxes on the rich. But the main trend was the same everywhere: Between WW2 and 1980, the rich had agreed to transfer some of their wealth back to the workers, in order to stimulate demand and avoid social unrest. After 1980, they replaced transferring with lending. The rich still gave some of their money back to the workers, for the same reasons as before, but now they expected the workers or their governments to pay them back (with interest).

This strategy has now reached its inevitable end. The demands of the rich to be paid back can only be met through massive cuts in the living standards of the workers. In the US, where so much debt is individual, these cuts often come in the form of people being kicked out of their homes because they can't pay mortgages, or having to drop out of college, or being unable to afford health care. In Greece (and much of Europe), where the government took on a lot of the debt, governments are the ones who can no longer afford to pay back the rich and must therefore cut basic services.

So let us be clear here. What is happening in Greece and the entire world is that the rich are telling working people, "the deal we made with your grandparents after WW2 is over. We allowed you to enjoy rising living standards for a while. No more. From now on, most of the value that you used to consume will be given to us instead."

In capitalism, a small rich minority controls most of the wealth. For sixty years, they've been willing to share a large chunk of that wealth with us in one form or another. Now they want to keep it all for themselves. That is the real problem in Greece. As I said in the beginning of this post, the physical "hardware" of the economy is doing just fine. We could all continue to produce and consume as we did before 2007, if we really wanted to. But the capitalists - or, to be more specific, the banks - refuse to allow us to do so.

The solution is not to say to them, "ok, fine, we'll pay, we'll do whatever you ask." The solution is to remind the capitalists that the working class is the producer of all wealth and that the money we borrowed from them should have been rightfully ours in the first place. The solution is to cancel all debts and tell the banks to shove it.

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I wouldn't be so sure about the usefulness of pure marxist dichotomy in this problem. The problem with Greece seems to me to be in consumption, not in government's unproductive investments.

When I borrow to start a business, the debtor rightly expects from me to repay him; if I'm succesful, my productivity raises and I'm able to repay the debt. Problem with Greece is that it didn't use the money for improvement of its productivity. It borrowed on the EU market, but couldn't produce wares capable of competition there. Yes, that means sometimes bonuses for big companies with know-how and modern technologies too. You can have thousand factories, but if they don't improve their products, you can't have wage increases. Yet, what does actually Greece produce? Baklava? You get it ten-times cheaper across the border in Kjustendil or Edirne. Greece couldn't improve its private sector, so the state absorbed many persons unable to find or start to work. Immense administrative, low retirement age, with wages and rents on a "western" level, despite economy's unproductivity. The only argument against the cuts, ad nauseam repeated by Greek politicians, is that their voters won't accept this. The "workers" have their say, I think, they are thus the cause of Greek turmoil. They have chance to 1.) become like Bulgaria, an austere state with minimal welfare, but open for EU support, or 2.) like Syria and damage the whole EU.

In Greece, the problem is populism and total irresponsibility towards the financial resources. People think the state is omnipotent and ignore simple mathematics.

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I wouldn't be so sure about the usefulness of pure marxist dichotomy in this problem. The problem with Greece seems to me to be in consumption, not in government's unproductive investments.

Really, this would imply otherwise: http://www.zerohedge.com/news/greece-spends-bailout-cash-european-military-purchases

As if the people currently have any real power. Governments are usually in control of the finances of a country (ie. not the people), especially in the case of Greece.

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''I wouldn't be so sure about the usefulness of pure marxist dichotomy in this problem. The problem with Greece seems to me to be in consumption, not in government's unproductive investments.''

The problem is Greece's consumption? What part of Edric O's post did you read exactly, apparently it was the imaginary part that speaks about unproductive government investments.

Seems like you're just speaking random nonsense to me.

''It borrowed on the EU market, but couldn't produce wares capable of competition there.''

''Yet, what does actually Greece produce? Baklava? You get it ten-times cheaper across the border in Kjustendil or Edirne. Greece couldn't improve its private sector, so the state absorbed many persons unable to find or start to work.''

And this is the fault of the Greek on the street how? Might want to re-familiarize yourself with the topic.

''The "workers" have their say, I think, they are thus the cause of Greek turmoil''

And what gives you that idea? The Greek government has been the loyal lap dog of the Troika, who, it is said, even appointed their new prime minister (I don't know much about the prime minister business to be honest)

''low retirement age, with wages and rents on a "western" level, despite economy's unproductivity''

Low retirement age? I believe we've been through that. While I'm on the topic, here are some facts supported by reputable organizations (mostly anyway).... ya know, if anyone is interested in that sort of thing:

'' Public spending: according to the Center for American Progress, public spending in Greece is only 44.6% of GDP. This is lower than the EU average, lower than Germany’s 46.6% and considerably lower than Sweden’s 55%.

Tax collection: the real problem is not social expenditure on the poor but the lack of tax collection from the rich. From 2001 to 2007, Greece collected only an average of 39.4% of GDP in taxes, compared to the EU 44.4% average.

Hours worked per week: According to Eurostat data of 2005, the Greeks worked 43.1 hours per week (compared to 35.7 hours in so-called ‘thrifty’ Germany, with its much-touted ‘Protestant work ethic’).

Hours worked per year: More recent OECD data shows the Greeks to work an average of 2,119 hours per year — 690 hours more than the average German, 467 more than the average Brit and 356 more than the OECD average. In fact, out of all OECD countries, only the Koreans work more.

Amount of paid holidays: The paid leave entitlement in Greece is 23 days per year. This is actually below the EU average, and significantly lower than the minimum of 28 days in the UK and 30 (!) days in Germany.

Retirement age: Again, Eurostat data from 2005, shows the average age of exit from the labour force in Greece to be 61.7. This was higher than in Germany, France or Italy and higher than the EU27 average. It is being raised even further now as a part of the EU-IMF bailout conditions.

According to Eurostat, even before crisis, in 2008, one in five Greeks (among them almost half a million children) lived under the formal poverty line of 500 euros per month.

An independent survey by Kapa Research and the London School of Economics found even worse data: a third of the Greek population now live in formal poverty (and mind you: this was in 2007 – it’s actually gotten a lot worse since as a result of these draconian austerity measures).

Every child in Greece is born with a 40,000 euro debt on their name.

Greece’s youth are now referred to in the country as Generation 700: because that’s the maximum monthly wage that young Greeks will typically make – that is, if they are lucky enough to find a job: according to the Financial Times, over 35 percent of young Greeks is out of work right now.

The so-called 13th and 14th salaries (Christmas, Easter and summer bonuses) are not additional salaries. As a Greek reader on this blog, Amalia, pointed out: “Greeks do not get two extra salaries a year; their annual salary is simply divided by 14 and they get two installments at Christmas, one and half at Easter and one and a half sometime in the summer.”

The Dutch get a 13th month worth of salary and Austria has a 14th month. Since these countries are not experiencing a similar budget crisis, this simply can’t be the cause of Greece’s debt.

The bottomline is: it doesn’t matter in how many installments you receive your salary (whether it’s in 12, 13, 14 or 2,000 parts); what matters is your annual salary. As long as you make less than 6,000 euros a year (as is the case for 20 percent of Greeks) you live in poverty — period.

Living costs in Greece are the highest of all of Europe.

As a result of this lethal combination of low wages and high living costs, millions of Greeks are forced to work two or three jobs just to survive.

Since last year’s bailout, the Greek economy contracted almost 5%, 50,000 to 65,000 business have been closed, unemployment increased by 400,000, industrial activity declined by 11%, the construction sector contracted by 73%. Partly as a result, suicide rates are reported to have nearly tripled.

All in all, this is a humanitarian tragedy of unprecedented proportions. How could Mr. O’Brady possibly keep a straight face arguing that the people experiencing all of the above, are somehow spoilt children?

First of all, the bailout is not a handout: the Greek people don’t actually benefit from the EU-IMF bailout. Even if the bailout money really did go to the Greeks, this wouldn’t necessarily be beneficial for the Greek people at all. After all, the bailout is a loan for which the EU and IMF charge an exorbitant 8 percent interest rate, meaning northern European tax payers and the IMF should make a handsome profit from their so-called ‘rescue aid’, while the Greeks will only be further indebted by it.

The bailout serves not Greece but Europe’s insolvent banks: as former IMF Chief Economist Kenneth Rogoff pointed out last year already, “a lot of European banks are insolvent.” The real problem of the European crisis isn’t the fiscal crisis in the periphery, it’s the financial crisis in the banking sector of the core.

Private bank exposure to Greek sovereign debt: BNP Paribas: 5bn – 7 percent of equity; Société Générale: 2,5bn – 6 percent of equity; Postbank: 1,2bn – 21 percent of equity; Kommerzbank: 2,9bn – 27 percent of total equity. That’s just a handful. More data here.

Central Bank exposure to Greek debt: the European Central Bank has 190bn of exposure to Greek debt.

ECB close to insolvency: according to a recent report by Open Europe, asset losses as small as 4.25% could tip the ECB into insolvency. Greek default alone would chip 2.35% to 3.47% off of the ECB’s capital base. Add in a Portuguese or Irish default and you have the European Central Bank – the flagship of European capitalism – literally going bankrupt.''

Courtesy of Jerome E. Roos, who somehow managed to actually dig this shit up.


The Eurostat, OECD, Open Europe, Financial times, e.t.c links are all on the page.

''The actual resources that must be expended to produce things are human labour and raw materials''

Even raw materials can be put in terms of human labour. It's not like we'll ever actually run out of anything, it just takes more and more to get to it. Taken together with technological advance, this can make raw resource acquisition either more or less expensive.

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