Greek finances: as cryptic as the riddle of the Sphinx (Naxos Town)
It is the end of the summer season so no more blog posts on Greece. Except of course that the country has found itself in the eye of a financial typhoon and I am constantly being asked about it. So here is a series of blog posts on the Greek problems
It may be apt to remember that only six years ago, the country was the 2004 European Football champion, had staged an incredibly successful Olympics and even won the 2005 Eurovision Song Contest with Elena Paparizou’s ‘My Number One’. But in the same way that the Labour party’s reputation economic prudence went awry with the 2008 financial crisis, so did Greece’s mid-noughties achievements. History may well show that the 21st century started not with 9/11 but with Northern Rock.
Let’s first explode some myths.
Myth Number one: Greeks are lazy and just lie on their beaches while their northern neighbours toil away. The OECD-published statistics show that the reverse is true. In the last decade, Greeks have worked around 2,100 hours per year on average, while Germans work around 1,430, the Finns around 1,700, the French around 1,550 and the Brits (who like to believe their own half-truths) around 1,650. The problem is not that Greeks are lazy – on the contrary. The problem is that they are not as productive as their more advanced northern neighbours.
Myth Number Two: It is Greek social handouts that are the cause of the problem. This is the most ridiculous of all claims, as anyone who has been in Greece is aware that unemployment benefit is negligible and that pensions vary between €300 and €800 on average. Like in all Mediterranean countries, it is the extended family that supports older relatives. Regards health: the waiting lists in hospitals and the quality of care is such that everyone who can goes private or contributes brown envelopes to jump queues. No, the problem is that the state sector is huge and includes water companies, electricity suppliers, telecoms (until recently), chemical factories and, of course, an overbloated army.
Myth Number Three: Greeks are not taxed much. Well, the tax table is as follows:
| Annual Income | Incremental tax rate % |
| 12,000 | 0 |
| 12-16,000 | 18 |
| 16-22,000 | 24 |
| 22-26,000 | 26 |
| 26-32,000 | 32 |
| 32-40,000 | 36 |
| 40-60,000 | 38 |
| 60-100,00 | 40 |
| 100,000+ | 45 |
It is worth dwelling on the Greek tax system, though. The problem is not one of taxation. It is one of tax evasion. In 2009 only 33,000 Greeks declared an income over €100,000 and in 2010 the figure had dropped to 31,000; only 74 declared an income greater than €900,000.
This leads to some interesting stories which I will leave for Part II.
But the next post is about productivity.
Far from exploding these Greek myths, you’ve actually entrenched them.
‘Greeks are lazy’ – no they’re not, they’re just unproductive. I can spend 15 hours a day in the office, but if I’m playing Farmville on facebook the whole time I’m hardly benefiting the economy, am I?
‘Greeks social handouts are the problem’ – when your defence is that the system is riddled with corruption you’re only adding another reason to the perception that Greece is a basket case.
‘Greeks are not taxed much’ – you can claim the progressive tax rates compare well against other economies, but it counts for nothing if nobody is actually paying the tax they’re supposed to. It doesn’t matter if the top tax rate is 99% or 1% if everyone is evading it.
Greece saw a brilliant strategy by dumping the Drachma for the Euro – easy access to billions of dollars worth of loans. Now they can’t afford to pay it back, what do you think the answer being proposed is? Lend them trillions of dollars to ensure they don’t default. Umm… how are they going to afford to pay back the money they’ve loaned to pay back existing loans?
It’s no wonder governments lose the faith of their constituents when any one of us could tell them that further borrowing to service your repayments will always get you into an irreversible cycle of debt.
Time for Greece to reap what they have sowed. They are about to cop a dose of good old fashioned German pragmatism – the Greeks won’t know what’s hit them.
Hi Kingsley
This is one of several articles I intend to write so, I wish you’d written an opinion after you’ve read them all. You have however, changed the path I intended to take. Instead of talking about the taxes in the next post, I will talk about productivity and “playing Farmville on Facebook at work”, OK?
I’m extremely inspired together with your writing abilities and also with the structure on your blog. Is that this a paid subject or did you customize it yourself? Anyway stay up the excellent quality writing, it?s uncommon to see a nice blog like this one these days..