The Greeks Are Being Unfairly Maligned by Global Financiers: The Truth Is Very Different

Beyond the anti-Greek media campaign lies the story of a weary people caught between a corrupt political system and rapacious financiers. Sound familiar?
October 17, 2011  |

Photo Credit: AFP
Yiannis manages a small inn in Crete. The 50-year-old from Heraklion with salt-and-pepper hair and a hefty moustache has a son just graduating from college.

“We tell the young people to leave,” he says quietly. “There’s nothing for them here.” Protests and strikes are sweeping the nation, but Yiannis doesn’t like talking about the economy. I sense a feeling of pride holding him back. But he does offer this insight: “We know that it is the ordinary people, not the rich and the powerful, who pay for this.”

The Lazy Greek Meme

Greece is a land of ancient myth. But more recent myths have made Greeks like Yiannis cringe when foreigners start asking questions.

Greeks are lazy. They don’t work. They’re profligates who are taking down Europe. The caricature has become so common that a recent TV commercial in Slovakia used it to sell beer, drawing a contrast between the virtuous Slovak and the paunchy Greek indulging himself on a beach.

Most foreigners know Greece from holidays spent lolling on its beaches and drifting around its magical ruins. You could easily take it for granted that everybody here is just chilling out. They aren’t. The Greek labor force, comprising 5 million souls, works the second highest number of hours per year on average among countries in the Organization for Economic Development (OECD), right after South Korea. Greeks work 42 hours per week, while the industrious Germans toil just 36.

The average Greek worker earns a bit over $1,000 a month. Private sector employees are the most underpaid in the EU. Even before the harsh austerity measures imposed by the EU and the IMF, the Greeks had already cut the real average wages in the private sector to 1984 levels. This week the Greek parliament is expected to vote on measures that would place 30,000 public sector workers in a “labor reserve” at slashed pay – up to 40 percent.

Greeks retire a bit later than the European average. And the average pension, $990, is less than that of Ireland, Spain, Belgium, and the Netherlands. Thirty percent of the labor force works with zero Social Security or protections, while in the rest of the EU only 5-10 percent of workers are in this precarious situation.

So much for the myth of the overpaid, lazy Greek.

The reality is simple, though rarely admitted – except maybe by Yiannis, who seems to know exactly what’s happening. The “bailout” of Greece is really a bailout of big European banks. A game of smoke and mirrors leads us to think that Greek indolence led to financial ruin. The Greeks have done some things wrong, to be sure. But it was a dangerous mix of stupid economic theories and high-flying finance, fueled by a corrupt government, that exploded the economy. If all this sounds sickeningly familiar, it should. We’re witnessing Round 2 of the Great Global Shakedown by the banks.

Mini-History of the Modern Greek Economy

In modern history, southern economies have typically been weaker than those in the north. They industrialized later and only fitfully; large landowners often dominated them far into the 20th century. Economic growth was painful, marked by big deficits, bloody political conflicts and instability. You can see this in the history of Italy, Spain, and even France to a degree, but especially in Greece. The Greeks got socked in WWII and then creamed again by a brutal civil war (1946–1949), in which American military aid to the Greek governmental army ensured the defeat of the Greek Communist Party.

After WWII, the Truman Doctrine and the Marshall Plan determined relations between the U.S. and Europe. The economic recovery of Germany—designed to benefit American multinationals like IBM, Ford and General Motors – was a high priority. (Watch a fascinating lecture by economist Joseph Haveli here.) Greece mattered to the U.S. as a strategic barrier against the USSR in the Cold War, so it decided to support Greece with economic and military aid, fearing that another communist domino would fall.

Italy’s Ambitious Plans to Recover Billions From Tax Evaders

Italian Prime Minister, Silvio Berlusconi

Italian Prime Minister, Silvio Berlusconi

Italian Prime Minister Silvio Berlusconi raised eyebrows back in 2004 when he publicly philosophized over whether Italy’s heavy taxes made tax evasion a “natural right.”

Now that Italy is staring into the abyss of the euro zone debt crisis, Mr. Berlusconi is no longer waxing philosophical.

Measures aimed at fighting tax evasion are a central plank in Rome’s efforts to balance Italy’s budget by 2013 and appease the European Central Bank, which is currently propping up the Italian bond market.

Billions in revenue will be recovered by cracking down on Italy’s infamous tax-evaders, the government argues, plugging large holes that emerged in Rome’s €45.5 billion austerity budget after the government scrapped politically unpalatable proposals, including tax increases and a pension overhaul.

“The problem is that we have an unsustainable fiscal pressure weighing on the official side of the country”, Industry Minister Paolo Romani said in a recent interview at the Ambrosetti conference in Northern Italy. “We have to get €240 billion in phantom income back into official circulation, which means €120 billion in evaded taxes,” he added.

Economy Minister Giulio Tremonti said he expects to recover from tax evasion €700 million in 2012 and €1.6 billion in 2013, by introducing prison sentences for evaders and by forcing tax payers to provide more detailed banking information with their tax returns.

Speaking at the Ambrosetti conference, Mr. Tremonti noted that only 796 people in Italy declared incomes above €1 million last year while little more than 3,300 people earned more than €500,000.

Analysts and European Union top brass question whether Italy is betting too heavily on its ability to rein in tax evaders.

Similar policies have fallen short of their revenue-boosting goals in other countries, such as Greece, because the effectiveness of anti-evasion measures are hard to predict. Measures such as Italy’s jettisoned plan to levy a 5% tax on people who earn more than €90,000 tend to deliver more reliable results, because they target salaried workers who can’t hide their income from the tax man.

The government, however, argues the fairest way to restore Italy’s fiscal health is to simply to make the chronic evaders pay up, rather than levying heavier taxes on those who have already borne the brunt of Italy’s fiscal burdens.

That rationale offers a new spin on Mr. Berlusconi’s past musings on Italian-style fiscal justice. In his 2004 address to Italy’s tax police, the billionaire media mogul declared:

“There’s a norm of natural right that says if the state asks you for a third of your hard-earned money, the request seems right and you’ll give it in exchange for state services. But if the state asks you for more, or much more, you’re being bullied. Thus, you focus on finding ways to avoid–or even evade–that feel in harmony with your inner sense of morality, that don’t make you feel guilty.”

United States Students Drown in a Sea of Debt

American university students are beginning the new year with a mountain of debt. There is now $850bn owed in outstanding tuition costs and paying back the money is an ongoing challenge.

Two in every three American students graduate with loans outstanding, and the current debt is 11 times the total it was just two decades ago.

The average yearly cost of a bachelor’s degree in the US is between $5 000 and $43 000, compared to just over $5 000 in Canada and $1 300 in much of the European Union.

Experts say a college degree is an important investment, but in a difficult job market it is an investment that could take a lifetime to pay off.

Al Jazeera‘s Tom Ackerman reports.

 

For more about this subject watch this compelling documentary called College  Conspiracy.

The Future of Europe: A Stronger Union or a Smaller One?

european union 2011

The E.U. logo reflects in a window opposite the European Central Bank's headquarters in Frankfurt on Aug. 09, 2011

It may be called the European Union, but at least part of that name is being called into question. The market convulsions of the past week are clearly about short-term concerns, about the balance sheets of countries like Italy, Spain and even France. But they’re also about a problem with a more distant horizon: Does the E.U. still make sense in its current form?

As long as that question remains unanswered, uncertainty is bound to continue. Short-term measures, like the propping up of Spanish and Italian bonds by the European Central Bank “are quick fixes that smooth things over the short term,” says Stephen King, chief economist at HSBC in London. “But they don’t answer the questions the markets are asking: What are the political and fiscal arrangements that would create stability in the future?”

The trouble is one that was identified long ago. The E.U. has created a single currency, but it hasn’t forged a deeper political or fiscal union. The result has been the creation of a system that yokes individual countries to a single unified monetary policy, without allowing for the transfer of funds that would allow the union’s member states to ride out the distortions that setup can create. As a result, consensus is mounting that the current situation is simply not sustainable. The E.U., says a rising chorus of voices, needs either to be strengthened, or it will break apart. “What needs to happen is that there’s an honest recognition that those two choices exist and that a choice has to be made,” says King. “Pretending we’re going to muddle through just won’t work.”

The E.U., as is stands, “is a fair-weather construction,” says Emma Bonino, the vice president of the Italian Senate and a former commissioner at the E.U. “It works only in the absence of economic trouble.” The solution, she argues, is the further centralization of political power. Such a move wouldn’t have to be the creation of a single European superstate along the lines of the U.S. Bonino herself has proposed an intermediate solution, in which member states cede only some of their powers — such as foreign policy, defense and border control. Most crucially, it would include a Finance Ministry in charge of economic stabilization, and, when needed, transfers of funds from the central government to individual states. The common political identity, she argues, would make the necessary redistribution more palatable. “Help normally comes only if there is a shared feeling of belonging,” she says.

The other possibility — argued most loudly in Germany, where anger is mounting about taxpayers being forced to bail out less-responsible countries like Greece or Ireland — is to start to break the union apart. “It is better for all concerned, in particular for Greece, if the country leaves the euro temporarily,” Hans-Werner Sinn, an influential economist at the University of Munich, wrote in a recent essay. The weaker country would be free to devalue its currency and begin to regain its competitiveness. The rest of the E.U. wouldn’t be forced to come to its assistance. Even Otmar Issing, a former member of the European Central Bank and one of the driving forces behind the single currency, has warned against the rushed strengthening of the union. A proponent of European integration who once famously cautioned that “there is no example in history of a lasting monetary union that was not linked to one state,” Issing now worries that a bailout of Europe’s less solvent members would lead to “fiscal indiscipline” and even unrest by taxpayers furious over being forced to sacrifice when others didn’t.

Both choices have historical precedents, says HSBC’s King. After the collapse of the Soviet Union, countries that for decades were united under a single political authority suddenly weren’t. Many of the newly formed, previously Soviet republics first tried to keep using the Russian ruble. But soon, in a development that should give pause to anybody watching the E.U., the economic discrepancies between the various economies became too great. And the single currency fell apart.

A model for the alternative scenario is the E.U. itself. Before the introduction of the euro, the European Community had introduced a currency mechanism intended to reduce the variability in exchange rates between the various member countries. In 1992, however, that system began to fail. In a sequence of events that would seem familiar to anyone watching the markets this week, speculation sent the market into a frenzy. The U.K., which had joined the mechanism two years earlier, hastily withdrew. The other countries drew the opposite lesson and pledged to move toward closer economic integration. “The single currency wouldn’t have happened without that crisis,” says King. “The crisis reveals the choice, and the choice has to be made.”

2011 Global / World Wide Riots and Protest Have Started

Riots and protests have begun world wide! This is only the begining. With food prices skyrocketing and inflation setting in along with austerity measures in countries people have had enough. Egypt has been protesting for nine days and already the world is calling for Mubark’s resignation. As the year progresses food and fuel will increase in price along with other basic living essentials Expect to see more of this.
2011 – Riots in Assam, Meghalaya, Northeast India, 4 dead.
2011 – Riots in Arusha, Tanzania, 2 dead and nine people injured
2011 – Riots in Algeria, 2 dead and four hundred people injured in riots linked to food price increases and unemployment
2011 – Riots in Tunisia, at least 78 killed
2011 – Riots in Jos, Nigeria, more than 30 people dead
2011 – Riots in Tirana, Albania, 3 killed, 17 policemen and soldiers were injured, including three seriously, along with 22 civilians
2011 – Riots in Lebanon, following the fall of Saad Hariri‘s government
2011 – Riots in Egypt, at least six killed
2011 – Riots in Tafawa Balewa, Nigeria, 4 killed

Banks Refusing a “Haircut” Behind EU Financial Crisis

Tom Ferguson: Austerity demanded so the banks get paid, even though it deepens the global financial crisis.

Clarke and Dawe: The Greek Economy

Another satirical overview of the Greek Economy and the European Bail Out Plan for Greece.