Greece first cooked its books to enter the Eurozone, then used cheap credit to live beyond its means. A profligate pact by the Greek government and the Greek people expanded the state and ran up deficits and debt. With a budget deficit of more than 15% of GDP and government debt of more than 126% of GDP, Greece is one of the most indebted countries in the world. Tax evasion is rampant.
In order to receive further loans – on which Greece seems to be hooked like an addict – the Greek government has reluctantly promised some austerity measures and economic reforms. Except for some cuts and tax rises, the reforms have mostly been empty promises so far. Oddly, Greeks still think that none of this is their fault and that austerity is not necessary. Because of this, attending one of the many strikes is much preferred over working on reforming the country, as is blaming the EU, the IMF and Germany in particular.
The Greek Finance Minister, Evangelos Venizelos, perfectly personifies the Greek attitude to austerity.
Evangelos Venizelos to Mario Draghi, head of the European Central Bank: "Move over the money, Mario!"
Evangelos Venizelos to Jean-Claude Juncker, Prime Minister of Luxembourg: "Come on, just a few million. You have so many Euros in your little country."
Evangelos Venizelos to Jean-Claude Trichet, former head of the ECB: "Austerity? Reforms? You guys in Frankfurt really have funny ideas!"
"I wonder if I can eat these two stars when nobody is watching."
Evangelos Venizelos to François Baroin, French Finance Minister: "What do you mean, you have steaks of less than half a meter? How is that enough for breakfast?"
"What a stupid meeting. No food at all!"
The Happy Hermit 
Austerity is imho no solution, as the BIP of Greece is shrinking (http://www.n-tv.de/wirtschaft/empfehlungen/fonds/Aermel-hochkrempeln-article816645.html). If you wanted to reduce deficit by austerity, you would have to decrease government spending faster than the BIP is decreasing.
Whilst this would be possible in theory, decrease in government spending will accelerate BIP shrink (less work, less paychecks), working as a positive feedback.
While I think austerity is necessary on the long term, when the economy can afford it, you can`t blame Greece for not suiciding.
(btw, like the pics ;-) )
The government could pursue austerity either by taking in less money or by paying off debts.
Lower tax revenues would mean that the money stays with private citizens and companies, and they will spend and invest. No negative effect on BIP.
Paying off the debt would reduce the debt (and thus the deficit because a large part of it is due to interest payments) and would also put money back into the Greek banks and to the private Greek bondholders, enabling them again to spend or invest.
Another pair of nails in the coffin of austerity (sry, only Ger):
http://www.taz.de/1/archiv/digitaz/artikel/?ressort=wu&dig=2012%2F01%2F28%2Fa0126&cHash=9adae32b8b
http://www.capital.de/politik/:Top-Oekonom-Robert-Skidelsky–Sparen-macht-die-Krise-schlimmer/100044225.html?p=1
makes mainstream-arguments sound inconsistent…
Whenever somebody suggests “austerity in the long term”, we all know it will never happen.
Dear Andreas, please allow me to say that your view on Greeks and the Greek situation is rather simplistic.
When you say “Greece first cooked its books to enter the Eurozone” please bear in mind that it was Greece’s politicians who did this and not Greece as a whole.
When you say “then used cheap credit to live beyond its means” bear in mind that those who lived beyond their means where mostly people who took part in the “party” set up the politicians and the banks. Yes there were surely some “ordinary citizens” too…
“A profligate pact by the Greek government and the Greek people expanded the state and ran up deficits and debt.” when there is no transparency it is impossible to know what is going on. The ones eating the big money threw a few scraps our way and there you go.
“Tax evasion is rampant.” Yes it is, especially by the rich. The poor unfortunately don’t find it so eay to tax evade, they can’t afford to!
“In order to receive further loans – on which Greece seems to be hooked like an addict – the Greek government has reluctantly promised some austerity measures and economic reforms.”
I can tell you for sure my friend those who were eating are still doing so and we are now asked to pay the bill both poor Greeks and Germans…
“Except for some cuts and tax rises, the reforms have mostly been empty promises so far” I wouldn’t call them empty exactly. My father after 36 years of hard work now has a great pension of 700 euros and he is expecting it to be cut down…
“Oddly, Greeks still think that none of this is their fault and that austerity is not necessary” You are wrong, most Greeks believe that austerity is required but first of all not only on the poor and second there should be some benefit or at least hope in the long run. Also most people recognize their fault in that they didn’t pay enough attention to what was going on.
I agree with you that strikes are not a solution especially when they are being orchstrated by the same politically connected syndicates who @@cked everything up in the first place.
I have grown up in greece and spent all my life paying my taxes properly. My daughter’s school is a wreck from 1953, falling apart and we have been asking for a new one since 1987. Do you know how many politicians villas have been built sice then? The local (new) hospital was 15 years in the making and now does not have enough staff because of austerity measures. So I go to a private doctor who thank god is a friend and says “give me what you can” I have my own business, i have paid over 400.000 euros in taxes yet my country has given me or my children nothing for this. I even had to pull my oldest daughter out of uni because i couldn;t afford the expense as i am being taxed to death.. So don’t tell me about the Greeks Andreas, look at Germany and tell me everything is so clean and correct there, or rather that is what you think…? Corrupt politicians are everywhere , the differnece is German ones look cleaner…
I agree. But there is more to it than that. It is an international con-job. First the IMF recommends, nay, imposses austerity measures and then those other organs of the same bankers, the Rating Agencies, say we will downgrade you because we do not think that you can pay your debt and by doing so your interest rate will now go up from 5% to 15% and also we think that because of austerity measures you will now not be able to stimulate the economy to grow. It is a one, two, three bunch attack.
It is standard practice for the IMF to demand real assets and resources for its fiat money lend, which of course most countries cannot repay. That how it is in Africa and other nations were the IMF and World Bank got involved, wholesale stealing of assets and resources (through privitazation) is taking place and this means that these countries can never get out of poverty. In Greece’s case, a couple of Greek idyllic islands should do. In fact, this was already banded about by Germany at the very start of this ‘crisis’. The fascists are in charge, unless you have missed it, and that is why the first targets are always socialist benefits such as welfare and pensions.
A few big facts are never mentioned.
Greece has the biggest military budget in Europe. About 56% of the national income.
Oversized, but absolute ineffective bureaucracy. About 60% of all civil servants appearing 1 time per month. To collect their paycheques.
They have no real taxsystem – except VAT -, no cadastral register:
No registration of address office. Due this lack they pay pensions for dead people – best result 120 years.
Unfortunately the real honest people are touched very hard by the austerity procedures.
Nevertehless, I do really believe: The loudest of the protesters are those who´re loosing their sinecures for doing nothing, but helped running the country to ground.
You can´t blame the EU for this maladministration.
“It’s funny to see how Greeks still prefer to blame us Germans for your mess.
We never forced you to borrow so much money and to waste it. We didn’t tell you to tolerate tax avoidance.
Well, your Finance Minister is a good representative of the Greek attitude:” https://andreasmoser.wordpress.com/2012/01/24/evangelos_venizelos/
Comment από Andreas Moser | Ιανουαρίου 24, 2012
Andreas, Greeks are funny people you should know about that! And as you know from the Greek history…after each play of tragedy…a comedy act was performed by the actors so the viewers could go home in light spirit!
So being in the country that tragedy and comedy was born…its normal for us to act funny after the tragedy we created its over…
Now its the comedy part of the play…
Yes my friend…its mainly our fault to have elected shity politicians and useless governments that were doing all kinds of unethical things and they were playing with our lifes and our dreams!!!
Just one question? Did it take Europe 40 years to figure out that the Greek debt was 500 billion euro???
They were good years for the European economy though…full of nice contracts (jobs and growth…) for…
Olympic games stuff…Airports…Bridges…Metro subway lines… telecommunications…planes…frigates…submarines…tanks…artillery units…radars…trucks…cars…appliances…wind generators…helicopters…missiles… torpedoes….C4I systems…airborne warning radars…civil planes…etc
We had the needs…you were producing and giving the loans…then you were overpricing the products…and now you are waiting for the monthly payment that doesn’t exist…
who is the funny guy now, dude???
Of course the suppliers of all this infrastructure and other stuff profited handsomely from Greece, I agree.
But nobody forced Greece to spend that much and to take up so much debt. That was a Greek decision all by itself. That’s also why the criticism about “overpricing the products” doesn’t work: Greece agreed to the prices. Again, nobody forced Greece to sign contracts at a certain price.
Nobody forced Greece to spend that much??? you are right… But he German panzers and the German air force (as a NATO and EU Allie…) didn’t come to help us from the daily threat and dispute we face from the Turkish aggression over the Aegean sea and the North boarders! We almost had a war in 1996 because of the Imia island-Aegean dispute. We need those weapons (unfortunately) for defense and to protect our nation. Back in 1989 the same story…Last year we had over 4000 air space violations over the Greek airspace…Do u know any other European country facing such an aggression and disrespect every day from another Nato member and an an aspiring EU participant? Do u know any other European country that “accepts” 2000 illegal immigrants EVERY day??? (they are pushed from the Turkish army through the Greek northern boarders daily).
We buy Leopards they buy the same tanks from Germany one month later…we buy Mirage from France they buy F16s from the States…we buy submarines from your country they order the same…We have 100.000 men in uniform they have 1.000.000 men! What do they want all this army for man?
US/Germany/France/Russia and the rest of arm manufacturers are so happy to sustain the fire of this idiotic crisis! Turkish government does one think,,,the Turkish military generals are doing the exact opposite (plan Balyoz…). Why doesn’t Germany draw the line of the European boarders and defend the International law and the boarders we have in Europe??? The “play games set up crisis-buy weapons corporation” has played a vital role to the Greek debt…and if u are clever u should realize what I mean!
Greek debt was not created because we don;t work hard enough here in Greece…believe me! (I work twice the time many Germans work and I bet I have twice the degrees u have…dude!)
You wrote that Greece agreed on the prices…Come on man! Greek government accepted the terms and the prices! They arranged the bribing, handled the contracts and the loans with its sponsors (..your government and your bankers!) and the Greek army still waits for the hardware…Please!!!
Yes we did vote many of them but we didn’t expect such corruption and short sighting from our leaders!!! On the other hand we never expected the whole European foundation to let this unroll and to have NO protected mechanisms for the EU citizens.
EU is a monetary union and there is no loyalty or honor to almost any of its foundation…its just a shopping mall that’s all! We shopped a lot…and charged our credit card my friend!!! see.we had no limit from the banker….
I know u are going to be convinced…its your right…but remember Not everybody in my country is a lazy public servant…and everybody here is willing to leave Greece to be fallen apart…
This is Sparta…don’t forget that!!!
‘But nobody forced Greece to spend that much and to take up so much debt. That was a Greek decision all by itself.’ (seems to be your bedrock argument on this issue).
There was a time, not so long ago, that lenders would do a fair amount of due diligence before handing out ‘other peoples’ money’ (OPM), and when a counterparty failed to repay, the lender took the hit. Today, we keep on throwing more of OPM just to keep the charade going. And it is a charade.
No offence, Andreas, but you of all people should know where the constant, subtle erosion of (contract) laws lead to.
We don’t really need armies to destroy countries and sovereigns today, just a legal, political and financial framework which everyday people cannot control.
Andreas, your summary of the cause of Greece’s troubles is a repetition of what has been out there in the Media, which puts blame squarely on the shoulders of each and every Greek. Remember, the Greeks have a long tradition of questioning everything and rightly so. It is no wonder that so many schools of philosophy came out of this nation, the Sceptic School being one of them. And who can blame them. It shows that unlike most of the world, they know that they are being had and are not ‘sheeple’.
Now, for a more in depth look at the ‘Greek Debt’, I would heartily recommend you read the book “Vultures’ Picnic, in pursuit of Petroluem, Pigs, Power Pirates and High Finance Carnivores” by Greg Palast. It reads like a detective novel except it is for real and it moves from one subject to another, but it is wealth of information that is kept from us ordinary mortals and for good reasons. Here is an excerpt from the chapter in on the Greek debt.
“Greece’s economy blew apart because a bunch of olive-spitting, ouzo-guzzling, lazy-ass Greeks refuse to put in a full day’s work, retire while they’re still teenagers, pocket pensions fit for a pasha; and they’ve gone on a social-services spending spree using borrowed money. Now that the bill has come due and the Greeks have to pay with higher taxes and cuts in their big fat welfare state, they run riot, screaming in the streets, busting windows and burning banks.
I don’t buy it. I don’t buy it because of the document in my hand marked, “RESTRICTED DISTRIBUTION.”
I’ll cut to the indictment: Greece is a crime scene. The people are victims of a fraud, a scam, a hustle and a flim-flam.”
And––cover the children’s ears when I say this––a bank named Goldman Sachs is holding the smoking gun.
some corrections…
I know u are NOT going to be convinced…its your right…but remember Not everybody in my country is a lazy public servant…and NOT everybody here is willing to leave Greece to be fallen apart…
This is Sparta…don’t forget that!!!
The EU was sold to Europeans as an equal partnership of all the Judeo-Christian nations of Europe when in actual fact it was just a ruse invented to remove borders and trade controls and and push a Globalist agenda.
Of course, the industrial-military complex sells and arms both sides – that it the game-plan. They make money coming and going, while the nations are stuck with the costs.
Likewise the illegal refugee influx, is designed to erode nationalism and burden the taxpayers. In every situation, it is pertinent to always ask the question “who is benefitting” and to be able to connect the dots.
I hope so because I actually like Greece. After all, I have a Greek name.
@ by taking in less money:
This would mean less income, how could you decrease state deficit this way? Say you decrease all taxes by 1%, this means 0.01 BIP less income at first. People will have 0.01*BIP more money, if they spend it, you will have an increase in taxes of 0.01*(taxes-0.01)*BIP 1, equals less import than export. Thus it is in dept to other economies, paying those back while they cant afford it will not strengthen Greece economy. They could, by exporting more… like Germany. But if they do, they better stop before causing the next Euro-crisis ;-)
@paying off the dept:
Greece imported more that it exported, that was in part the fault of “Exportweltmeiser” Germany, who had a huge export surplus, archived by extending the low-wage-sector (Leiharbeit, Agenda 2000) and thus decreasing the wealth of its population.
One way out for Greece would be basically the same Germany did.
That would mean lower wages for the population… and/or higher ones in Germany, reducing Ger.s export and increasing Ger.s import, thus balancing import/export ratios within EU (hardcore simplistic and naive, but a better approach than this much short-term austerity imo)
I recommend a non-mainstream, and while rather left and old-fashioned, pretty open-minded, accurate and predictive blog(german):
Finally, I have to agree with you that promises of long-term austerity are pretty unrealistic, I think thats due to the short-term nature of our political system. You don`t just make unpopular decisions if you want to be re-elected, and reducing dept is clearly of that sort if it means cutting (social) services… but I would like you to consider this:
Germany got most of his dept from cutting taxes, and if you look at the current tax structure, it was cutting rich mens` taxes. So, what do you think of taxing rich people, who don`t spend their money(else they wouldn`t be rich…) instead of cutting social services, thus increasing the burden for the poor indirectly? Not a politically realistic plan, as power is a whore to money and the SPRINGER-verlag (at least in Germany, don`t really know about the rest of Europe…).
Please consider this side of the coin, I would love to read a post with a bit more in-depth understanding than bashing some incompetent politician ;-)
It’s hardly surprising that many Greeks don’t accept austerity measures, especially the strata of young professionals that are paid several times less than the European average, have always paid their taxes and didn’t really see any benefit from the loans.
I’m not saying that the Greek government isn’t to blame for this mess, but I expect the German people to have a modicum of sensitivity about these things, at least out of respect for the Greek people themselves, and for those who recognise the deep irony of the situation.
In that oberlehrer manner that only a German could pull off, Merkel suggested jokingly that they sell their islands to cover the debt. How arrogant, especially considering how badly Greece has been shafted by Germany in the last 70 years, first by plundering the banks and crops in Greece, causing widespread famine and poverty, and then by never repaying bar some farming equipment. (To be fair it was US diplomacy that led to this).
I say let Greece give all it’s islands to Germany. Let them deal with the illegal immigrants for once , I’m sure Merkel will suddenly declare illegal immigration to be an EU pandemic rather than feigning concern with countries like Malta by taking a mere hundred or so immigrants off Malta’s hands.
Sometimes history repeats itself in the oddest of ways. It seems that Germans have become the new shylocks of Europe. Hopefully they’ll have better luck than their predecessors. Maybe Hasbro will release a new boardgame “Deutschen raus” with grotesque pieces resembling German bankers.
(P.S Sorry if this sounds angry or mean, but I really disagree with people taking it out on the Greeks in this way. And I’m not even Greek. To be fair the British are just as bad as the Germans when it comes to mocking Greeks about their current situation. It’s even degenerated to the level where they have a reality show called “Go Greek for a Week”)
Use German money to pay for the help. Tell the Germans that they are being Nazis if they refuse.
That is telling them! I am not Greek either but I can see the whole unfairness of the situation.
You may not like Venizelos as a minister but he’s a great singer:
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