Sympathy with Greece is mostly misplaced

My Sunday readings included i.a. The New York Times, John Mauldin, The Daily Mail, and a lot of statistics by Eurostat, IMF and OECD. All the facts and hard data on Greece point to a country where citizens cheat their government, and where the government has been cheating Europe.

John Mauldin, the well-known US economist, writes in his weekly newsletter:

Europe would be better off just taking the money they are giving to Greece and using it to recapitalize their banks. Let Greece go. Give it up. Let them enter a 12-step program or whatever it is that insolvent nations do. That is harsh, but it is also the truth.

The Daily Mail has a big article on Greece, with striking examples of abuse, with the eyepopping title: "The Big Fat Greek Gravy Train: A special investigation into the EU-funded culture of greed, tax evasion and scandalous waste". Before you brand this as populist talk, most of these abuses were already highlighted in the Belgian TV-documentary of Panorama on Greece. The British tabloid might have an anti-EU and populist reputation, the facts mentioned in the article, cannot be refuted:

A striking example is the underground: air-conditioned, plasma screens, payed by Europe for the Olympics, and almost free, as people don't pay tickets and controls are non-existent. As the Daily Mail observes:

The transport perks are not confined to the customers. Incredibly, the average salary on Greece’s railways is £60,000, which includes cleaners and track workers - treble the earnings of the average private sector employee here.

But Greek derailments are all around:

The overground rail network is as big a racket as the EU-funded underground. While its annual income is only £80 million from ticket sales, the wage bill is more than £500m a year — prompting one Greek politician to famously remark that it would be cheaper to put all the commuters into private taxis.

'We have a railroad company which is bankrupt beyond comprehension,’ says Stefans Manos, a former Greek finance minister. ‘And yet, there isn’t a single private company in Greece with that kind of average pay.’

Tax abuses are a national sport in Greece. The go from hiding swimming pools (there are virtually no controls) to hiding millions of revenues. Greece does not seem to bother to collect its taxes properly:

One of the reasons they are so rich is that rather than paying millions in tax to the Greek state, as they rightfully should, many of these residents are living entirely tax-free.

Along street after street of opulent mansions and villas, surrounded by high walls and with their own pools, most of the millionaires living here are, officially, virtually paupers.

How so? Simple: they are allowed to state their own earnings for tax purposes, figures which are rarely challenged. And rich Greeks take full advantage.

Astonishingly, only 5,000 people in a country of 12 million admit to earning more than £90,000 a year — a salary that would not be enough to buy a garden shed in Kifissia.

Yet studies have shown that more than 60,000 Greek homes each have investments worth more than £1m, let alone unknown quantities in overseas banks, prompting one economist to describe Greece as a ‘poor country full of rich people’

And still a lot of politicians in the eurozone try to capitalize on sympathy for the Greeks to convince their citizens that a new bailout package is justified. It is unclear whether this is the real motivation however.

One year ago, a huge European bailout fund was raised, with the help of the IMF. Politicians sold this to their parliaments and population, as not being a gift, but rather a highly yielding investment. In other words: it would return a gain, or at least a yearly income, for their own national budgets. One year later, they are confronted with potentially high losses, in case of a default.

In my opinion, it is not so much sympathy for the Greeks, than fear for heavy losses, that motivated politicians to beg so urgently for more support for new bailouts. I agree that the banking sector would be hurt by a bailout. But European banks have already transferred most of their Greek government debt to the ECB/EFSF/IMF. Furthermore, not all banks have been investing in more risky Club-Med debt. It seems that the reckless financial institutions were often the same as the ones involved in the subprime-crisis.

But unfortunately, European citizens are not convinced about the sustainability of the Greek bailout. And worse, in a lot of countries confidence in the whole euro-project is decreasing. Today a poll in Germany showed a worrying decline in confidence in Greece and the euro.

Sympathy is not a good basis for a sustainable monetary and budgetary European policy. But if it would be justified, you could take it into account. In the case of Greece, evidence shows that Greece has been abusing its own system, and the EU.

Throwing more bailout money to Greece, will therefore only buy some time. In the meanwhile, tax payers in Europe are bailing out banks that have taken too much risk. They are also compensating for the fact that few Greeks are willing to pay their fare share of the taxes. Sympathy for the Greeks is therefore mostly misplaced.

Sympathy and respect for the fair tax payer in the rest of Europe should weigh as much in the bailout decision. Their tax efforts should not be wasted in bottomless money pits, but be used with care.

Important closing remark: sympathy with the banks is even more misplaced.

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