Ok, opinion coming from a guy of Greek descent living in Canada. I'm no economist, and I hope what I propose makes sense, but I hope I can give an accurate portrayal of both sides of the coin.
To be honest, this whole mess is not the fault of any one person, government or organization. This is just the culmination of error after error on the part of the EU and Greece.
a) Why Greece is to blame for this
Knowing the Greek mentality, some of the population seems to have a rather snobbish view of superiority because of the history of the Ancient Greeks (democracry, inventions, etc.). Add to that the fact that Greeks need only work 35 years before collecting their pensions, and then you get 55-60 year olds that toil away in restaurants, cafes and a life of leisure and vacation for 20-30 years of retirement, and you can easily see why Greece is having the economic problems they are having.
Percentage of the annual budget that goes to pensions in Greece? Around 17%. Much higher than world average
Another major problem that Greeks have is a ''me before everyone else'' mentality. Tax evasion and corruption is a major problem in Greece, especially for the upper classes of society, costing it as much as 8% of its GDP per year.
Tax paying is just not a thing for Greeks. I've even had stories told me about how people would do things like build wooden floors over their backyard pools to avoid the taxes that come with them. Bank accounts, extra vehicles, on the side jobs in the fields collecting olives and farming, etc.. All these things are stuff the people consider their own business, and they feel like the government shouldn't be involved in taking cuts from that.
So, what is Greece's major problem? Mentality and culture making their economy incompatible with the modern capitalist taxing system and thus, unsustainable.
And that leads me to Europe's role in this whole mess
b) Why Europe is to blame
Now, besides the fact that the European Union should have been more careful before admitting Greece into the Euro (books were well cooked and padded to make the economy look better than it actually was), what the EU has done wrong is quite simple: they didn't properly understand Greece's problem and applied the wrong solution.
What do I mean by that? Well, we are all well aware of the rounds and rounds of austerity applied to Greece over the last 5 years. Now, I agree that austerity and cuts are part of the solution to stabilizing Greece's economy. However, the problem was the EU made that their only tool to fix Greece's problems: slap more austerity and cuts each time Greece's economy didn't improve in exchange for bailout money.
The first problem with this continued austerity is that it put Greece in a brutal cycle. The only way to pay back the debt was to get the economy running: job creation, increasing salary, more taxes, then pay back debt. The usual steps.
However, by slapping such strict austerity measures on Greece, this caused under-funding in major public sectors, which lead to massive job losses. This obviously leads to loss of confidence in the economy, media coverage of austerity makes people less likely to invest in said country, etc. Higher taxes also ensue, leading to lower money amounts for everyone and less spending.
Firstly, austerity in Greece's case was overdone. No matter the country and the situation it's in, no one can realistically expect any country to repay back hundreds of billions within the span of a few years when the austerity you slap onto said country makes the debt to GDP ration 170% (i.e: Greece has to bay back almost double its annual budget per year just to cover the debt payments and interest). Not to mention that Greece's unemployment nationwide is 25%, and among the youth, it is over 50%. That amount of people out of work makes it so much more difficult to get the economy running.
If it was truly in the EU's interest to get Greece back on its feet, it would give it a stricter guideline to follow in terms of law changes and austerity measures, but actually give them time to let their economy recover. It may take decades for Greece to recover, but at least if they recover, they can make payments, many over many decades, but at least they are functional and able to operate.
Basically, what should have happened was that the EU set the debt payments over decades into the future, but Greece has to meet certain milestones every few years, and if they don't, then you squeeze them with interest and move up the timeline to repay the debt by a few decades. At least then, everyone can claim that Greece was given a fair window of time to actually address their economic issues and deal with the growing pains. Nobody said Rome was built overnight. Greece's economy needed that scale of rebuild.
c) What would have been the ideal solution
However, even then, austerity was still the wrong answer to the Greek crisis. Why? For reasons I mentioned earlier:
Mentality and culture makes Greece's economy unsustainable.
The EU just saw the italicized and underlined part of the problem and applied what they thought was the best solution to that problem.
The real problem, that the EU failed to address, was the bolded part
What Greece needed more than an economic reform, was a social and cultural reform.
Austerity's main selling points are higher taxes and cuts to spending to get the economy back on track.
Corruption and tax evasion that is so relevant among Greeks basically negate any positives to be had from austerity and leave only the bad. If people don't pay taxes to begin with, what's the point of raising taxes? If people in the government are corrupt and funneling public money to private beach islands and boats, that basically makes any cuts to budget even worse than they look.
The right way to fix Greece's economy, in my opinion, was austerity mixed with a social intervention from outside EU countries that have successful programs running. I know that Greece has tried to implement reforms to address tax evasion and corruption, but again, the mentality of the people just basically negates any progress that Greece tries to make. Greece is basically a disobediant child, sad as it is, and you can't expect them to fix their problems themselves. They need parenting. Enter the EU as parents (with Merkel as the mom ;) )
For the corruption, I would have requested that the representatives from the Swedish government, which are known for their excellence in tackling corruption, to aid in a restructuring and change of mentality for the high levels of Greek society and for government representatives. Perhaps a way to enforce this change would be too give Greeks incentives to focus on the collective health of the government and country. Help the government, and help yourself sort of thing. I'm no sociologist, but if the Swedes can at least reduce Greece's corruption problems, that would go a long way.
For the tax evasion, perhaps the IMF could request members of the IRS from the USA to come give a hand? Again, I have no idea if they are any good, but based off stories I've heard, they can be quite persistent to the point of the extreme. Maybe Greece needs a bit of that system in them. If they do high level and focused investigations of a lot of the higher earners, they force them to give the money they actually owe. And as a bonus, they motivate other high earners and other earners in general to pay their taxes so they could avoid their headaches. It would be a big undertaking, but Greece has lots of time to repay its debt in this scenario, so long term projects are viable.
d) Conclusion (and a TLDR)
So, here ends a long rant from a random guy on the internet. Long story short, Greeks have been living the great life for a while, not paying their dues to society, and the EU came in and instead of showing them the right way to run their country (fixing their corruption and tax evasion, mentality and social problems basically), they came in and requested austerity and a massive pile of debt that was unrealistic and wrong from the start.
As a Greek in my culture and in my heart, it saddens me to see Greece's current state. They have such a beautiful country with a wonderful climate, incredible food, and great history. It literally is paradise on Earth, in my opinion. The only problem is, sometimes you gotta come down from paradise to face the realities of the modern world, and though I can understand why tackling real world issues like economy is a problem for the Greek mentality, at some point, sacrifices had to be made.
Ancient Greeks were some of the smartest of their time, and a lot of their ideas, inventions and discoveries have forever shaped our world. They were fore-runners, the ones who looked beyond themselves to discover a great many things. It is my only hope that their modern descendants today can also look beyond themselves to discover what is wrong with their great country, and take the Πατριδα (country) from a desolation in a world that already has too many back to its former roots, where Greece's old tales of discoveries and new tales of recovery from the brink can hopefully inspire the world all over once more.
(And I realized I basically wrote an essay even though I am on summer vacation from college. Oh well :), Hope you guys enjoy it)
Log in to comment