June 18, 2015

The Greek situation

Greece has huge debts that it cannot repay and is essentially "broke".  And its creditors are barking at it. They want their money. Its only way forward would seem to be to retire from the Eurozone (a common-currency area) and reintroduce its own currency, the Drachma.  It can then print as much money as it likes and pay Greeks everything that they think they deserve.  The result of that will be hyperinflation, yet more economic collapse and sky-high prices for anything that Greece imports from overseas.  Greek living standards could end up at less than half of what they once were.  And it would leave the Greek government unable to borrow from overseas for a long time.

To understand the Greek situation, people need to know something that is just about unmentionable these days -- because it could be seen as "racist":  Greeks are undoubtedly the most work-shy people in Europe.  Where a lot of Northern Europeans like to keep themselves busy by building and making things or otherwise doing something constructive, the ideal life for the average Greek male is to sit around with his friends drinking coffee and arguing about politics.  Finding a way of getting money without working for it is his Holy Grail.  Which is in part why one in two Greek households rely on social security payments to make ends meet.

And the Greek government too wants a free ride.  It has had such a ride courtesy of Europe's banks but now that it cannot pay the interest due on its borrowings, it still wants to cruise along propped up by the rest of Europe.  Faced with colossal bad debts, the rest of Europe is inclined to continue that propping up -- but not at any price.  They want the Greek government to curb its wasteful ways and get on top of its debt.

But the present government is a far-Left one so will not.  They say that Greece has already cut all its fat.  But it has not.  A major demand of Germany and other creditors is that Greece reform its pension (social security) system.  But government payments to the elderly are already low so that cannot be done, says the Greek government.  They are actually right in saying that the payments are low but that is not what the rest of Europe has its beady eyes on.  What they are looking at is ELIGIBILTY for pensions in Greece.  An article from five years ago tells us rather vividly what it is all about:

In Greece, trombone players and pastry chefs get to retire as early as 50 on grounds their work causes them late career breathing problems. Hairdressers enjoy the same perk thanks to the dyes and other chemicals they rub into people's scalps.

Then there are masseurs at steam baths: they get an early out because prolonged exposure to all that heat and steam is deemed unhealthy.

Until the Greek debt crisis, northern Europeans looked at Greek early retirement with an amused roll of the eyes. But more and more such loopholes are angering them: they bristle at being asked to pay for their laggard southern neighbours' early retirement.

When Germany's top-selling newspaper Bild asked readers in that fiscally prudent nation how they felt about coughing up hard-earned money for this kind of luxury, the daily's website lit up with comment.

In a bloc with a shared currency but no power to enforce budgetary restraint and keep members from spending themselves into messes like Greece's, the retirement quirk illustrates another fault line that crept to the surface with the debt crisis that began in Athens and is threatening to spread across the euro zone.

Germany, making available as much as 22.4 billion euros for the joint EU and IMF bailout of Greece, and which not long ago raised its retirement age from 65 to 67 to offset a shrinking, aging population, is being made "the laughing stock of Europe," one reader wrote to Bild.

Like many EU countries, the general retirement age in Greece is 65, although the actual average is about 61. However, the deeply fragmented system also provides for early retirement - as early as 55 for men and 50 for women - in many professions classified as "arduous and unhealthy."

The vast majority seem reasonable, like coal mining, but others, like the bakers and wind-instrument musicians, might strike some as a tad silly.

Greek pensions are low but the system is widely abused, and as part of a drive to reduce Greece's huge debt the government is trying to simplify the labyrinth of rules governing pensions and abolish early retirement rights for some categories of workers. In the end, Greeks will have to work more years, pay a bit more into the system and receive smaller pensions.

In Stockholm, 22-year-old security guard Jenny Lindstrom, called the Greek system unfair to other Europeans and said the bloc should have a single set of rules. "I also would like to retire earlier. I don't want to work for a long time to pay for others' to retire early in other countries."

Greece has to reform its system.  It is just not sustainable to allow women to retire at, say, 58, and pay them a pension well into their 80s. Along with early retirement, Greece has one of Europe's highest longevity rates - with an average life expectancy of 77.1 years for men and 81.9 for women.

As far away as Finland, where the government has tried to push up the retirement age to make up for a lack of skilled workers, there is resentment over paying for early retirement in the EU's sun-baked south.  "No way. It would be really unfair on a Finnish taxpayer who is still at work at the same age as someone in the same profession in another country retires," said 60-year-old Pirkko Toivonen.

SOURCE

Some changes to the above situation have apparently been made since then but not many and not by very much.  See here

So at a time when many countries are phasing in 70 as the normal retirement age, Greece could cut its pensions bill by a huge amount simply by falling in line with that retirement age.  But a far-Leftist government just will not do it of course.  They will   send the whole country into a downward spiral rather than earn the ire of one of their major support groups.

And the rest of Europe also has its beady eyes on the Greek tax system.  Greeks are so crooked that the tax system collects only about half of what it should.  Tax evasion is a way of life in Greece.  Again, a little has been done to tighten that up but not much.  Much more could be done.  And it's not the Leftist government that's principally at fault in that matter.  The situation is the fault of Greeks generally.  They almost all think that someone else owes them a living and that they have already paid plenty.  That attitude has already significantly impoverished them and they are now on the brink of even greater impoverishment

There is one potential solution to Greece's problems that would rid Greece of its debts in an entirely honourable way -- but nobody much is talking about it so far -- so I will mention it only in passing:  Greece has a LOT of islands, many of which are in very attractive locations and thinly populated.  Greece could  sell off entire islands to foreign governments, which would use them to build for their citizens retirement homes in the sun.  That could prove quite attractive to some Northern European countries.

There's a current report of the negotiations between Greece and the rest of Europe here -- JR





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