Greece is a marvellous country and we have also vacationed there -- some years ago, enjoying superb Greek hospitality, food, music and lifestyle.
Ever since antiquity, and surely since the days of the Trojan Horse, the Greeks have always had the reputation of being keen and clever persons, a cleverness that modernly extends deep into the business and economic world.
As written at Bloomberg in Billionaire Greek Ship Owners Surface While Home Economy Sinks:
"Greeks have long dominated the shipping business. The nation’s fleet, numbering 3,669 vessels in 2013, is the largest in the world, according to the annual report of the Union of Greek Shipowners, making up more than 7 percent of the Greek economy and providing 192,000 jobs in 2013.But that cleverness poses modern problems.
Greece’s shipping magnates control 23 percent of the world bulk carrier fleet, according to the report, even as their home country accounts for less than 0.4 percent of the world economy.
...
As social pressures mount, the privileged tax status of the shipping industry has come under increasing scrutiny as successive Greek governments look to boost revenue. The industry pays no tax on international earnings brought into the country under rules incorporated in Greece’s constitution in 1967." [emphasis added]
Given the above knowledge about the virtual non-taxation of shipping in Greece, many observers in the world and in the European Union viz. Eurozone have little sympathy for the present Greek financial crisis. A government that does not tax its major industries is not going to have much money.
Moreover, observers are astounded that Greece not only has the highest pensions spend in the Eurozone, but seems unwilling to reform its vast overspending habits or to make major reforms to a totally skewed national economy that has ca. 800000 civil servants, whereas, by population, if compared to the number of civil servants in the United Kingdom, it should have maximally only 80000 civil servants, i.e. 1/10th that amount.
The reality is that e.g. citizens in France and Germany have saved their money over decades and have saved that money in banks who have loaned that money out inter alia to Greece, in effect, as it turns out, to finance Greek overspending and to subsidize the Greek shipping business, which, as noted above, pays virtually no taxes.
Now that is cleverness on the part of the Greeks and one should view it as such. We live in a world where people get what they can, if you let them.
But now the trick is known, and it should not go on indefinitely.
It turns out that the Greek government owes so much money to banks that Greece has little hope of ever repaying the vast monies that have gone to finance the past decades of Greek overspending with money financed north of the Alps. As written by Mehreen Khan at the Telegraph: "Greece's debt mountain is set to rise to 180pc of GDP this year."
Is there a workable path out of the situation?
or is this now the end for Greece in the Eurozone?
See
Greece talks to go down to the wire amid fears of imminent banking collapse
The problem of the European Union, the Eurozone and the Greek financial crisis was discussed in understandable form at the London Review of Books by John Lanchester in Once Greece goes…: Any hope for the euro? · LRB 14 July 2011.
That was FOUR years ago.
If one reads the article now, and one really should read it to understand the core essentials of the problem, it would appear to this observer that virtually nothing substantial has changed in the last four years in terms of any truly effective structural economic and financial improvements in Greece.
As Paul Krugman has long pointed out, simple austerity is not working and of course can not work. It never has, because it shrinks an economy that needs to be growing fast to meet its spiral of increasing debts. Austerity has merely led to increasingly high levels of unemployment and many other social evils.
As for obtaining more government money via taxation, a government must focus on the people who have that money, and not on those who do not have it. In Greece, the rich pay few taxes, and, indeed, the richest industry, shipping, is virtually freed from taxation. How is government finance then supposed to work? Where is the money to come from if home industry does not pay it? The answer has been that loans from northern nations have been paying the bills.
In other words, it is no wonder that the problem of Greece persists still today.
It is equally understandable that there are many proposed solutions:
- The Greeks themselves, as could be expected, are pragmatic. As written by John Hooper at the Guardian in Greece’s plight at odds with public's lack of concern as default deferred – for now (this was in May):
"Kostas Panagopoulos, of Alco Polls, said a survey he carried out last month indicated the public was already resigned to compromise: 52% of respondents said they wanted a deal with Greece’s creditors “even if the prime minister had to step over those red lines”.
Hence, we expect a compromise whose reaching Greece will surely prolong as long as possible simply to win time. - No Simple, Painless Solutions for Greece: Das - "Risk Consultant and Author Satyajit Das discusses Greece’s attempt to get new bailout terms from Germany and the ECB with Bloomberg’s Rishaad Salamat on “On The Move.”
- Mikio Kumada - Greece Should Sign Any Deal, LGT Capital's Kumada Says - "Mikio Kumada, a strategist at LGT Capital Partners Ltd., talks about the standoff between Greece and its creditors. He speaks in Hong Kong with Angie Lau on Bloomberg Television's "Asia Edge." (Source: Bloomberg)"
- At Zero Hedge, Tyler Durden's picture - The Austrian Solution to Greece
- A Greek exit from the Eurozone as the last option - Michael Nevradakis interviews Economist Roger Bootle in "Grexit" Is the Only Solution for Greece
Of course, that will never be done, but our proposed solution, easily implemented, very clearly puts the focus on the cardinal question which is always: who pays????????
The clever ones seldom do.
Look at the digital era companies Apple and Google in the USA, who pay little corporate income tax, which is not "tax avoidance", as Tim Worstall has correctly pointed out at Forbes in Can We Please Get This Straight, Apple And Google Do Not Avoid US Corporate Tax, but is simply utilisation of tax rule options provided to them by the laws, i.e. the government. It is comparable to the tax preferences viz. "exemptions" granted to the shipping industry in Greece. And Greece shows us where that kind of preferential treatment of corporations -- who make full use of the free infrastructures of government -- ultimatley leads: to government insolvency.
