Greece's Extortion Game

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By Wolf Richter  www.testosteronepit.com

Civil servants of bankrupt Greece enjoy the most curious bonuses. Train engineers of the state-owned railroads, who make up to €7,000 a month, get an additional bonus for every driven kilometer. Their days off don't have 24 hours but 28 hours. Plus they receive €420 a month for hand hygiene, a bonus that other railroad workers also get. Bus drivers of the state-owned transportation firms in Athens are paid for the time they spend commuting, and if they show up on time, they're paid an extra €310 a month. Messengers for ministries get an extra €290 a month if they carry documents. Other ministerial workers get bonuses if they know how to use a PC. At the culture ministry, they get a clothing allowance. Workers at the partially privatized telecom OTE receive €25 a month for warming up company vehicles (investigation by Handelsblatt, article in German).

These bonuses are now on the chopping block that the bailout Troika (IMF, ECB, and EU) graciously placed in Greece's kitchen. After having reviewed Greece's finances for the fifth time, the Troika inspectors were satisfied—unlike the prior times when they left angry—and recommended that the next bailout installment of €8 billion ($11 billion) be released. In return, Greece must chop off ever bigger parts of its budget as it is now clear that privatizations won't produce the initially expected revenues. Still, the fiscal targets for 2011 won't be achievable. Greece's national debt of €350 billion will continue to balloon and will reach 166% of GDP by 2012. Hopeless, really.

The Troika inspectors will submit their official report at the G-20 meeting in Cannes on October 23. And the transfer will likely happen in early November. If not, Greece will go bankrupt by the end of November. However, Greek dates are in flux, like its finances. The original bankruptcy-date the Greek government brandished to extort more money was mid October. But when that didn't result in more money, Greece suddenly "found" €1.5 billion (Greece 'Finds' Treasure, Stays Solvent For Another Month).

But on the street, resistance is growing. In Athens, transportation workers, who make up part of Greece's 1.3 million civil servants, have shut down the public transportation system Thursday and Friday. Even taxis are on strike. Lawyers are on strike till October 19. Thursday, civil servants at the state-owned power company occupied its billing offices to prevent it from sending out the new electricity bills that now include a property tax—and a latent threat that if you don't pay your property tax, we'll cut off the juice. Seamen, hospital workers, and others will go on strike next week.

It's not just bonuses that are on the chopping block. Salaries of civil servants are too. And now the minimum wage caught the Troika inspectors' eyes—at €750 ($1,050) a month, it's higher than that of Spain, Portugal, and Poland, countries with a similar standard of living. To make Greece competitive, the inspectors will include a demand in their final report that the minimum wage be reduced, on the theory that it would create jobs (L'Expansion, article in French). The reaction on the street will be interesting. But even more hardship is coming down the pike: they're going to have to pay their taxes.

"Tax fraud is a national crime, a national plague," announced finance minister Evangelos Venizelos in a speech to parliament on Friday (Zeit, article in German). And apparently, he is trying to do something about it, maybe. An investigation by his ministry revealed that Greeks owe €37 billion ($50 billion) in back taxes. The majority, €32 billion, is owed by companies. To remedy the situation, the finance ministry will publish a list of 15,000 people who haven't paid their taxes. It identified fraudsters who owed more than €1 million. It further determined that 3,718 Greeks moved €5.5 billion out of the country during 2009 alone. Of them, 542 declared income of less than €1,000. That's just for the tax year 2009. The investigations of tax years 2010 and 2011 are ongoing. And for what it's worth, he announced that private companies would be recruited to help in the collection efforts.

Half-hearted measures at best. Publishing a list, I mean come on. And years late. They're supposed to mollify the taxpayers in Germany, France, and other Eurozone countries who will be forced to bail out the banks that got fat recklessly lending to the Greek government. American taxpayers will pay via the FMI. And the French banks are now in the hot seat. Yet...

"We don't have any doubt about the solidity of French banks," said the French government—a week after the collapse of Dexia. All eyes are now on Société Générale and BNP, which just got downgraded again. BNP is the world's largest bank with assets of $2.8 trillion, dwarfing France's $2.1 trillion economy. And they're desperately trying to sell assets to stay afloat: France's Fishy Denials as Mega-Banks Teeter.

Wolf Richter    www.testosteronepit.com