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Greece's Extortion Game
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
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Everyone hates lawyers till they need one. I defend clients against the IRS - ready to go it alone? I save my clients, most of them, much more in taxes then they ever pay me. Just completed an estate audit where IRS assessed additional $4 million, CPA and client panicked and got me involved. Ended the case owing about $1 million, big difference. Clearly, my efforts add value. Again, ready to go it alone?
Flat, consumption based tax. End the IRS. Yeah, I'd go it alone.
We're getting screwed over by the IRS and the lawyers.
I agree that Greece needs another dictator for a while, but the remark about having Turkey administer Greece is gratuitous. Would you accept China administering the USA?
It is clear that democracy has been tainted, bought and corrupted in the USA as well and in most democracies. This is the problem when systems become complex or too big. Corruption becomes hard to track and discover, let alone defeat.
"You need a dictator" is an impolite way to say "Fuck You"
>They need another dictator.
I vote me! (thats how it normally works <waves gun in the air>)
OK you are hired. How soon can you get over there?
This is the truth, I worked for the CCSF (Cith and County of San Francisco): SF bus drivers get several days per year in which they are simply allowed to not show up for work, no call, they just sleep in on a drug/alcohol binge or just forget it's their work day, whatever. About 15 years ago the City was in a bind because the union coerced management into ignoring the then-new federal drug testing for bus drivers. I think the Clintonista Admin went along with it.
Admit it. If you could live like the Greeks making $100,000+ a year and not breaking a sweat.
Retire at 50 or 55. Not pay taxes. Live in a beautiful, laid-back resort with sunny mild weather year round.
Wouldn't you do it, especially if some dumb Germans were willing to subsidize your lifestyle.
I think 9 out of 10 people would and that's being conservative.
Yeah, and you get to wear a pleated white skirt and big red pompom's on your boots......ver macho.....
Zorba you are spot on. The dumb lenders have only themselves to blame because everyone else already knew that most Greeks enjoyed the dolce vita, paid no taxes and made fun of those that did work and pay taxes.
Nobody subsidized anything. Greece was and is still living on borrowed money. And yes, to some extent everybody in the West has done it, but Greece is too much of a basket case.
The 1% of the Greek elite should shoulder 99% of the blame. Trying to pin the majority of this on bus drivers and public service clerks is ridiculous. GS was contracted by the Greek Government and financial system to help hide Greek debt from the EU. That is the doing of the top 1%.
And as usual it is the wealthiest who have the ability to move capital out of the country, construct elaborate tax dodges, and influence legislators to open all manner of loop holes and opportunities for the rich to take advantage of.
Easy option for the Greeks, default and rebuild their country over the next three or four years. They've done it before, they will do it again.
Better than putting the next two generations into debt bondage to French and German banks,
I agree, you cannot blame the average worker, but you can blame the unions that allowed them to believe in something for nothing. Greek public sector wages have doubled in the last ten years. That is because of the unions.
I honestly don't think that the unions asked for raises of that sort.
What little I know is that the government started throwing a lot of money around certain
public utilities and offices for unknown (to me) reasons. I'm sure some form of corruption
will be uncovered, but it's nice for the worker to get something for nothing, for a change.
just joking, but the rest of us having nothing but falling real wages now for roughly 20 years,
and it's not gonna change for the better, any time soon.
Nice! I agree completely. this is the only long-run tangible solution.
if only majority of the Greeks felt this way, burned some EU flags and demanded that their national pride be restored and they rebulid from start. But most seem upset about the euros in their pockets being taxed away.....they don't want to leave the eurozone! yet they don't want to start taking the hard steps required to stay in it.
Meanwhile the world is laughing at the impotence of EU leaders to grab the bull by the horn on this one.
I agree that default is the way to go and that those with money should make the down payment on a new system and set the example.
Sorry if this has been posted today, but the shit never gets old. What the fuck did they pay us with? German taxpayer money?
http://www.businessinsider.com/what-greece-to-buy-400-tanks-from-the-us-...
No, they will be paying the US with its own money via the tranche from the IMF. Net gain ZERO, except now we've given them the mean to attack their people....good stuff....just can't make this sh@t up.
must defend banks... must defend banks... must defend banks...
Nassim Taleb: The American Economy Will Transfer $5 Trillion To Banker Pay And Bonuses Over The Next 10 Years
I chuckled Aldous when I read this at the bottom of the article...
"Nassim Nicholas Taleb is Professor of Risk Engineering at New York University and the author of The Black Swan. Mark Spitznagel is a hedge-fund manager. The authors own positions that profit if bank stocks decline in value."
yikes. full time job to keep up on all this shite. if only there was some "house-husband makes 5,000 a month for reading zerohedge" pyramid scheme. id sign up
Wow, Greece is even more generous than the US liberals with the taxpayers money. Gee, I wonder why they're broke. Hmmmmm.
"They're supposed to mollify the taxpayers in Germany, France, and other Eurozone countries ..."
LOLOLOLOL! Has anyone told the Greeks this?
Isn't every western country more generous with the taxpayers money than the US? We spend our money on the banksters military in this country.
Wow, Greece is even more generous than the US liberals with the taxpayers money. Gee, I wonder why they're broke. Hmmmmm. Oh wait I found out at the NY OWS that capitalism is the reason Greece and the US are broke. Never mind.
Since GS was guiding both efforts, they have a point.
When one paints the Mona Lisa, one does not stop after filling in only the right half of the face.
Have you ever been shopping for basic goods in Athens? Well, here's a nifty little fact: products sold by large European chains throughout Europe cost 2-3 times as much in a store in Athens as they do in places like Portugal and Spain. Why? For the same reason that a German multinational would never ever consider bribing a politician in Germany, but have done so for years in countries like Greece.
This would be equivalent to stating that a laborer in Manhattan should earn the same as a laborer in Wichita.
So while I agree with most of the things you mention here - and I can assure you, many Greeks have been berating such practices since the end of the Civil War in the 1950s - the issue with the minimum wage is one on which I will disagree. Crushing wage earnings in the US was accomplished over the last 30 years, and where did that get us? Walmart Nation, that's where. Sure, if the minimum wage was much higher, I'd say you have a point, but 750 euros? Seriously, thats starvation money in Greece.
A false perception of standard!
Ever considered the idea that pricing levels are adjusted according to the buying power of the target region. Following your thought, I start a grocery store in Kongo and price products five times the price of the US. Accordingly, the state and the global capital markets need to make sure, those prices can be paid for. BS!
"But 750 euros? That's starvation money in greece." Wake up, if you cannot manage to produce more than 750 euros, there is no legitimization why you should earn more than 750 euros.
Also, you are arguing relative income levels of Manhattan and Wichita, no one has argued against income differences between Athens and some rural places, so be it. The problem with your argument is comparing Greek productivity and per capita GDP to that of the US.
Right US real labor income has decreased only that the interpretation is somewhat different. The US can in mass manufacturing still not compete with developing coutries. WOuld that have been different if the real labor income had risen instead of decreased. Well, at least not in terms of export. If you like to push the domestic demand argument, feel free, but please finance your domestic demand increase domestically then.
The kicker, you compare Madrid and Barcelona to Wichita and Athens to Manhatten? Just no comment!
Finally, you accuse international corporates of closing in on Greece and capturing all your wealth through bribing officials. Well, that may coincide with a local culture, reaching from the very top to bottom. Bribery does not shift responsibility. While corporates paid for market access, the people paid for tax evation. Why do you think any of the described aspects of completely ineffective fiscal execution exist in Greece. Corruption, a lack of honesty, complete failure of motivation and effort appear to be at the core of society. So, why wonder about bribery. Ever tried to bribe a Scandinavian official, to capture their wealth? Let me tell you, you wouldn't succeed, but that is about mentality, bribery is not imported into society.
The arrogance speaking from your statement reflects the mindset of the Greek public as it is perceived by some Northern and central European and overseas countries that have over the past decade or are still in the process of reform of the labor market. Despite having been competitive, people have faced cut backs and believe me it has taken a lot of spirit by those societies to invest some of what they currently deserve to prepare for future competition.
Asking these people to show solidarity with greece based on your arguments is like smacking them in the face.
What do you expect from the future, endless black mailing of some other entity and living off that. HIghly unlikely! No matter, how the current situation ends for greece, it better start now preparing for the time thereafter in terms of competitiveness. Well, start with educating the people about the principles of market economics, where performance kind of determines the rewards. Not even the last resorts of socialism afford the relaxed mentality you convey, as they know, even with a domestically socialist society, they will have to compete internationally.
It makes me truly sad to recognize any idea of a united Europe is rapidly led to the moral hazard endgame due to a degenerating moral and ethic in the least productive regions.
Ever considered the idea that pricing levels are adjusted according to the buying power of the target region. Following your thought, I start a grocery store in Kongo and price products five times the price of the US. Accordingly, the state and the global capital markets need to make sure, those prices can be paid for. BS!
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Ummmmmh... This is totally disconnected from Smithian economics.
Grocery do not get cheaper because they are sold in Kongo. They are simply not sold in Kongo. Because Kongo people pricing power is outmatched by foreign people's pricing power (not that hard actually when working a successful fiat monetary system that ensures you can always outbid other people) and the local production is shipped elsewhere.
It is a free market economy. Production is put on the market and has to be buy back. If Kongo produces grocery and can not buy it back, it is consumed elsewhere. It is how it works in Smithian economics: suppression of local demand to favour consumption in dense consumption centers.
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Wake up, if you cannot manage to produce more than 750 euros, there is no legitimization why you should earn more than 750 euros.
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Few people produce money. People are rewarded in money. Production has nothing to do with reward. You can produce nothing and be rewarded with more than 750 euros. All it takes is to own enough for that to happen.
Ah, a last point. Funny as usual, it is hoped. US citizens harp all day long about human nature and use it to legitimize all sort of weird US citizenish behaviour. But does not human nature include self preservation?
Shall not self preservation legitimize the very fact that people have to earn enough to self preserve?
US citizenism is such a bubble of nothing. Thinking within the contextual framework provided by US citizenism is such a waste of time.
In the end, it always boils down to self entitlement: me do, me right, you do, you wrong.
"But 750 euros? That's starvation money in greece."
--> Well maybe you should wake up from your textbook dreams and do some empiricism. Take groceries, cars, utilities and travel around Europe. Same products, different pricing, even different relative pricing structure among countries. It is demand driven. If you seriously like to question this, I will happily deliver more.
Few people produce money. People are rewarded in money. Production has nothing to do with reward. You can produce nothing and be rewarded with more than 750 euros. All it takes is to own enough for that to happen.
--> Right, add cash-equivalent of 750 euros. If you like to hair-split, great, whats the purpose, if the average Greek owned enough, he/she wouldn't care shit. Different from your surreal abstraction, productivity in our world is rewarded and lack thereof is not. For your narrow-mindedness, if you own capital and have the chance to let the capital be productive, you may be excused and collect your rewards for productivity on that side of the equation. Your arguments are actually both theoreticall and practically extremely weak.
US citizenism is such a bubble of nothing. Thinking within the contextual framework provided by US citizenism is such a waste of time.
In the end, it always boils down to self entitlement: me do, me right, you do, you wrong.
--> If you had any ability to reflect, you would have realized all by yourself that neither I nor my standpoint originate in the US. But critical reflection does not seem to be your strength.
I cannot really associate your final statement to any honest and critical analysis of what is occurring in Greece?! Is is so morally flawed in your view to critically question the Greeks pushing for cash donations, uncovering hidden wealth on demand and publically mocking the nations they are pushing to send more money. I would argue, if you face such a situation, you have right to critically ask questions and state some criticism.
--> Well maybe you should wake up from your textbook dreams and do some empiricism. Take groceries, cars, utilities and travel around Europe. Same products, different pricing, even different relative pricing structure among countries. It is demand driven. If you seriously like to question this, I will happily deliver more.
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Deliver more what? Strawsman?
How does it connect with 750€ not being starvation money in Greece?
That there are different pricing does not conclude into 750€ not being starvatiion money in Greece.
It is a free market. The goods are consumed on places where the best prices can be offered.
If place A can allocate five euros to buy potatoes and place B can allocate eight euros, the locally grown potatoes in A are shipped to the place B.
And that is not textbooks, but observations.
750 euros is definitely starvation wages in greece. Buying a house is definitely not cheap and unless rents really drop, starvation will be an actuality.
Tough shit Greece.
Learn to live on sweatshop wages.
Learn to live like the Chinese.
Don't expect the rest of the world to pick up the tab for your extravagent lifestyles.
Sweat for your existence. Your Grandfathers did.
Learn to live on sweatshop wages.
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The application of knowledge depends on means and situations.
Claiming that it is possible to live on 700 euros is a matter of knowledge is US propaganda.
It is a matter of environment, whether or not the environment allows to live on 700 euros.
In Greece, it does not, as a result of Smithian economics.
Living on a sweatshop wage requires to live in a sweatshop environment.
"Sweat for your existence. Your Grandfathers did."
And do you know what else Greek Grandfathers did? They defaulted on their sovereign debt and gave the banksters the bird.
Old strategies are the best, it seems like you agree.
hahaha, and their great grandfathers back to the times of oiled up gay boys getting together for a wrestle fest on mount olympus.
Old strategy? Thomas Jefferson definitely got it right 200 years ago when he warned that banks are more dangerous than standing armies, and that if allowed to control the issue of currency they will “deprive the people of all property until their children wake up homeless”.
"Plus they receive €420 a month for hand hygiene"
I 'll keep my hands clean for a mere $420 per month.
God, I hope you're not an American.
Tell me your from Canada, South Africa, Laos, anywhere but the USA.
Please, I'm beggin' ya!
extortion? Greeks?
finally ... thank-you
Extortion? Greeks? You must have waken up from a coma!! The real extortionist is Tim Jeetner going around arm twisting other nation instead of letting Zombie banks go belly up!
Extorting the weak and farming the poor is part of the classical US business pack.
Greeks have grown into US citizens for some time now...
No piece of news.
You know what really makes me angry about americans?
They didn't give Avatar the oscar for best picture.
and gave it to that piece of shit iraq movie... no napalm in sight.
sickening.
They didn't give Avatar the oscar for best picture.
and gave it to that piece of shit iraq movie... no napalm in sight.
Sickening.
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Sickening if you are interested in US cultural items. If not...
Avatar, never watched. Heard of it because I could not escape the marketing steamroller.
The other film, waoooo, I cant see what it is. Dont care too.
It makes me as sick as the thought of putting my left socket on my right foot.
But indeed, this is the kind of unbearable acts for US citizens.
WTF is wrong with you complaining about your favorite movie not winning any fucking price?? Majority of the people in the world didn't even raise an eyebrow when Obama was awarded his Nobel Peace price! They gave one of those price to Kissinger too. Makes me wanna puke.
Greek government = Euro Gangsta.
Someone should tell the EU to put their hands down because this toothless Greek Gangsta doesn't have a gun.