8 Jun 2015

Greece is not Ireland – and it’s not just about the economics

I spent four frantic days in Greece last week. The population watched anxiously as a compromise their far-left leaders were fairly certain they had achieved with Europe, fell apart.

On Friday night, after a lively parliamentary clash, I sat outside a calm, prosperous-looking restaurant in the bohemian Exarcheia district of Athens.

Our night ended suddenly as we watched a group of around 30 men clad in balaclavas turn over bins, set fire to them and systematically distrupt the area.

No police came. No firefighters attended. The petrol smoke drove about 1,000 diners and drinkers and promenaders off two or three intersections’ worth of nightlife. Everybody cursed the anarchists – who are routinely accused also of being as police provocateurs – but shrugged their shoulders.

It was a taste of the new normal in Greece. None of the photographers or cameramen with me even bothered to try to film it, as we all knew our equipment would be immediately destroyed, and that the people complaining about the smoke fumes would probably not lift a finger to help us.

New normal

The event won’t make the Greek papers, nor turn up as a briefing for Angela Merkel or Christine Lagarde. But it should. Because it is a perfect example of something the leaders don’t seem even now to understand: Greece is not like Ireland, the poster child for austerity.

Though the Greek unions and youth activists have been largely mesmerised into passivity for the five months of seeing a radical left government in power, that night was a taste of the levels of chaos Greeks now have to tolerate.

As PM Alexis Tsipras prepares to seek a political solution this week with Angela Merkel and the other EU leaders, the situation is at least clear. The Greek “offer” – a massive climbdown on Syriza’s election programme but not austere enough for Europe – is as far as Syriza can go without losing its ability to get its way in parliament.

So unless Merkel and Tsipras broker a delay, or compromise, all objective analyses have to see default as a likelihood at the end of June.

Doomed to fail

Over the weekend there’s been searing criticism of the IMF over its role in this, and for good reason. The IMF’s own economists recognised, two years ago, their method for understanding the impact of austerity on growth had been wrong.

And when it came to Greece, for all the reasons people in northern Europe don’t like Greece – its corruption, its oligarchy, its unreformed retail economy, its pension system – the IMF-mandated austerity programme was doomed to fail.

Take a look at this graph to see how badly.


Portugal and Ireland – the two light blue lines – were also given tough austerity programmes. But their economies suffered mild depression, while the Greek economy, the dark line, collapsed.

But Greeks themselves don’t measure it in GDP figures – they measure it in extra suicides, a falling birthrate, the migration of 100,000 young people abroad, whole streets full of closed shops.

Perplexing questions

So why did Greece collapse and Ireland survive?

It’s a question that perplexes international policymakers, and the answers are not to be found solely in economics.

First, because the Irish crisis was a banking crisis: its banks were bust, the state bailed them out and took on debts it could not sustain. Austerity was harsh – but the economy was globalised. Even as Irish banks went bust, the Irish banking sector – an unofficial conduit of money from London to the tax havens, and full of US investment banks – was still recruiting.

Then there’s agribusiness. Irish agriculture, from a country of 3 million people, produces enough to feed 50m worldwide and growing. If you look at the the profile of imports and exports from Ireland to Britain, it’s much the same via mix and per-capita GDP as the trade between the north and south of Britain. In other words – hugely controversial to say politically – Britain and Ireland are close to being a single economy with two currencies.

Ireland, in short, had the English language, an established role to play with the City of London and Frankfurt, and a modern, high-scale agriculture business.

Unmodernised capitalism

That is not to say austerity was popular: even now the water protests are boosting the same kind of radical left party we see ruling Greece, and boosting Sinn Fein, which has aligned itself internationally with Syriza.

But in Ireland the kind of austerity enacted did not tank production by 25 per cent and family incomes by 40 per cent. It did not cause ordinary middle class people to vote for a party whose flags are red and methodology Marxist. And there was no mass fascist movement in Ireland.

The difference is: Greece is an unmodernised capitalism where you can’t impose austerity at this level and hope to modernise at the same time.

I’ve become an unwilling expert, for example, on its pharmacy regulations. Sure, the law saying pharmacies can’t open within a certain short distance of each other has been repealed, but there is still a rule that says one pharmacy per 1,000 people, one owner for each pharmacy, one pharmacy for each pharmacist.

Walgreens, Superdrug and Boots, in other words, are locked out of this sector, whose opening hours are not generous. There is even a massive fight over whether newsagents are allowed to sell aspirin in Greece.

To somebody who needs aspirin during pharmacy closing hours this can appear a no brainer: liberalise everything. It is exactly what the IMF has been arguing for in the Brussels Group talks, even this month: liberalise the pharmacies and bakeries or we withhold 7bn of aid and your country goes bankrupt.

Deep structures

The problem is, the deep structures of Greek capitalism mean you can only modernise by unpicking things carefully and with consent. A population used to being seen personally by a pharmacist, to getting their drugs on informal credit when they can’t pay, just will not transform itself overnight into a midwest American consumer group.

It’s the same with taxes. Hiking VAT sounds like a no-brainer in a country that needs to raise taxes. When finance minister Yanis Varoufakis proposed instead to set a low – 16 per cent – top rate of VAT, on the grounds that it would undermine the culture of evasion, the IMF’s economists reportedly said yes. Somewhere along the line it got hiked to 23 per cent.

If the IMF’s negotiators wanted to give the impression their aim is to destroy most of the small businesses that keep Greek capitalism alive, and with it, consent for democracy, they are doing a brilliant job.

And that’s what has begun to undermine the faith of those identified as moderate and western-educated in the Syriza leadership.

The IMF now seems to be not only acting as if ignorant of its own economics department, but as if Greek society did not exist.

The IMF, in a leaked document from its own negotiators in Greece, admitted last month that there is “an inverse relationship” between the reforms being imposed on greece and the “sustainability” of its debt.

Having pressured the Europeans for less austerity and more debt write offs, the IMF seems now prepared to walk away from the problem. Its rationale is most probably the pressure it is under from its non-European members.

And such pressure may increase if, later this month, the Greek parliament’s own inquiry alleges the IMF lent tens of billions to Greece unlawfully.

Having a stake

And here’s why the unpoliced riot I sat through is important. What stops ordinary people from joining in, and in fact makes them remonstrate vociferously with the teenagers in balaclavas, is having a stake: a small restaruant, a coffee shop, a small theatre, a street market, a degree and the prospect of a job that pays better than waiting table.

It was the lenders who, late last year, decided to load one more dollop of austerity onto a conservative-socialist coalition that could not deliver it. Result: Marxist government.

What if they now load one more dollop of austerity onto a Marxist government that cannot deliver it? I think the result will be more riots and more despair among the middle classes.

If you wanted to create such mayhem in an economically destroyed country, you would probably not want that country, simultaneously, to enjoy the most pro-Russian political culture in Europe, and be one border away from the Islamic State, with 42,000 Syrian migrants a month landing on its island outposts for good measure.

And you would, if you were sensible, stop comparing it to the Republic of Ireland.

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63 reader comments

  1. Jan says:

    First Portugal and Ireland are mentioned, but then the comparison with Greece is only made for Ireland. Why not also compare Greece with Portugal? Their economies and culture are much more similar than those of Greece and Ireland (language, corruption), and Portuga is doing much better than Greece.

    1. George says:

      Dear Jan
      The economies of Portugal and Greece are no where near to what one could describe as similar. In addition Greece’s geographic location and number of islands with what these two factors entail (increased defense budget needs, dealing with increasing number of refugees, very high transportation costs to ship basic goods such as drinking water to the islands) makes the comparison rather unfortunate.

    2. Kostas M. says:

      Our culture,economy and history has nothing to do with Portugal. Where did this myth came from??

    3. Nick Kouzos says:

      Please accept this post from a Greek person that tries to explain the problem with an article.

    4. Harry Adal says:

      Portugal lost 4.4% of its GDP during the crisis while Greece lost a whole 25%!!! Clearly not tha same cases…

    5. Cohen Sommer says:

      You really need to study a bit lad. Corruption in Greece as no paralell with that of Portugal, in fact, if you look at the stats you will find that Portugal sits a lot closer to Ireland than to Greece (which is after Brazil). The same way, the language has nothing in common. Portuguese is a neo-latin language with germanic, celtic and arab minor influences and english an almost perfect mix of Latin and Germanic origins. The main language in Ireland is therefore undoubtly closer to the Portuguese, than this to the Greek (it has it’s own language branch such the disparity with the remaining indo-european languages). The “culture”, it’s also something quite debatable. Celtic influence in Portugal is heavy (the oldest celtic language is from Portugal i.e.) and the religion is exactly the same as in Ireland (although in Portugal secularism and atheísm is much stronger than in Ireland). On the other hand Greece is Orthodox and has no celtic influence at all!

  2. Dan Allen says:

    While I appreciate Masons efforts here and I think he’s right about the systemic problems in Greece, he surely has to recognize that the scale of the fiscal adjustment in Portugal and Greece is different, and that this alone easily accounts for the difference in outcomes. Greece budget has adjusted by 18.6%, Portugal by 4.5%, Spain is actually up 1% since 2010.

  3. Connit says:

    This world is bonkers!

  4. David Woodruff says:

    On this:

    “And when it came to Greece, for all the reasons people in northern Europe don’t like Greece – its corruption, its oligarchy, its unreformed retail economy, its pension system – the IMF-mandated austerity programme was doomed to fail.”

    You list a lot of problems that existed when the Greek economy was doing much, much better. Its austerity programme was doomed to fail because it was pro-cyclical, and particularly harsh.

    1. George Kanakaris says:
    2. 10kObserver says:

      While it is true that any austerity comes with pain, the Greek situation pre-crisis bears a closer examination. Perhaps it is precisely because of the corruption, oligarchy, and wilful tax avoidance that reveals that the prosperity post EU membership was illusory.

      The entire economy was domestically driven with no material export numbers to speak of. This would mean that all the cheap credit in the years leading up to the crisis fed into giant bubbles of a deeply inefficient civil service, generous pensions, and unsustainable spendings. If we now view that cheap credit was the real reason for the false sense of prosperity, then the fact that all those years of cheap credit did not go towards building any industry driving new tangible exportable goods or services means that we are just seeing an unwinding of a giant bubble that in its core really had nothing to sustain it.

      A greek living in SF once told me something about the greek psyche. Many Greeks (his words) believe that if you’re smart, then you can game the system and become rich without working. The whole point of this exercise is because the lenders want to pretend that in the future, Greece will will able to repay this loan. The size of this loan is irrelevant now because the interest is essentially zero, the lenders want to find a story to kick the can down the road so that 3-10yrs in the future, Greece can somehow start to repay the loan again. At this point, that sum is being backed by the taxpayers of europe, it’s no longer the private sector banks or companies (other than a few courageous, but in hindsight, foolish gamblers) that will take a bath here. The taxpayers of europe can take this loss and write it off. If it’s just Greece, it would be possible.

      The reason they can’t, is that Italy and Spain are much bigger. This is the part that Syriza either failed to grasp or pretend that they don’t grasp.

      Either way, when you think about it, it’s surreal. You have a country asking for rescue package(s) in tens of billions, while simultaneously ripping open the facade that they will be able to repay this loan in the future. The lending negotiators can’t even lie to their own taxpayers that the sunk debt is safe, and that these new rescue packages are just to get to the point where the debt will be recovered (at near zero-interest).

  5. Conrad Easby says:

    Typically excellent piece, Paul, to which i might like to add something.

    The Greek crisis too can be seen as a banking crisis, but whereas in Ireland the crisis was of Irish banks, in Greece it was a crisis of German banks. In this way a German-led Europe can fashion a solution which does nothing to solve the underlying economic problems in Greece.

    The bit about the globalised nature of Irish banking is interesting, because the solution to the German-banks-in-Greece problem was to reverse this process in southern europe.

    When the cross-border eurozone bond market stopped working (altho ironically it actually began to start working, insofar as it began to price risk correctly when it became apparent the convergence trade of the mid-00s was neither based on nor led to underlying economic/financial convergence & so subsequently reversed), the difficulty this presented was also an opportunity to re-stitch the govvies’ market together very differently.

    The stress this puts on sovs & fins becomes a vicious circle from which all the other stuff stems.

    Hope these ramblings make at least some sense, and thx as always for giving us commenters the chance to have a say. Much enjoy your reporting. Keep it up.

    1. Derek O'Flaherty says:

      The biggest bank failure in the Rep of Ireland -and the first – was the German Landesbank/Hyporeal offshoot Depfa which failed with debts of up to a reported €200 billion. Anglo Irish Bank, which destroyed our economy, failed with losses of €64 Billion. Depfa’s debt was repatriated to Germany as, obviously, Ireland would have sunk below the Atlantic if Schauble tried of hang that around our necks. Depfa – a brassplate operation – was the place in Dublin where ropey lending deals, negotiated in Frankfurt, were signed. As they would not have been legal under Germany’s regulatory framework.

  6. Mike Harland says:

    There is only one real reason for this inexorable imposition of austerity over democratic will: corruption in Germany that sold submarines to the Greek oligarchs (originating from the dictatorship), only delivered one and refused to wipe out the debt that would have saved Greece from the now super-inflated debt it can never repay – somebody rational just do the maths and see for yourself – it is as stupid as talking about reducing the UK ‘deficit’ all the time at £80 billion when our national debt is increasing at £1 billion PER DAY and I paid tax last year for that debt that was more than Education and Defence (it’s on my tax statement, so look at yours).

    That same German corruption is trying to save Deutche Bank today which is possibly about to fail if Greece defaults and has sacked its two top executives because it still has enormous exposure to the unsecured credit it leant to all these oligarchs in Greece and other countries. The largest bank in Austria failed recently and bail-in laws have been illegally changed to not guarantee the equivalent of our £80,000 per bank failure. Last week 11 other countries were ordered to implement the same bail-in laws (although nobody knows which countries will also fail to guarantee the minimum.

    How come nobody is making news of these factual EU events, Paul? Because this is all about crushing Greece to save Spain, Portugal and Italy’s massive debt and now even Germany’s and probably the UK’s failed economics. EU democracy is a sham now and southern Europe knows it.

  7. Margaret Eleftheriou says:

    I am sitting in Dublin reading this and I have to say it brought the tears to my eyes. Yes, things are very different here in Dublin as compared to Athens and here too the bankers mostly responsible for the crisis escaped scot free, as my taxi driver from the airport informed me indignantly and in great detail.
    While in Greece I hear about yet another suicide and yet another heart attack in my immediate circle. We really do not know what will happen but are prepared for the worst. Medical supplies and medical help seem to be the worst affected, with most people really not knowing what to do if the medicines on which they depend to contain their chronic illnesses disappear. If this is what the European project has turned into, then I, who have worked for 25 years within European programmes designed to support the free movement of labour, feel that I cannot no longer support such a charade.
    And what about the refugees who come in every day, by land as well as by sea?
    Thanks, Mr Mason, for articulating this intolerable situation in such simple clear language.

  8. Jerry Melinn says:

    I totally agree about the requirement to modernise the Greek economy, which is in no way comparable to the Irish economy. Ireland has an open, export-oriented economy based on agriculture and FDI in the IT and Pharmaceutical sectors. I support the efforts of SYRIZA, who are not responsible for the problems they inherited from the mis-management of previous governments. However, I am disappointed that there have been no ‘micro-economic’ changes such as tackling pharmacies, the example quoted in the article. Also there seems to be no plan to remove restrictive practices and other obstacles to creating a modern business-friendly economy. SYRIZA was a government-in-waiting since at least October 2014 after all.
    Varoufakis’ point comparing post-war Germany to present-day Greece resonates well but unfortunately, SYRIZA are not trusted based on the stereotypes of previous Greek governments and politicians

    1. Al says:

      “Tackling pharmacies” and other small businesses like bakeries will not make one iota of difference in Greece’s GDP or ability to pay off our debt. That issue is a red herring at best and absolute ideological imperialism at worst. The current system of large numbers of independently owned pharmacies has been a job creator. We pay less for medicines in Greece than most EU countries. Creating large chain stores will put an end to the neighborhood pharmacy and reduce employment even more. That this issue is still a sticking point only exemplifies the ignorance of the lenders. Mr Mason subtly said this if you read his words carefully.

    2. MrJones says:

      “modernise the Greek economy”. Sounds more like they are keeping capitalism the way Adam Smith meant it to be. Keeping it localized, competitive and blocking out the monopolies. Allowing Walmart, Walgreen’s and CVS in to take over the market is not “modernizing the Greek economy”, it will have a pejorative effect. Just because you can’t get aspirin at 11pm doesn’t mean they are in the dark ages. Maybe to you and outsiders, but I haven’t heard any Greeks complaining about it. When you live there, you just know when you take an aspirin and there is only a few left you make a note to get a bottle the next day, or call on a neighbor for friend. Heaven forbid we cross the lawn and talk to a neighbor in the USA. That would been putting down the cell phone for a bit. When money is spent on a locally owned business it continues to circulate locally. You spend money at Walmart it is sent overnight to Wall Street and/or some corporate head quarters.

      1. Stamatis Kavvadias (Σταμάτης Καββαδίας) says:

        I very much agree and very well depicted!
        Unregulated globalization and the economy of and for the 1% needs to be held back and fought against.

  9. Guy Wylde says:

    This is the most sensible commentary on the Greek situation that I’ve seen in a mainstream western news outlet. Most of the commentary, and “information,” aka propaganda is nonsensical and ridiculous. Most people have an opinion on the subject commensurate with the material aka manure that they are continuously fed.

  10. Andrew Dundas says:

    Businesses in Ireland invested unwisely in a speculative building bubble. Consequently, developers went bust and banks found themselves with crippling bad debts. Otherwise, Ireland is an efficient economy with a sophisticated population of working age. It’s predatory Corporation Tax regime annoys other EU States. Nevertheless, the UK has provided a loan of £6 Billions as part of a bail-out of Ireland.
    Greece is almost four times Ireland’s population and its economy is inefficient (with important exceptions) and out-of-step with most of the EU. At current exchange rates Greek business must either become efficient or go back to accepting it is an under-developed and inefficient economy. Which Syriza says is impossible.
    Lenders who provided loans to Greece and signed Greece into the EZ, should have known how weak Greece was. They will have to write-off a lot of the debts that Greece owes. Which is a hard lesson for France, Italy, Germany and others to learn. They didn’t have to accept Greece into the EZ. Now they must pay the price for that mistake.

  11. Ed says:

    Some corrections – population of Southern Ireland is about 4.6 million, not 3 million; current estimates are that it produces enough food to feed 35 million people -50 million is the amount they hope to reach in 5-6 years as agriculture expands and EU quotas vanish or are softened.

  12. Boffy says:

    As I wrote at the time, the reason Ireland was recovering fairly quickly was because, as Paul says here, its crisis was financial not economic. Ireland has for many years, had a fairly substantial modern sector of its economy, probably even more modernised than in Britain, because Ireland had pulled in and developed a technology, high value sector, whilst Thatcher had imposed a low wage, low value/high debt model on Britain.

    The problem in Portugal and Greece is precisely that they were unmodernised economies. As I have written several times over the last year, the problem in Greece is not shortage of money, but shortage of capital.

    I think that the situation of the restrictions on pharmacies etc. has a fairly straightforward solutin that Syriza could support at no cost. Its a solution that southern Europe developed itself long ago, particularly in Portugal. Why don’t all the individual pharmacists get together to form pharmacy co-operatives – preferably connected with co-operatives of GP’s, polyclinic co-operatives and so on?

    That could keep within current regulations, but allow the co-operatives to enjoy economies of scale to buy drugs and so on.

  13. Mike says:

    How dare you compare us with the Irish? When we are fighting in the streets with heavily armed police forces, when we were starving because the EU has taken everything away, they are only keep laughing and drinking beer. When was the last time when the Europeans show any sympathy to us? We don’t need their compassion.


    1. Stef says:

      EU showed you mercy by lending you more and more money to prevent the whole country from spiralling back to the middle ages. Greece is obviously unable to govern itself.

      1. Andrew Dundas says:

        V Good point Stef!
        Perhaps we should add that Greece was always known to be an inefficient economy stuck in medieval and syndicalist cultures. With that knowledge, why did the EU’s Council of Ministers ever welcome Greece into the EZ’s club in 2000? That Council (and the ECB) owes some responsibility for allowing Greece into its financial club and for ignoring the danger signals ever since. The EU has been very careful not to allow several East & Central EU members to adopt the Euro until they’re ready, so what was so urgent about welcoming Greece?
        EZ lenders also deserve their large impending losses for their own culpability.

      2. Kostas M says:

        More than 95% of those loans went directly to debt repayment…Which was in fact a massive swap of greek bonds from,mainly,german and french banks to ECB,IMF and EU countries that should never happen and was not in favor of Greece or the EU citizens.Greece suffers an economic crisis that can only be the result of loosing a world war those white collara cannot ask for more..We are done…

    2. Anna says:

      Having lived in both countries, I have to agree with your statement on the Irish. That said, you were/are not all fighting in the streets or starving in Greece, and you do have your own fair share of ass***es.

      1. lux says:

        In fact I’m drinking a beer and laughing at you right now.

  14. Theod says:

    I think you are only trying to see the problem from an economic perspective. You clearly miss out the fact that the EU has chosen to punish the entire Greek population in order to shut down the spread of anti-austerity movements to the rest of the continent. Here there is an important link http://www.respublica.gr/2015/04/column/commentsfree-prometheus/

  15. julien etienne says:

    I like your analysis very much, but I would challenge the assumption that the chaotic scenes you are referring to have to do with the crisis. That happened before the crisis began. Non-intervention againsts anarchist violence is also a policy of the current government; see the recent, frequent instances of violence in different universities in the country. That’s got to do with deep-seated principled opposition to all security forces, which has been cultivated for years…

  16. George says:

    I cannot comprehend how austerity has become a “one size fits all” solution. As Mr Mason put it Greece is a different economy than Ireland and Portugal (as well as Spain). Yet the creditors insist, despite their failing predictions, on even greater austerity measures. If this goes on Greece will be forced to leave the Euro (and the EU) but this event will have devastating consequences for the whole of Europe, in fact it will mark the beginning of EU’s breakup.

  17. Sofia says:

    Well aspirin and paracetamol are only sold in pharmacies in Germany as well as many other EU countries, specifically those which seem to be doing just fine financially. I guess that leaves a huge gap in big players profits that somehow has to be filled. Or your country will default. Beautiful, ain’t it?

  18. Nikolaos Giannoulakis says:

    I would like to congratulate you for such a great presentation of Greece reality. As for the comments it takes two to corrupt. One receives and one gives. At what time even now someone within European ‘Union’ helped to stop this? Was the giver also taking more? At what time the Greek’s became productive? Certainly not within EU but rather before. In Greece people are proud of who they are and that is why they behave themselves apart from a small percent of population. An old Greek saying goes like this. You cannot collect anything from someone that possess nothing.

  19. panagiotis says:

    how you define “far-left leaders” in modern times? The politicians that support people’s right for public education and sustainable NHS?

  20. M P says:

    It is more or less true what is reported, just a piece of information: Europe did knew about “oligarchy, corruption, reformed retail economy etc.” and still did lent billions to this corrupted system and governments. The corrupted is of course to blame, but is the “corruptor” fully innocent? It is the German government who protects siemens’ scandal builders, is it not? They paid the money on the oligarchy, that went afterwards on people’s bill. Greeks are to be blaimed for having this system, but by restraining the air would really help Europe?

  21. Maria says:

    Somehow mr. Mason has managed to get a profound grasp of the greek mindset in just a few days compared to the hordes of policymakers, IMF and EU experts who have been resident in Greece or repeatedly visited the country since 2010.

    I don’t know how he does it! Is it common sense and basic economic literacy?

  22. Nick Kouzos says:
  23. Dimosthenis says:

    It is a nice try by Mr.Mason but sadly fails to point out the most significant reason for the failure of the plan for Greece. One needs only one paragraph to describe this:

    The current Greek government (as the one before it) continues to refuse to make reforms in basic aspects of the economy. Why? Because by making structural reforms they would let go of their client-like deals between voters and parties!

    In Greece and for the last 30 years, the political system (the main parties) has learned to support itself by awarding voters with their demands. Who are these voters? Anyone with the ability to demand by strikes or “revolutions”, e.g. public sector workers, anarchists, radical leftists, etc etc. They would demand and each party would promise them extra rights and salaries (paid by the rest of the citizens of course) as soon as they voted for them.

    The plans in Protugal and Ireland succeeded because governments there agreed to make structural reforms (Mr. Mason seems to forget the deep structural reform of the Irish bank and economy sectors) and that is why after some years the economy strengthened itself.

    Lastly, the only failure of the IMF and EU in their efforts for Greece was that they did not refuse to provide help UNLESS the basic structural reforms were adopted. Instead, they let the Greek governments increase taxes and doing everything else to achieve the needed positive financial results BUT decrease the voluminous public sector and bringing back common justice amongst the citizens. They still do not make clear that the austerity measures are taken because the Greek government fiercely refuses to reduce the overpaid public sector.

  24. Georgios says:

    Some truths there, but failing to point out the real case. It is a relatively simple answer once you have an overview of the state’s situation and the (absence of) government’s actions. The plan for Greece failed because it was actually never executed.
    Below two very recent comments which explain this:

    “…Primary budget surplus without new taxes requires reduction of the state’s expenses. If we exclude the reduction of salaries and pensions (which is correct) what remains is the drastic reduction of the number of public employees. If we exclude this too (which is wrong) then we should not complain about the extra tax measures because they are the only remaining way to achieve primary surplus…” (Stefanos Manos, former president of Drassi)

    “…To prove how right is Stefanos Manos, we just have to calculate the number of public employees that correspond to the measures the current Greek government proposes. For 2015 and 2016, the total taxes that the government will enforce is 2,344 mi. Euro. The median total annual cost of a public employee is app. 60.000 Euro (together with all 14 salaries, dues etc.). In other words, with app. 20.000 public employees fired, no added taxes are needed. And by the way, during the past few months, app. 40.000 private employees have lost their jobs, just because of the “negotiations”…” (Nicholas Nicolaidis, vice-president of Dimiourgia Xana!)

    To the above I will just add that it is relatively easy to find 20.000 public employees who were taken in the public sector without any skills and who sometimes do not even show up for work but still take juicy salaries…

  25. Owen says:

    “Irish agriculture, from a country of 3 million people, produces enough to feed 50m worldwide and growing.”

    The population of Republic of Ireland 4.58 million in 2012. Emigration is high, but not that high!

  26. Al says:

    Your pharmacy example is an excellent exhibit of the lenders not seeing the forrest for the trees. Yes, Greece is a country of owner operated small pharmacies that have limited hours. We have no Boots or Walgreens. Yet, those small pharmacies are conveniently located, and at least on our island, will open at any time for a true emergency. Further, combined, the nation’s small pharmacies create more local jobs than major predatory chain stores could ever provide.

    That said, we are dealing with an austerity program that has collapsed the economy and left over 25% of the population unemployed. The lenders have their knickers in a twist demanding “pharmacy reform”. Pray tell, do they really think their desired approach to pharmacies is going to improve the GDP, reduce unemployment or increase Greece’s ability to pay off its debt? What their obsession with minutia like pharmacies shows is that they really have no grasp of the greater social, economic and labor force issues. They simply say, “Do it the way we do it and all will be fine.”

  27. An Mailleach says:

    Population of 3m? In 1960 maybe.

    The main causal difference between Ireland and Greece? We have a state that works, and is generally free of corruption, with a rule of law. The Greek welfare state collapsed with the economy, bribes are needed for the smallest transaction, and politics dominates over a labor of legal system.

    It’s not culture, it’s not the initial shock (which on most metrics was bigger in Ireland), it’s the ability of the state to ameliorate the effects of the shock.

  28. Kathleen Smith says:

    I can’t believe that your expert analysis failed to mention a neo-liberal agenda for Greece. This is how it works – Let’s bankrupt the corrupt country (blame the little guy call him lazy and entitled and not the rich oligarchs who have controlled the government for decades and who do not pay their fair share of taxes – kind of like the USA). Now that your country is out of money because you can’t pay back money we lent you(by the way we knew you could never pay us back when we gave you the money in the first place). Now we want you to privatize – so sell us your ports, rails, water, postal service, schools, anything public we will buy it at discount with worthless money we make from nothing. Now you are a serf and we are your lords. This is progress.

    1. fearghal Connolly says:

      Excellent point Kathleen, spot on. And I too shall drink beer later and laugh

  29. Mike says:

    I appreciate your insight but thought you didn’t address the “reasons” for the failure of the “austerity” sufficiently well nor the connection to the elite/cartels/politicians who rake moneys off the system. You state that “Greece is an unmodernized capitalism where you can’t impose austerity at this level and hope to modernize.” I don’t think that is true. Specifically the pharmacist cartel is a great example. This group has been well protected by politicians for a long long time. This includes the sale of generic drugs that cost up to 880% more than affluent Sweden; pharmacies that are allowed guaranteed profit margins of 25-35% on most products until 2017; the lack of new licensing by the government; baby milk and over the counter medicine sold only in pharmacies and the ability to avoid significant taxes. “Breaking” the cartel could enhance the monetary condition for the Greeks as a whole but this is fought with proposed “reforms” thwarted by powerful politicians ( ie.Panagiotis Kouroumplis – Health Minister). Greece has major structural problems with bribery; cartelism; tax evasion; extortion; graft; patronage; nepotism, etc.. The Troika has made and continues to make mistakes but many of the Troika proposed austerity “reforms” were intended to change the environment and lead to some degree of Greek self-sufficiency. Instead of negotiated compromises Syriza has hidden behind a voting “mandate” and has unleashed propaganda to stoke the fires of “dignity” and “nationalism”. At the same time they owe pharmaceutical companies 1.2 billion euros; do not fund EU subsidized infrastructure projects (removing good paying jobs); do not fund health care/education and Syriza has not proposed any “growth” plans. While Parliament passes the ability for members to get interest free loans (+ they refused to deposit their own reserves for government access), a recent Greek paper stated that it would take 30 years to audit all suspected tax evaders. If they don’t want to reform, so be it. The memorandums had conditions. They are reciprocal. If the Greeks resent “reform”, they can seek alternatives. If they don’t want to pay taxes, the government will lack funding. If they cannot collect taxes (current system in chaos and serial amnesties), the government will lack funding. From the very first, the idea that Greek would gain significant moneys and repeal “austerity” with no strings attached was delusional. The Greeks as a whole acknowledge the endemic problems. The powerful in Greece have decided to avoid possible painful solutions and maintain their toll-taking of the economy. I am all for repudiation of debt, humanitarian projects funded by the EU but overseen by third parties and growth projects funded by the EU but overseen by a third party (IMF). The Greeks need to decide. They need to make hard choices.

    1. Stamatis Kavvadias (Σταμάτης Καββαδίας) says:

      I largely agree with you, but you are making a big mistake. Opening up the pharmacies to competition is OK, but allowing in chains with international subsidiaries, able to move their income abroad, is not. Making tax collection strict for the lower incomes is not going to work (the government will eventually fall), despite a majority that would faithfully pay their taxes and request receipts, if the rich were contributing their fair share. Increasing VAT without a sober public discourse on shifting the basis of the economy away from retail and cheap tourism, is not going to help and will soon be reversed.

      The issue far more cultural than Europeans care to admit. Your stringent rationalism will not work, I am sorry to say. A political approach is needed. SYRIZA is the best there is in this respect, though it is not good enough. And, unfortunately, mild politically-colourless thinkers are elusive, including because of the long social frictions in Greece. Thus, attempting a complete, viable and sustainable solution, in a single step, is the wrong way forward.

  30. Robert Bolton says:

    I think that it’s all about asset stripping the Greeks. The Banksters demand privitisation of publicly owned services in exchange for an exorbitant loan, then sell them off at knockdown prices to their cronies. It’s the criminal Banksters who are to blame the world over.

  31. Mat Porter says:

    Your example of the pharmacy is one that shows just how simple some of the reforms can be. What you say may be true (that the Greek people are happy to pay more for their drugs and get the service you describe), but they don’t have the choice. Open the sector to competition & see what happens. Boots/whoever can come in & succeed or fail (and either will be positive for Greece in the short term).
    Until these things are tried, how does anyone ‘know’ the Greek people will not accept it? The aim of a business should be to serve it’s customers, not to serve the business owner.

    1. Stamatis Kavvadias (Σταμάτης Καββαδίας) says:

      That is correct, but it is also the aim of an economy only if business is taxed domestically and has no means to transfer its earnings to Luxembourg. Otherwise, it is the aim of a global business-lobbied establishment, prone to lack of accountability and impunity.

  32. Stamatis Kavvadias (Σταμάτης Καββαδίας) says:

    It’s not only that Greece does not have as modern capitalism social and law structures as Ireland. Greece (currently) does not want these structures to the extend they lead to an economy for the 1%.

    Modernising the mindset of Greeks, out of the retail economy culture and a tourism industry for low income tourists, is a huge shift, needed but not in sight. Populist and low content political and public discourse, do not offer any grounds for evolution of ideas. Mixing politics with economics creates a thick wall against any argument.

    Reasonable modernization arguments have to also guarantee the rich pay their share, otherwise they create popular contempt and voters’ shift to the left. The continuous (global) shift to more business favouring legal structures, does not, will not (and in my opinion should not) advance in Greece. To the extend any memorandum proposed to Greece advocates this kind of structural reforms, it is “absurd”.

    Greek culture is far from the European trajectory to prosperity that tolerates banking sector rents and races to the bottom. The gap between the rich and the poor tolerated in the rest of the west is intolerable to Greeks. If convergence is to take place, it will not be on European terms, it will be only on terms of mutual interest and it will need a considerable amount of time and mindful governance in Greece. SYRIZA could play that role, but it is rejected by the European culture. Do not fool yourselves: Europeans do not reject SYRIZA, they reject Greek culture.

    Of course, this culture could change (not that I am convinced it should). But Greeks are not in a historical situation where they have prospered for a prolonged time, nor so on their own means in any reasonable sense. Currently, there is no space, nor the positive attitude required to inspire any change.

    Nor do the Greeks feel they are lifting their own cross. Europeans have taken the side that raises popular contempt and voters’ shifts, among Greeks. That’s not so in Greece only and Irish choices and culture cannot be exemplar across Europe.

    The effort of comparison and moral judgements is the political sin coupling the original economic divergence implied by the gap in economies’ potential (economic fundamentals must include structure) that are dooming the EZ project, triggered by its rigidly incomplete fundamental structure and lack of a lender of last resort.

  33. VN Gelis says:

    Greece produced a lot of its own drugs. Under IMF imposed reforms it was about reducing Greek NHS bill which was cut by 40% to bail out banksters. Thus reductions in purchase price was demanded for medicine whereby generic drugs were to be imported from low cost Asia without any due checks…
    Troika programmes aren’t about reforming or developing basic Greek capitalism but in creating Europe’s first maquila. Once up and fully running in Greece it will be exported. The EU wants head to head competition with Asia. Can only achieve this by driving costs down, eg labour, patents, etc.

    1. Andrew Dundas says:

      How true!
      Like everyone else, Greece has to be competitive to serve its citizens best.

  34. Nick says:

    Perhaps Greek society at large should take an inward look at itself.
    As a Macedonian, I’m disgusted at Greece’s treatment of its’ minorities, Macedonians, Turks, Vlachs, etc and it’s policy of doing everything it can to stop Macedonia, the country from being recognized fully, using its own name Macedonia. You can’t even baptise your child in a Greek Orthodox Church in Greece, using an ethic Macedonian name.
    Its’ refusal to accept the reality that Turks live in northern Cyprus..and that they don’t want to be ruled by Nicosia and Athens is another debacle, along with Greece’s horrible treatment of Albanian temporary workers, which has been well documented.
    Perhaps the Greek psyche needs to be changed. To accept others. Then maybe things will get better with the economy.

    1. George Kanakaris says:

      Another generalisation.You can replace ‘Greece’ with America , England or Macedonia….

    2. Nick Kouzos says:

      Dear Nick
      It is not surprising that you as a Macedonian would not miss the opportunity to bring forward what is the main conflict between Greece and Macedonia. I believe that the Greek financial crisis has no relation with either the conflict over the name Macedonia or the treatment of minorities in Greece.
      But I would like to take the opportunity to clarify a few issues since you brought those issues up.
      Of course I don’t expect you to adhere to my points of views, I only hope that I can convince you to listen to the story from both sides or may be even from more than two sides.

      There were more than 70 nationalities under the Ottoman rule before the 20th century.
      The Greek war for independence played a very important role for the collapse of Ottoman Empire in the Balkans and Central European Countries.

      After the collapse, there were continuous exchanges of populations between the Balkan populations of different nationalities and Turkey.

      There were 1.500.000 Greek nationals who were expelled from Turkey while the new Turkish state was formed.

      There were some Muslim minorities that still remained mainly in the area of Thrace and the Greek part of Macedonia. These Muslims were mainly Pomacks and not of Turkish nationality, otherwise they would have been exchanged under the population exchange treaty of 1924.

      These minorities were treated as equals and not as the remaining Greek minorities in Turkey, who were expelled as recently as 1956.

      There is no comparison in treatment of minorities between Greece and Turkey.Just consider Armenians.

      Of course, they were other conflicts between Greece and Bulgaria, as well as between Greece and Albania. The Bulgarians claimed part of Greek Macedonia as well as part of your country which was part of Yugoslavia under the dominance of Serbia. Fights between Greece Bulgaria and Turkey were very hard and cruel over the Balkan wars during 1912-13 even during the first and Second World War.
      Finally things stabilized and the frontiers between Greece, Turkey Bulgaria, Yugoslavia and Albania were set with some minorities left in most areas.

      The issue of the name and Macedonian Nationality was very recently raised by Tito who inspired the part of Yugoslavia that was part of the geographical area to be the actual Macedonian Nation.

      We in Greece claim that the Geographical area Macedonia was part of Byzantine, and later Ottoman empire inhabited by various national groups including Turks, Slaves, Vlachs, Bulgarians Greeks, Albanians, and some others.

      We claim that the geographical area is Macedonia that has been split in three, Your country, the Bulgarian part and the Greek part, we object the argument that any one of the three or more nationalities can claim to be owners of the Geographical area to be as one state, especially we object the existence of a Macedonian Nationality that can inherit the historical part of an ancient Greek state called Macedonians.

      Ancient Greece consisted of many States, in the Greek Mainland the islands, Asia Minor even Italy. These States spoke the same language shared the same religion and culture and most of all they shared the feeling they had the same Greek nationality; this is why Alexander the Great distributed the Hellenic culture in Asia up to India Syria and Egypt.
      His teacher was the Greek philosopher Aristotle, I hope you will agree that sharing all these attributes define what in general people accept to be a common Nationality.

      Finally I would like to counter argue some facts about Cyprus. The Turkish Cypriot population existing in Cyprus, before the Turkish invasion, during 1974 was just 18%. I hope you will accept the fact that such a minority cannot dictate the governance; neither can justify the split of a country in two. Would you accept the split of your country in two because of an Albanian minority?

      Finally you speak of the treatment of the Albanian temporare workers in Greece, please note that in a country with 35% unemployment you may experience some discrimination which is very difficult to control. Just consider the amount of money transferred to Albanian economy from such Albanian workers who in most cases work free of any tax reductions.

      I felt the need to give this response to provide an explanation on the part of my country which is suffering enormously, at this time especially, because we are obliged to maintain a defense budget to face continuing aggression from the Turkish activities in Aegean Sea.

      Thank you for your patience, I do enjoy visiting your country where I am enjoying strong friendships.
      Nick Kouzos

  35. gerardnfarrell says:

    Ireland’s population is 4.5 million, passed the 3 million mark in about 1970, just so’s you know…

  36. Jack van Dijk says:

    The Greek philosopher Nikos Dimou has been studying for sixty years the national character of his countrymen. His analysis? “Greeks live twice over their financial resources. They promise three times more than they can deliver. They claim to know than four times more than what they have really learned. And their feelings are set to five times more intense than what they actually feel.

    1. Stamatis Kavvadias says:

      Do you personaly know any Greeks, or Nikos Dimou for that matter?

      1. Jack van Dijk says:

        No. The quote comes through De Correspondent, a left progressive digital Dutch newspaper where the comments are sharp and intelligent. In later articles they decry the fleecing of Greece by the banks. I purchased the small booklet of Mr. Dimou and read it on Kindle). It was not positive about the Greek. Most interesting I found his comments that the Greek are not the great source of democracy, or even do not inherited from Socratis. He said that the Greek are a heap of Balkan people, Turks, Macedonians and the like. the original population is watered down to what it is now. Visiting Anatolia on vacation, I was surprised to see that where Iliad was played, was now Turkije and when I asked this question to the tourist guides (we spoke German) they said that the takeover by the Turks was never a bloody affair. Dimou makes the point that the Greek population does not have a glorious past, just people, nice people.
        By the way, although writing from North Carolina, I am Dutch, From De Correspondent I have not a great opinion about Jeroen Dijsselbloem. I also lived years in Germany and came to admire them (not their sense of humor). Los of people tried to fleece them as well the Dutch, none got the chance. The Germans fleece the Americans by lowering the value of the Euro and sell them Mercedeses.

      2. George Kanakaris says:

        Is that the same Nikos Dimou who urged people not to vote for Tsipras ?Nuff said.

      3. Stamatis Kavvadias says:

        Well, I partly agree with Dimou, but that’s from my personal experience, as wide as it can be. The value of opinions, based on personal experience, is limited. To disprove your quote and Dimou’s comments on Greeks, I will paraphrase Epimenides for you:

        If Dimou is Greek and expresses his feelings on Greeks saying “their feelings are set to five times more intense than what they actually feel,” how true can his statement be?

        [The liar paradox: Epimenides was a Cretan who made one immortal statement: “All Cretans are liars.”]

        All this is about trying to say something “intelligent” about a real situation. Many Greeks are having real everyday problems, feeding their children. What we are saying here is not really intelligent.

  37. Jack van Dijk says:

    I wrote a long answer, but 4News deleted it. I indeed decry people going hungry or not having medical care. I cannot afford it, otherwise we would go on vacation to Greece and spend some money there. The Greek youth should go to other countries and work. The Spaniards do it.

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