Is the Eurozone about to split?

[andyandy]

With the IMF imposing its usual strict rules for reform, with Greece having a pretty militant strike-happy workforce, with Germany baulking at contributing to a bail out fund for a country with much more lavish pensions than its own, what's the prediction for the Eurozone? How likely is it that Greece will leave the Euro?

One analogy was quite interesting - that Greece will be the Bear Stearns of the crisis - small enough and early enough to be bailed out - and that by the time the next country is in trouble (Portugal? Spain?) it'll be a Lehman's style "let them go bust" attitude....



(at least holidays to Europe have got a bit cheaper in the last few days :) )

Discuss....

[Francesca R]

The IMF only gets involved when nobody else will help a country out of a terminal crisis. The conditions it applies (which it cannot always enforce anyway in the case of much poorer countries than Greece) are very much more lenient than those that unfettered market forces would apply (which would probably drive Greece into insolvency and then pick off others).

Strikes and riots are commonplace under these conditions in the country requiring severe fiscal adjustment. They do not tend to derail IMF programmes because the stakes have already been pushed to such extreme levels that protests on domestic TV are not the greatest of politicians' concerns. If this was France attempting to raise its state retirement age by a week, then protests would of course reverse it, but it's more serious.

Similarly, public opposition in Nordrhein-Westfalen is unlikely to stop Germany's CDU-FDP government lending money to Greece (although their dithering has undoubtedly raised the cost of this), because they know (even if the public doesn't) that it is in Germany's national interest, and the EMU-zone's group interest for Greece not to default in a disorderly way, or re-create the drachma and devalue by 50% (since German lenders own about EUR50bn of the debt. France owns more). Germany does seem to be insisting on some kind of "restructuring" (prematurely ruled out by the largely uninvolved Jean Claude Trichet and the highly irrelevant Herman Van Rompuy) so that private lenders take a permanent hit from this, alleviating the potential hit to taxpayers. It is well beyond my expertise to comment on how this could get done in a legalistic way that does not trigger CDS events, but I think it can (as Dubai World's collapse in December showed).

IMO countries bigger than Greece (Portugal is smaller actually) can't feasibly be rescued without the European Central Bank buying their debt, and I can't think of how this could happen without junking the inflation mandate, which would give the euro a boost in the worldwide race between currencies for which one can go down the most. It would raise the inflation premium paid on borrowings for all 11 countries in the zone.

[Frank327]

I think european countries are fully ready to support greece with avoiding collapse, and under less strict control than the IMF, but it has to come from both sides. We're also talking about a country where people normally retire at the age of 53, and where tax evasion is the national sport.

The attitude of the greeks now seems to be that they don't want to change any of that, and that would simply cause the euro to collapse. If you live in a country where it now seems the retirement age is about to go from 65 to 67, it's only logical to say let's throw greece out of the union.

Anyways, that's all from the general population's point of perspective. We all know it's in our self interest to help countries in trouble, but we're not going to keep countries' economies alive if they're eventually going to collapse anyways. My message to Greece is: start working a bit more and start paying some taxes. If things are still horrible then, go ahead and complain.

[Toke]

The last I read on it was that the Greek government in 2007 had more or less shut down the IRS control function and replaced tax income with loans.

[El Greco]

Please, keep this discussion going on. I want to see how many more things I will learn about my country and the way we live here.

[plumjam]

Personally, I miss the drachma.
In Kavos, Corfu, in the summer of '94 seven drachma would buy you a hearty meal, 4 bottles of Amstel beer and two* packs of pornographic playing cards.
I cannot say that of any competing currency.


* in case you lost one

[Frank327]

Please, keep this discussion going on. I want to see how many more things I will learn about my country and the way we live here.Yeah, sorry about that, but that's pretty much how the media paints the picture. I understand most greeks are hard working tax paying citizens.

I live in a country having to cut back deficits too, which is some 31 billion euros (I live in the Netherlands), so if you ask the people, no one wants to bail out other countries while we ourselves are severely cutting back. Especially if you hear stories about government employees with 14th months retiring at 53. I hope you guys can force government to sort itself out with this crisis.

[barrymore]

I understand most greeks are hard working tax paying citizens.

Stand your guard. Greeks do NOT pay taxes--not as much as they should anyways. There is no arguing against it really. If you plotted the income distribution of reported income, it would not resemble anything even remotely connected to reality.

ETA:

And no, the Eurozone is not going to split. The EU was borne out of tensions between Germany & France, so unless something happens with either of those countries, I do not see it going down. Which is not to say there will not be reforms.

[El Greco]

I understand most greeks are hard working tax paying citizens.

Most are hard working, indeed. The vast majority pay taxes, mainly because they can't avoid it (it has been estimated that it is about 8500 people those who owe 8 billion of taxes). And we are also ******* stupid idiot morons, mainly because of the way we have been voting all these years. Hmmm... no need to include myself in that one.... THEY are the morons, since I have never voted for one of the two parties that have been governing Greece during the last 35 years.

That being said, it is really amazing to watch the image of the average Greek being pushed by many foreign media. If other Europeans can believe this crap, then we can at least find solace in the fact that we are not the only ones that can be so easily fooled.

[El Greco]

Stand your guard. Greeks do NOT pay taxes--not as much as they should anyways. There is no arguing against it really.

Ah, thanks. Nice to see another expert chiming in.

[El Greco]

no one wants to bail out other countries while we ourselves are severely cutting back.

I really believe that we would be better-off long term if there was no bailout. There would be much blood in the Greek streets and it would probably start a chain reaction with worldwide consequences, but corruption here is so deep that I don't see an easy exit.

The problem is, that if there were no bailout for Greece, Dutch people would suffer as well. Unfortunately.

[El Greco]

And I don't care much, to say the truth. Basically I would like to emigrate.

[Toke]

(it has been estimated that it is about 8500 people those who owe 8 billion of taxes)

Removing the control part of the IRS will benefit those with the highest incomes, and make little difference for regular employees. Getting fancy with your taxes tends to require a large income.

[barrymore]

Ah, thanks. Nice to see another expert chiming in.

Why are you denying it? It is an empirical fact.

http://online.wsj.com/article/SB10001424052748704182004575055473233674214.html


Greece has one apparently simple option for reining in a budget deficit that has roiled financial markets: Clamp down on widespread tax evasion, which costs the country an estimated €15 billion ($20.5 billion) a year, an amount that would pay off a big chunk of the budget deficit.
...
The Greek shadow economy, which is made up of unreported income, was 25.1% of gross domestic product in 2007, according to Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The shadow economies of Spain, Portugal and Italy were all around a fifth of GDP. That compared with just 11.8% for France and 7.2% for the U.S., he said.


And this little salacious (though somewhat anecdotal) piece from the Financial Times:

Don’t quote me on this apocryphal statistic, but I’m reliably informed that exactly six Greeks declared more than a million EUR in income last time anybody counted. And exactly 85 declared more than half a million. So we’re probably a bit better than top 40.


http://ftalphaville.ft.com/blog/2010/02/15/149206/greeces-personal-wealth-comedy/

[Toke]

The Danish state bankruptcy in 1813 lead to the creation of a new central bank and currency.
It was backed by 6% of all real estate value in the country, it* could be paid as a lumb or in rates.
*The new and sudden real estate tax.

It looks like Greece have the money, if just the government dares to go for it.

[The Central Scrutinizer]

Please, keep this discussion going on. I want to see how many more things I will learn about my country and the way we live here.

This whole thing is your fault.

[El Greco]

Why are you denying it? It is an empirical fact.

I'm not sure what exactly an "empirical fact" is. I suppose it's something that can't be verified. The vast majority of Greeks pay taxes. They are civil servants who can't avoid it. They are pensioners who can't avoid it. They are small businessmen who often times pay MORE than what they should be paying (due to some nice logistic tricks and semi-obligatory "settlement arrangements" devised by the Greek IRS). Those who don't pay are very few and evade a lot.

Even those filthy politicians have now stopped urging people to pay their taxes. They understand that it is getting ridiculous, because the vast majority don't have a choice anyway.

[barrymore]

I'm not sure what exactly an "empirical fact" is. I suppose it's something that can't be verified. The vast majority of Greeks pay taxes. They are civil servants who can't avoid it. They are pensioners who can't avoid it. They are small businessmen who often times pay MORE than what they should be paying (due to some nice logistic tricks and semi-obligatory "settlement arrangements" devised by the Greek IRS). Those who don't pay are very few and evade a lot.

Even those filthy politicians have now stopped urging people to pay their taxes. They understand that it is getting ridiculous, because the vast majority don't have a choice anyway.

:confused: I provided evidence, so I suggest you do the same. No one is saying that every Greek evades taxes, but if you deny that it is a LARGE problem, you are simply delusional. If you click on the WSJ link I provided you will see that Greece has the largest shadow economy of well-developed economies.

[El Greco]

:confused: I provided evidence, so I suggest you do the same. No one is saying that every Greek evades taxes, but if you deny that it is a LARGE problem, you are simply delusional. If you click on the WSJ link I provided you will see that Greece has the largest shadow economy of well-developed economies.

Do you know what "evidence" is ? What exactly constitutes "evidence" ? That article you linked to ? I will spare our precious readers from providing pages and pages of similar "evidence".

Do you understand the difference between "shadow economy" and "tax evasion" ? Do you understand that countries like Belgium have comparable underground economy but nothing like the Greek problems ?

You also seem to have a great problem distinguishing between the MAGNITUDE of a problem and the NUMBER of people responsible for it. Did I deny that tax evasion is a LARGE problem ? No, I didn't. What I did, perhaps not as eloquently as I should, is say that your blanket statement "Greeks do NOT pay taxes" is stupid. And I'm being really nice here. Still.

[barrymore]

Do you know what "evidence" is ? What exactly constitutes "evidence" ? That article you linked to ? I will spare our precious readers from providing pages and pages of similar "evidence".

How nice of you. Not quite sure why you take it personally that tax evasion is a major problem. You can call Americans fat, I do not care.


Do you understand the difference between "shadow economy" and "tax evasion" ? Do you understand that countries like Belgium have comparable underground economy but nothing like the Greek problems ?

Tax evasion and shadow economy are similar in Greece because there is not a large amount of illegal business going on, such as drugs.


You also seem to have a great problem distinguishing between the MAGNITUDE of a problem and the NUMBER of people responsible for it. Did I deny that tax evasion is a LARGE problem ? No, I didn't. What I did, perhaps not as eloquently as I should, is say that your blanket statement "Greeks do NOT pay taxes" is stupid. And I'm being really nice here. Still.

I agree that the blanket statement was unnecessary, but it is not central to my argument that it is a large problem. Wealthy people always pay a large percentage of taxes, so if they are evading in spades, it results in a large problem.

[El Greco]

How nice of you. Not quite sure why you take it personally that tax evasion is a major problem. You can call Americans fat, I do not care.

I'm not taking anything personal. It is just inaccurate to say that Greeks don't pay taxes. The vast majority do. Many pay MORE than what they should be paying according to their income. And as I said, I don't care much about Greece. If I had first-hand experience about eg Nigeria and I was listening to things that were not true about that country, I would say the same.

Tax evasion and shadow economy are similar in Greece because there is not a large amount of illegal business going on, such as drugs.

As opposed to Belgium or Italy (similar shadow economy), where drug dealers are plenty ?

I agree that the blanket statement was unnecessary, but it is not central to my argument that it is a large problem. Wealthy people always pay a large percentage of taxes, so if they are evading in spades, it results in a large problem.

I repeat that I didn't deny it is a large problem. What I find funny (and a little disgusting at the same time) is the completely inaccurate image of the AVERAGE Greek as a tax-evading lounger.

[Toke]

I repeat that I didn't deny it is a large problem. What I find funny (and a little disgusting at the same time) is the completely inaccurate image of the AVERAGE Greek as a tax-evading lounger.
That sounds perfectly understandable to me.
Do you really expect the tax evading capitalist swine that bought your government to admit it?

Of course they are going to blame it on "the Greek people whose national sport is tax evasion" or alternatively on the pensions, military budget, or some other public expense.

[barrymore]

As opposed to Belgium or Italy (similar shadow economy), where drug dealers are plenty ?

Are you trying to argue that shadow economy statistics for developed countries are not a good reflection of tax evasion (by otherwise law abiding citizens)? What illicit businesses could possibly be going down in Greece that would inflate it so much?

I repeat that I didn't deny it is a large problem. What I find funny (and a little disgusting at the same time) is the completely inaccurate image of the AVERAGE Greek as a tax-evading lounger.

From what I have read, no one is painting Greeks as crooks. But if you are looking at US media, it is going to get attention because it seems to be more of a problem in Greece than it is in the US, even among the average taxpayer.

[MikeMangum]

http://www.powerlineblog.com/archives/2010/05/026229.php
In Marxist theory, the Communist Party represented the interests of productive workers, the value of whose labor is expropriated by others. That was wrong, but at least it had a certain coherence. Greek Communists (and more generally, 21st century socialists) stand for something quite different: the ‘right’ to be supported by the labor of others (in the Greek case, Germans); the ‘right’ to be a sponge, forever; the ‘right’ to be an exploiter. It would be hard to think of a less attractive political program.” And yet it is generally regarded by “right-thinking” people as respectable. . .

I find it hard to see how this assessment is wrong with regards to the protestors.

[El Greco]

There are many things I would have written had I not been extremely occupied with other things, but here's something interesting:

dQGkP68AVTI

[El Greco]

Meanwhile, a recent study concluded that Greeks work on average MORE than Germans do.

[Chaos]

I'm not taking anything personal. It is just inaccurate to say that Greeks don't pay taxes. The vast majority do. Many pay MORE than what they should be paying according to their income. And as I said, I don't care much about Greece. If I had first-hand experience about eg Nigeria and I was listening to things that were not true about that country, I would say the same.



As opposed to Belgium or Italy (similar shadow economy), where drug dealers are plenty ?



I repeat that I didn't deny it is a large problem. What I find funny (and a little disgusting at the same time) is the completely inaccurate image of the AVERAGE Greek as a tax-evading lounger.

I think there is only one way to settle this argument. Why don´t you provide evidence - of the same quality as your opponent´s - that all people in the US, particularly in New York, are depraved, violent criminals who will rob any hapless tourist they come across, beat them to within an inch of their lives, and then dump them in the Hudson River? After all, there is nothing more satisfying than defeating someone on their own level of discourse...

[rjh01]

I think there is only one way to settle this argument. Why don´t you provide evidence - of the same quality as your opponent´s - that all people in the US, particularly in New York, are depraved, violent criminals who will rob any hapless tourist they come across, beat them to within an inch of their lives, and then dump them in the Hudson River? After all, there is nothing more satisfying than defeating someone on their own level of discourse...

Stawman. What more needs to be said?

[Chaos]

Stawman. What more needs to be said?

What needs to be said is that barrymore´s assertions are ridiculous, as is his so-called evidence. I suggest that El Greco counter it with even more ridiculous assertions backed up by the same degree of evidence, to convince barrymore that this debate tactic is not particularly fruitful.

That is not exactly the highest art of debate, but more rational approached have so far failed to convince barrymore, so I imagine El Greco might be ready to try something more extreme.

[Puppycow]

The vast majority of Greeks pay taxes. They are civil servants who can't avoid it. They are pensioners who can't avoid it. They are small businessmen who often times pay MORE than what they should be paying (due to some nice logistic tricks and semi-obligatory "settlement arrangements" devised by the Greek IRS). Those who don't pay are very few and evade a lot.

So most people pay their taxes. What is the ratio of the public sector to the private sector? We are told that too many people work for the government and not enough in the private sector. I looked for statistical information on this but I haven't found what I was looking for yet.

[barrymore]

What needs to be said is that barrymore´s assertions are ridiculous, as is his so-called evidence. I suggest that El Greco counter it with even more ridiculous assertions backed up by the same degree of evidence, to convince barrymore that this debate tactic is not particularly fruitful.

That is not exactly the highest art of debate, but more rational approached have so far failed to convince barrymore, so I imagine El Greco might be ready to try something more extreme.

Funny--I am the only one here that has provided evidence of any kind. I provide hard numbers, El Greco provides anecdotes.

[WildCat]

Meanwhile, a recent study concluded that Greeks work on average MORE than Germans do.
In hours per week, or lifetime total?

What's the retirement age in Greece? In Germany?

[DC]

EU zone should switch to the Swiss Franc. We are the only Country that fullfills the Maastricht criteria.