Saturday, 25 June 2011

Beyond myths!


From ROAR MAG:

Special thanks for the data below go out to Alex Andreou and Ingeborg Beugel.
MYTH #1: The Greeks are profligate
The unquestioned assumption in the international media is that the Greek debt crisis was caused by excessive state expenditure, an overburdened welfare state and an inflated public sector.
TRUTH #1: The Greek welfare state is actually anemic
Here are the facts:
  • Public spending: according to the Center for American Progress, public spending in Greece is only 44.6% of GDP. This is lower than the EU average, lower than Germany’s 46.6% and considerably lower than Sweden’s 55%.
  • Tax collection: the real problem is not social expenditure on the poor but the lack of tax collection from the rich. From 2001 to 2007, Greece collected only an average of 39.4% of GDP in taxes, compared to the EU 44.4% average.
MYTH #2: The Greeks are lazy
Another unquestioned assumption is that the Greeks don’t work enough — they retire at 50, take crazy amounts of paid holidays and lie around in the sun drinking ouzo most of the day. Angela Merkel, for example, recently called on the people of southern Europe to “work more, play less“, i.e. work more hours, retire earlier and take less holidays.
TRUTH #2: The Greeks actually work most of all Europeans
Here are the facts:
  • Hours worked per week: According to Eurostat data of 2005, the Greeks worked 43.1 hours per week (compared to 35.7 hours in so-called ‘thrifty’ Germany, with its much-touted ‘Protestant work ethic’).
  • Hours worked per year: More recent OECD data shows the Greeks to work an average of 2,119 hours per year — 690 hours more than the average German, 467 more than the average Brit and 356 more than the OECD average. In fact, out of all OECD countries, only the Koreans work more.
  • Amount of paid holidays: The paid leave entitlement in Greece is 23 days per year. This is actually below the EU average, and significantly lower than the minimum of 28 days in the UK and 30 (!) days in Germany.
  • Retirement age: Again, Eurostat data from 2005, shows the average age of exit from the labour force in Greece to be 61.7. This was higher than in Germany, France or Italy and higher than the EU27 average. It is being raised even further now as a part of the EU-IMF bailout conditions.
MYTH #3: The Greeks are spoilt
In a truly terrible piece of journalism earlier this week, Sean O’Grady (economics editor of The Independent) wrote that “for many in northern Europe, the rioting in Athens must remind them of a tantrum by a spoilt child.” He refers specifically to popular opposition to the cutting of the so-called “13th and 14th salary” as a key indicator of this ‘spoiltness’.
TRUTH #3: The Greeks suffer more than anyone else
Here are the facts:
  • According to Eurostat, even before crisis, in 2008, one in five Greeks (among them almost half a million children) lived under the formal poverty line of 500 euros per month.
  • An independent survey by Kapa Research and the London School of Economics found even worse data: a third of the Greek population now live in formal poverty (and mind you: this was in 2007 – it’s actually gotten a lot worse since as a result of these draconian austerity measures).
  • Every child in Greece is born with a 40,000 euro debt on their name.
  • Greece’s youth are now referred to in the country as Generation 700: because that’s the maximum monthly wage that young Greeks will typically make – that is, if they are lucky enough to find a job: according to theFinancial Times, over 35 percent of young Greeks is out of work right now.
  • The so-called 13th and 14th salaries (Christmas, Easter and summer bonuses) are not additional salaries. As a Greek reader on this blog, Amalia, pointed out: “Greeks do not get two extra salaries a year; their annual salary is simply divided by 14 and they get two installments at Christmas, one and half at Easter and one and a half sometime in the summer.”
  • The Dutch get a 13th month worth of salary and Austria has a 14th month. Since these countries are not experiencing a similar budget crisis, this simply can’t be the cause of Greece’s debt.
  • The bottomline is: it doesn’t matter in how many installments you receive your salary (whether it’s in 12, 13, 14 or 2,000 parts); what matters is your annual salary. As long as you make less than 6,000 euros a year (as is the case for 20 percent of Greeks) you live in poverty — period.
  • Living costs in Greece are the highest of all of Europe.
  • As a result of this lethal combination of low wages and high living costs, millions of Greeks are forced to work two or three jobs just to survive.
  • Since last year’s bailout, the Greek economy contracted almost 5%, 50,000 to 65,000 business have been closed, unemployment increased by 400,000, industrial activity declined by 11%, the construction sector contracted by 73%. Partly as a result, suicide rates are reported to have nearly tripled.
  • All in all, this is a humanitarian tragedy of unprecedented proportions. How could Mr. O’Brady possibly keep a straight face arguing that the people experiencing all of the above, are somehow spoilt children?
MYTH #4 — the bailout is helping the Greek people
Part of O’Brady’s logic assumes that the Greeks should actually be grateful for receiving EU money in return for austerity measures. After all, EU taxpayers are footing the bill for the failures of the Greek people, no?
TRUTH #4: — it’s an indirect subsidy for Europe’s insolvent banks
Here are the facts:
  • First of all, the bailout is not a handout: the Greek people don’t actually benefit from the EU-IMF bailout. Even if the bailout money really did go to the Greeks, this wouldn’t necessarily be beneficial for the Greek people at all. After all, the bailout is a loan for which the EU and IMF charge an exorbitant 8 percent interest rate, meaning northern European tax payers and the IMF should make a handsome profit from their so-called ‘rescue aid’, while the Greeks will only be further indebted by it.
  • The bailout serves not Greece but Europe’s insolvent banks: as former IMF Chief Economist Kenneth Rogoff pointed out last year already, “a lot of European banks are insolvent.” The real problem of the European crisis isn’t the fiscal crisis in the periphery, it’s the financial crisis in the banking sector of the core.
  • Private bank exposure to Greek sovereign debt: BNP Paribas: 5bn – 7 percent of equity; Société Générale: 2,5bn – 6 percent of equity; Postbank: 1,2bn – 21 percent of equity; Kommerzbank: 2,9bn – 27 percent of total equity. That’s just a handful. More data here.
  • Central Bank exposure to Greek debt: the European Central Bank has 190bn of exposure to Greek debt.
  • ECB close to insolvency: according to a recent report by Open Europe, asset losses as small as 4.25% could tip the ECB into insolvency. Greek default alone would chip 2.35% to 3.47% off of the ECB’s capital base. Add in a Portuguese or Irish default and you have the European Central Bank – the flagship of European capitalism – literally going bankrupt.
But no one really seems to care about Europe’s ailing banks and the ECB. Indeed, hardly anyone is talking about it. Instead, we prefer to talk about the handful of Greek workers who retire at 50, the ‘spoilt children’ who refuse to accept the EU’s generous aid packages.
By narrowly channeling our ire onto the suffering people of Greece, we have completely lost sight of the infinitely larger structural problems we face in the European Union. Our private banks are insolvent. Our central bank is on the verge of bankruptcy. This is the real crisis.
Yet apparently, in all this misery and chaos, bashing the Greeks seems like an infinitely more enjoyable pastime for Europe’s populist politicians and the factually illiterate international media. It’s time we put these lies to an end and start speaking truth.
Thanks again to Naveena Kottoor and BBC World for allowing me a brief minute to highlight these concerns. I just wish there had been a little more time to delve into the real issues in depth.

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