Greece – financial mythology and most certainly a real tragedy.
The story of Greece is really at the core of the current wide-ranging problems in Europe. More on that in later articles. But what is the possible Greece Economic Outlook 2013?
Greek debt has rapidly risen. Estimates put Debt to GDP at more than 170%. Clearly not a good indicator of anything other than a major problem. The cause of this is significant government borrowing. Poor economic management and rampant tax evasion – again. All the hallmarks of a major problem.
Reading this may seem like the lecture. We probably all had from our parents. When we were younger, on looking after our money. And wise words they no doubt were and a shame not everyone took it on board!
So what are the options? Pay back the money – hmmm tricky, especially when you are used to spending so heavily. Add to that, with the broader economic slowdown. Your income would be expected to be a bit lighter too. Paying debt off of a smaller income… hmmm.
Secondly, cut your spending back. Sounds obvious really but the austerity measures. And granted, they are harsh. Really didn’t find a welcome reception from the broader population. Hardly surprising but at the end of the day, the reality and who likes change. Especially when your own outcome is less for you.
Thirdly, actually, start collecting taxes that are due. Again, pretty obvious to those on the outside. On this subject, consider this; Tax evasion is rampant in a country. That so desperately needs tax revenue. To restore and pay off its enormous debts. In Greece, there is a swimming pool tax. And until recently, only 324 households were registered as having a pool and paying the tax. Aerial reconnaissance revealed 16,974 in the Athens area alone. Go figure!
Even more ridiculous. Is that 65% of the population declare an income of less than 12,000Euro. And only 20,000 people admit to an income of more than 100,000 Euro. To put that into perspective. There are more Porsche Cayenne’s registers in Greece. Than people admitting to an income of more than 50,000 Euros. These figures simply don’t add up. And tax evasion is estimated at more than $20bn a year. It has to be close to being a national pastime.
Fourthly – how about refuse/actually not pay back the debt. This is know as default and is not a great place to go. Most people aren’t very happy when this path is take – as effectively they are writing the money off. Other countries have done this – Russia, Argentina and Iceland have all been there and look at them now. The short term pain is horrific, but there clearly is life after default.
Fifth – how about take your bat and ball and no longer play. The option of dropping from the Euro, back to Drachma is also a possibility. Again, this is not overly palatable – but certainly a realistic prospect. An interesting sidebar is that Greece has spent more (as a proportion of GDP) on its armed forces. Than any other of its European cousins, with the exception of the UK. Not that relevant? With unemployment running at such high levels. What are the chances of social unrest, especially amongst the youth generation? More so, what are the chances of a military coup – reasonable. I would suggest, given the Country’s history. And the depth of the economic problems. After all, it’s kind of hard to paid. When your counterparty is replying to you, albeit from the turret of a tank!
So, how about this instead. Greece drops from the Euro, the debts get write off. And then we all head down to the local Taverna. For some Ouzo and Koftas. Of course, with a “cash only” bar!!