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Sunday, March 2, 2014

Greece - Still a Failed Nation?

In this recent article, Prof. Yanis Varoufakis says that "Europeans must grasp a simple fact - that Greece has been, and remains, a failed nation-state". He concludes with the following facts:

* There are 10 million Greeks living in Greece (and falling fast due to migration), ‘organised’ in around 2,8 million households that have a ‘relationship’ with the Tax Office.
* Of those 2,8 million households, 2,3 million have a debt to the Tax Office that they cannot service.
* 1 million households cannot pay their electricity bill in full, forcing the electricity company to ‘extend and pretend’, thus ensuring that 1 million homes live in fear of darkness at night while the electricity company is insolvent.
* Of the 3 million people constituting Greece’s labour force, 1,3 million are jobless.
* Of the 1,3 million jobless only 10% receive unemployment benefits. The rest must fend for themselves.
* Of those who work in the private sector 500 thousand have not been paid for more than three months.
* Contractors who work for the public sector are paid up to 24 months after they provided the service and pre-paid sales tax to the Tax Office.
 * Half of the businesses still in operation throughout the country are seriously in arrears vis-à-vis their (compulsory) contributions to their employees’ pension and social security fund.

These clearly are facts of a failed nation. Regrettably, it is not possible to segment these facts into the failed part of the nation and that part which has not failed at all.

Suppose, in theory, there were a list of all 11 million Greeks, ranking them by personal net worth (including foreign assets). My sense is that the upper 10-20% would certainly reflect a very successful nation. Regrettably, such information cannot ever be put together.

My sense of Greek society is that, since Independence, the few have always benefited at the expense of the many. The Euro acted as a turbo in this development. A failed society more than a failed nation-state.


  1. Klaus, do you think that those numbers are approx. correct?

    If so, how does such a state handle bookkeeping?

    Are taxes that never will be paid fully depreciated or kept in accounts receivable?

    All payments the state has retained properly noted in accounts payable?

    I recently learned from your blogging about Kameralistik...
    Is there a similar system in Greece dating back to Archimedes?


    1. I have no idea whether these numbers are correct. All I can say is that Varoufakis cited them and I would expect Varoufakis to be intellectually honest enough to cite only numbers which he thinks are correct.

    2. I suppose the situation in Greece is bad enough, but these figures raise some doubts:
      According to professor Varoufakis, 2,3 out of 2,8 million households "cannot service their debt to the Tax Office", in other words: more than 80% of households would be supposed to pay taxes higher than their income (minus minimum cost of living). That does not sound plausible. It would be necessary to explain how this figures are derived; or are they just personal guesses of professor Varoufakis?
      1,3 million people out of a workforce of 3 million are said to be jobless; that is a rate of more than 43%. Eurostat gives the jobless rate for Greece at 28 % (latest available figure for November, 2013) - the Eurostat figure is supposed to represent "unemployed persons as a percentage of the labour force": still impressive, but far from 43%.
      The reliability of Greek statistics was doubtful in the past, at least for government finance statistics. The lack of reliable and generally accepted statistical information may in itself be an indication of a "failed nation-state", as professor Varoufakis puts it.
      In any case, if Greece were considered a failed state, I do not understand how taxpayers in the rest of Europe can be supposed to guarantee the debt of such a failed state.

    3. Just a few comments from an inside player:
      1. Paying taxes higher than their income: Could be actual. If your income less expenses leaves a zero balance and this equation is not accepted by the Tax authority (you are being taxed almost 100% on Gross income these days) + taxes on real estate which does not generate the math,,,
      2. Unemployment: 28% per cent is a number based on official documentation, ie does not take into consideration a series of factors such as being unemployed for mor than 3 years, people who cannot find a job for the first time (and thus get recorded as 'workforce') and possibly many of the freelancer professionals.
      3. Greek stats : Working for corrupt leaders stats can be manipulated exceptionally.

      I think most of us believe that the point is such debts to be unpayable, so that people can be governed by the debtor principle....

    4. The correct employment data are the following (from ELSTAT):
      as of November 2013

      Total unemployed: 1,382 million
      Total employed: 3,551 million
      Total labour force: 4,933

      The 28% is calculated from the total labour force, not as a proportion of employed persons. Almost as problematic is the law participation rate in the labour force, at 68% -- when most EU countries are mid-70s and sweden and Switzerland are over 80%. This is caused by low female participation and low male graduate participation (possibly caused by military service). The result is, along with an ageing population, a high dependency ratio. That is, far too many people are dependent on income from the few who have work. This is a recipe for a continued socio-economic disaster, with no hope of significant improvement.

    5. @Xenos
      Thank you for this enlightening comment!