Wednesday, June 22, 2011

It is hard to beat that argument!

I won’t pay for the Greeks

I work 40 hours a week, I pay 30% of my salary in tax each month, my company pays another 30% of my salary for pensions, healthcare, and so on, I work hard until I turn 65, maybe 67, I have five weeks off each year for vacation, I do not cheat the government by evading tax and lining my own pocket. Now, the Greek people want me to pay for them because they have not been paying their dues? No way. When the Greek people are mature enough to understand that they are a nation, that everyone has to contribute to the financing of that nation, then I will pay.

Ingrid Soderdal


  1. Dear Ingrid, thank you for sharing your lifestyle. Let me share mine.
    I also work 40 hours a week; plus 10 more hours overtime, which I do not get paid. I so much envy you.
    I only pay about 20% of my salary in tax; you see, I do not earn as much as you do, so I am in a lower tax category. I so much envy you.
    I am not sure how much of my salary my employer gives to "pensions, healthcare and so on"; but it can't be as much as the benefits that your employer (additionally) pays for you, because I get crappy health care (whenever I do not pay for it) and I am not so sure I will ever get any pension. I so much envy you.
    I will certainly have to work at least until 65 and I will probably need to work after that, e.g., cleaning houses, to supplement my meagre pension (if I do get any). I so much envy you.
    I have four weeks of paid leave (one less than you), but two of them I spend working a temp job as a waiter in August, to earn some money for the other two weeks of summer vacation, always in Greece and at (at least) twice the cost that you pay for your "holiday package". I so much envy you.
    I did not know that you had the option to "cheat the government" (which, you say, you did not use); in my case, it is the government that is cheating me. I so much envy you.

    And, since you have asked the question, I think it is time you knew the truth.
    Despite my misfortune, it is not I or my countrymen that is asking you to "pay for them". It is actually your banks, which have taken the money you have earned (I so much envy you), lent it to my government, which has in turn used it to sign overpriced deals (in return for bribes) with your company, so that you have a nice safe, well-paid job "instead of fighting over scraps of meat out in the streets".
    As a matter of fact, I do not want you to pay. Strike that. I want that you do not pay, because, if you do, the money will end up paying the interest to your banks, increasing my country's public debt, forcing my government to cut my already low salary and my almost inexistent benefits and driving me to such impoverishment that I would be happy to be shining your shoes for a chance to eat your leftovers when you spend your "five weeks off each year for vacation" in my country.

    I apologize for having to leave you now. I got to go to my night job.

    Best regards,

  2. The trouble with such arguments is that the individual perspective often differs significantly from the group perspective. From the individual perspective, Danny is right because there are many, many Greeks in a similar position as he is (and feel the same way). Personally, I would even venture to guess that the majority of Greeks are in similar positions: those Greeks whom we know as decent, honest, open-hearted, hospitable (perhaps even a bit simple-minded as you get away from the big cities) and hard-working people. They have not benefited all that much from the cheap Euros; they cannot enjoy an unduly high standard of living; and - above all - they are the losers!

    And the winners are those Greeks whom Ingrid describes. They comply with all the negative prejudices which are being circulated about Greeks these days and - above all - they are the winners.

    The group perspective doesn't differentiate between the two; it puts them all into one and the same category.

    Note the following about the group perspective, however. Despite all the tax paying by those whom the government can catch for paying taxes (recipients of official salaries), Greece's problem is still one of tax revenues and not one of government expenditures. Greek government expenditures are 49% of GDP compared with 56% in France. Greece's government revenues, on the other hand, are only 39% of GDP compared with 53% in France.

    Just think: if Greeks as a group came up with a tax contribution similar to that of France, Greece would have a budget surplus of about 3% today!

  3. Dear K.

    Thanks for disproving the title of your own article. It was not that "hard to beat that argument" after all; from the "individual perspective" of course (unless Ingrid is Sweden's PM).

    You have to explain to me the "group perspective" though; for it seems that whoever puts everybody "into one and the same category" is guilty of nothing short of racism. Being one of the few remaining Greek Jews (more than 90% were wiped out by... well, You-Know-Who), I am really careful in these matters. As a Jew, I have been called an Untermensch by... well, You-Know-Who. As a Greek, I am being called a Betrüger by... well, You-Know-Who. I hope you do not condone such "group perspectives", otherwise I am just wasting my time.

    In the case of the Greek crisis now, there is one question and one question only. Where did the money go? (it is evident that there was an influx of money for which IOUs were issued in the name of the Greek people) Well, we will never know, because nobody seems interested in investigating it (there are not many Correas around), but most people are content with blaming it on the lazy/greedy/good-for-nothing Greeks.

    Ingrid and most readers of Springer's "intellectual" publication seem to think that the money went to the pockets of the Greeks (you know, those lazy cheaters drinking ouzo and having year round vacation under the Greek sun). You seem to be playing along; from the "group perspective".

    You identify Greece's problem as "one of tax revenues". It is unquestionable that tax evasion (which tax-paying Greeks detest far more than any outsider) contributes to Greece's low expenditure capacity. But tax evasion has been around for as long as one can remember. If a steady tax evasion is the reason behind the debt, a steady deficit (%GDP) is to be expected. But this is not the case (; the deficit skyrocketed in 2004 and then again in 2008-2009. Since there is no apparent reason why tax evasion (as a %) should increase those years, the evasion aphorism does not seem to hold water. On the other hand, one cannot help noticing that 2004 was the year of the Olympics (the former Minister of Public Order was bragging that they spent €1 billion on security alone) and 2008 was the year of the Siemens scandal (Christoforakos, the great benefactor of the German employee, is being "detained" in the top-security facility of Münch[en-Bogenh]ausen).

    But, you see, I am just a simple-minded Greek and I do not have your experience. So, could you please explain to me, like I am a six-year old, why any additional tax money that could have been collected in that time would not have ended up in some bank accounts in Switzerland and in much more bank accounts in... Luxembourg? Why, if Greece had 53% of GDP revenue, Siemens, Hochtief and all the nice companies that ensure the high quality of life in Europe would not push even more money under the table to make sure that Greece's expenditures go to 63% of GDP?

    Thanks for the attention.

    Danny the Sucker from Europe's Latin America

  4. Part 1 of 2
    Poor wording. I should have said "individual citizens" vs. "country as a whole". You support my warning of the dangers of talking about "Americans", "French", "Germans", Greeks" (or "Jews" for that matter). That is one of the points which I tried to make.

    The Greek farmer who collected a, say, 500 EUR monthly pension 10 years ago and who collects less than that today is totally different from the corrupt Greek who has stashed away tens of million EUR in foreign bank accounts during this period. Unfortunately, they both live within the same borders and within the same jurisdiction and when the sovereign state of which they both are citizens gets into financial trouble, they are both on the hook. They should not be equally on the hook: the farmer should not be on the hook at all and the crook should be expropriated and in jail. To arrange for that, however, is the responsibility of national jurisdictions and not of foreign governments (and certainly not of banks!).

    Where did all the money go? That is relatively easy to answer (bear in mind, however, that one can only explain “official” money flows; whatever moved in cash/black can never be traced).

    One has to differentiate between 2 money flows: (a) the money which flowed cross-border into Greece; and (b) the money which flowed domestically from the Greek government to recipients of government expenditures.

    From 2001-10, at total of 288 billion EUR flowed cross-border into Greece. Of that total, 173 billion EUR flowed into the private sector (mostly banks) and 115 billion EUR flowed to the government.

    During this time, Greece exported 146 billion EUR but imported 446 billion EUR, leaving a hole of 300 billion. That amount landed in the accounts of foreign exporters to Greece. Suppose Siemens had been the only exporter to Greece, then those 300 billion would landed in accounts of Siemens AG. If Siemens had a deal with Greek importers that they would pay kick-back’s of 10%, then those 10% (30 billion EUR) would now be in foreign accounts of Greek importers.

    How could Greece finance this hole of 300 billion EUR? First of all through revenues from abroad totalling 101 billion EUR (tourism, shipping, other services). And the remaining hole of 199 billion EUR was financed with foreign debt.

    So, was the cross-border inflow into the private sector only used to cover this hole of 199 billion EUR? No! Since 2008, 50-70 billion EUR left the Greek banking sector in the direction of private accounts in Switzerland, etc. (capital flight). So you will be pleased to hear that Greece took on foreign debt (i. e. the Greek tax payer increased his liability) so that wealthy Greeks could transfer their own money –perfectly officially and legally – abroad! If that is not a reason to feel angry about the people who allowed this to happen, I don’t know what is!

    115 billion EUR flowed cross-border to the Greek government during this time. However, the Greek government borrowed a lot more than that because it not only borrowed from abroad but also domestically (mostly from banks). Where is that money today?

  5. Part 2 of 2
    It helps to remember the following formula: “the expenditures of the government are the revenues of those who receive them”.

    The 500 EUR monthly pension which the government paid to the farmer served to finance the farmer’s living expenses and probably not more than that.

    The 300 million EUR which the government paid to an Athos monastery for a nearly worthless lake landed in bank accounts of the Athos monastery. If the monks had spent all of that money on consumption in the Chalkidiki area, the economy of that area would have expanded by 300 million EUR. If they transferred it all to Switzerland, the Swiss bank deposits would now be 300 million EUR higher.

    The point I am trying to make is this: the money which the government spends domestically (be that as wages & salaries, pensions, kick-back’s or whatever) trickles down through the economy and creates growth. My brother-in-law has a small earth-moving business in a village. He is an extremely hard worker and made good money in the last 10 years because the village could give him a lot of public works which the village could only afford because of funds it got from someone else (mostly the state). Now, the village no longer gets those funds; my brother-in-law no longer gets the contracts (but he is owed a lot of money by the village). And his standard of living, of course, has been reduced dramatically.

    Car engines need gasoline to move the car. The economic engine also needs gasoline only that this gasoline is money. When the economic engine uses money for its growth; when that money is in the form of debt and not equity; and when that money is spent mostly on consumption --- then the economy comes immediately to a halt when the money no longer flows. In fact, it goes into reverse because the money no longer flows but the debt is still there.

    I have answered your question of where the money went in a long way. The short answer would be: into consumption (mostly imports); into the government deficit as a stimulator of (artificial) domestic growth; and – very importantly – into capital flight.

    Bear in mind that the cross-border inflow of debt is not everything which Greece received from abroad. Greece is one of the largest recipients of EU transfers (I am told that there is not enough space in Greece for all the olive trees whose plantation was financed with EU grants/gifts; and yet Greece imported olive oil in 2010!). There are also remittances to Greece from Greeks who work abroad. Etc., etc. In short, a real lot of money has flowed into Greece in the last 10 years. Only very little thereof landed where it should have landed: in revenue-generating domestic investments. And very much of it landed in pockets and/or foreign accounts of those Greeks who are probably not among the great tax payers these days.

    By the way, I have never argued that tax evasion is the reason for the foreign debt. Tax evasion is the reason why the government needs to borrow in order to pay for it expenses (which expenses are really not all that high when compared to other countries). In the grand scheme of things, tax evasion and public deficit are just factors. Important factors but for Greece they are not game-changing factors. If by some miracle the wealthier Greeks started paying their share of taxes; if the budget got balanced and if the government did not need to borrow more money --- Greece would still be in trouble because it no longer has a functioning private sector economy. Instead, the economy literally burns money because it produces very little domestically and imports just about everything Greece needs (and does not need!).

  6. I think this has taken too long for my potential (I am not in pension yet), so here are my final remarks.

    On the issue at hand:
    Ingrid's "unbeatable argument" is clearly a product of prejudice and misinformation, as she thinks (or has been led to think) that all/most Greeks are egoistic cheaters (do all Germans lack social conscience because some have accounts in Luxembourg?) and that her good fortune is due to "honest hard work" (one can find more hard-working people in a third-world country than in any developed nation).
    She also thinks that the Greek people want her to pay (the reason for "rescue packages" is not altruism, but relentless math: due to our crooked financial system, the cost of a Greek default alone is some €5 trillion; if Lehman was Hiroshima, Greece is the H-Bomb), whereas it is the European economy - and Ingrid's job - that is actually rescued.
    She is not to blame though. Us accusing each other is exactly what the puppeteers of this world want us to do, instead of making them pay for their mistakes and greed. Thus, they can blame it on the lousy Greeks when they reduce Ingrid's standard of living and let us take it on each other instead of taking it on them.

    On the debt:
    Your "answer" that the money went to bank accounts (be it in Greece or abroad) is like saying that the Pope is a Catholic! Which accounts and how?

    Real-life example (names changed): Takis imports vegetables into Germany and cooperates with Greek producers; he advises production manager Lakis that the most reliable machines for increasing production are those of Makis; Lakis, though, buys from Hans, who has pushed €20000 under the table for Lakis; the machine soon breaks down and a new one must be bought; from Hans, of course, who makes x-fold the €20000 that he initially "invested".
    Without transferring the €20000 to Switzerland, Lakis has shrunk Greece's export capacity, decreased the GDP (by denying Makis his sales), increased the external debt and has secured Ingrid's (fictional character) job at Hans' company.
    Potential future: Lakis' company files for bankruptcy due to high expenses. Hans loses one of his primary clients and has to reduce Ingrid's salary. Ingrid blames it on Takis, Lakis and Makis "as a whole", but not to Hans' dubious policies.

    And in all that, Klaus is pointing to the profit made by the local pusher (Lakis), not the x-fold of the drug lord (Hans), and blames it all on him not investing it back in Greece! Maybe 40 years in banking makes one see things from a different perspective, butmost people would agree that the main problem is not what happens with Lakis' and Hans' illegally-earned money, but that the money should not have reached their pocket in the first place. Had this been averted, the money would have stayed in Greece (theoretically, it would have also stayed in Greece, if Makis were the corruptor, but in this kind of competition the big fish always win).

    To sum it up:
    The Greeks are well aware of the woes of their state and society (nepotism, corruption, no respect for law, deindustrialisation, dependence on foreign powers, impotent political system, no long-term planning...), more than any outsider is. The Greeks are the first to demand change and many of us have been asking that in all of our adult life. The majority of the Greek society is looking forward to real system change (not the phony Troika "measures" that merely add to the misery of the common Greek and do not address the root of the problem) and want to see the real culprits pay. Lakis should definitely be incarcerated, but as long as Hans can get away by convincing Ingrid that her problem is Lakis (and Makis and Takis), he will be free to look for the next Lakis and keep feeding Ingrid with the crumbles of his loot.

    When the Ingrids of this world realise that we are on the same side, then I will write again.

    Thanks for hosting me.