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Tuesday, June 30, 2015

How long will this game of Liar's Poker continue?

 

Greece finally joined the euro in 2001. Two years earlier, the country was barred from entering because it did not meet the financial criteria. No matter: with the help of Goldman Sachs, the Greeks simply cooked the books.

Having falsely claimed to have met standards relating to manufacturing and industrial production and low inflation, the Greeks were allowed in. Funds poured into the country from across Europe and the Greeks started spending like there was no tomorrow.

Fiddling on a Herculean scale — from the owner of the smallest shop to the most powerful figures in business and politics — is as much a part of Greek life as ouzo and olives. How so? Simple: they are allowed to state their own earnings for tax purposes, figures which are rarely challenged. And rich Greeks take full advantage. Astonishingly, only 5,000 people in a country of 12 million admit to earning more than £90,000 a year — a salary that would not be enough to buy a garden shed in Kifissia. Many residents simply say that they earn below the basic tax threshold of around £10,000 a year, even though they own boats, second homes on Greek islands and properties overseas. And, should the taxman rumble this common ruse, it can be dealt with using a ‘fakelaki’ — an envelope stuffed with cash. There is even a semi-official rate for bribes: passing a false tax return requires a payment of up to 10,000 euros (the average Greek family is reckoned to pay out £2,000 a year in fakelaki.) Even more incredibly, Greek shipping magnates — the king of kings among the wealthy of Kifissia — are automatically exempt from tax, supposedly on account of the great benefits they bring the country.

When the former Greek President George Papandreou called for a crackdown on these tax dodgers — who are believed to cost the economy as much as £40bn a year — he resorted to bizarre means to identify the cheats. After issuing warnings, government officials said he would deploy helicopter snoopers, along with scrutiny of Google Earth satellite pictures, to show who has a swimming pool in the northern suburbs of Athens — an indicator, officials said, of the owner’s wealth. Officially, just over 300 Kifissia residents admitted to having a pool. The true figure is believed to be 20,000. Suddenly there was a boom in sales of tarpaulins to cover pools and make them invisible to the aerial tax inspectors.

Athens' state-of-the-art rapid transport system is, in effect, free for the five million people of the Greek capital. With no barriers to prevent free entry or exit to this impressive tube network, the good citizens of Athens are instead asked to 'validate' their tickets at honesty machines before boarding. Nobody bothers. And the transport perks are not confined to the customers. Incredibly, the average salary on Greece’s railways is £60,000, which includes cleaners and track workers - treble the earnings of the average private sector employee here. The overground rail network is as big a racket as the EU-funded underground. While its annual income is only £80 million from ticket sales, the wage bill is more than £500m a year — prompting one Greek politician to famously remark that it would be cheaper to put all the commuters into private taxis.

Greek pastry chefs, radio and television announcers, hairdressers, musicians playing wind instruments. and masseurs in steam baths are among more than 600 professions allowed to retire at 50 (with a state pension of 95 per cent of their last working year’s earnings) — on account of the ‘arduous and perilous’ nature of their work. Why radio and television announcers? Because they're at risk from the bacteria on their microphones. Of course!

For more than five years now, Greece has been Europe’s biggest concern. Instead of focusing on employment, or immigration, or the challenge of Vladimir Putin’s Russia, the continent’s attention has been on a country that represents 1.8 per cent of the eurozone’s economic output. It would be interesting to calculate how many hours Angela Merkel has dedicated to Athens in the past five years. Imagine President Barack Obama taking part in high-level talks for months on end, where little was on the agenda except the state of Tennessee. That, in effect, is what Europe’s heads of government have been doing.

In these five years the world has changed. China and India are undergoing profound transformations. The jihadis of the Islamic State of Iraq and the Levant (Isis) represent a new and serious threat to the west, as does Mr Putin’s revanchism. But European leaders, instead of devoting their summits to the question of how to best defend their economic and military interests, agonise over what to do about Greece.

Five years of negotiations have achieved virtually nothing (the few reforms that had been adopted, like a small reduction in the inflated number of public sector employees, have since been reversed by the Syriza-led coalition). It is pretty clear that the Greeks have no appetite for modernising their society. They worry too little about an economy ruined by patronage.

Trying to save Greece has become an exercise in the absurd. Greece is bankrupt. Most Greeks know that. It can never repay its debts, no matter how many deals with creditors are pulled out of a hat. The country is now run by a radical left party whose ministers have close to zero executive experience. Their executive experience nonetheless exceeds their diplomatic experience. This stands at less than zero — and it shows. The party, Syriza, includes people who want to re-fight the Greek Civil War (1946-49) in the belief the Communists will triumph this time.

Greeks don't consider themselves part of Europe. When I lived and worked there in the 80s, Greeks about to travel to Germany or the U.K. would tell me "We're going to Europe". Well, they've been to Europe; let them leave again because, while Greece may need Europe, Europe doesn't need Greece.