Rarely has an adage fitted a current situation so well. With a newly elected government in place trying to carry out hugely unpopular reforms against the backdrop of a shrinking economy, Greece has often been help up as the pariah of Europe, chronic evaders of tax
and recipient of generous bailouts which have gone to fund its peoples lifestyle.
The granular picture on the ground is a little different. In order for Greece to “get its affairs in order” it needs to reform its system of tax collection and public spending. For that to happen it needs to have increased revenue from direct taxation levied on businesses. This is a dicey proposition even in growing economies, where the rate of taxation needs to be carefully calibrated so as to not strangle growth.
In Greece the economy has been shrinking for the past five years and is almost 7 percent down on a year-on-year comparison with last year. This has left the government fewer opportunities to raise revenue and no options other than to cut salaries to the bone, cut back on essential services (doctors in the country’s state health system have not been paid for seven months) and try to plug the gap through indirect taxation.
While the outside world sees Greece receiving generous bailout funds what it does not see is that the bulk of that goes to pay Greece’s outside lenders
, a solution which has Greece receive gigantic loans "on condition of austerity measures that would shrink the national income from which that huge loan would have to be repaid", requiring yet more loans and more austerity."
You’re not alone in thinking that there is little logic to that. Then again there has been very little logic to the Greek crisis from the word go. The fact is that the country and its people have become a political football
in a game played by politicians in the EU from the one end and the money markets on the other.
Arguably, this is not the way to run a lemonade stand, let alone a country. With time running out for Greece and the EU something, obviously will have to give.