Creditors Getting Ready to Pay Up Again …

As Bloomberg recently reported, the official lenders to Greece are getting close to reaching an agreement on the disbursement of fresh funds to Greece's insolvent government:


„Greece’s creditors, known collectively as the troika, said they expect a staff-level agreement in coming days that would pave the way for the next payment of aid funds to the debt-stricken country.

The European Commission, European Central Bank and International Monetary Fund said “most of the core issues” have been settled, according to a joint statement e-mailed today.

Prime Minister Antonis Samaras faced down a growing revolt among coalition partners over changes to labor rules demanded by the troika as he has tried to come up with an additional 13.5 billion euros ($17.7 billion) of austerity to appease Greece’s creditors. The endorsement may bolster Samaras as he attends his first European Union summit tomorrow where he will begin lobbying for a two-year extension of the country’s bailout target.

“The authorities and staff teams agreed on most of the core measures needed to restore the momentum of reform and pave the way for the completion of the review,” the statement said.

A final deal will help unlock a 31 billion-euro aid installment that the country needs to avoid a second default. Greece remains on life support with the country mired in its fifth year of a recession that has shrunk the economy by almost 20 percent.

Samaras faces growing dissent within his multi-party coalition over the troika’s demand to overhaul some labor market rules.“

 

(emphasis added)

How can there even be a debate over the urgent need to reform labor market rules in a country faced with unemployment of more than 25%? It simply boggles the mind. One of the main reasons why unemployment soared during the Great Depression in the US was precisely that Hoover insisted that wages must not be allowed to decline.

Greek prime minister Antonis Samaras himself has recently compared Greece's downturn to this long ago calamity. He should do everything in his power to avoid repeating the mistakes that were made at the time. However, as we know, while the need to 'learn from history' is often invoked, it is a course rarely followed.

 

 

 


 

Greek unemployment rate by age group: among Greece's youth it has now reached a jaw-dropping 54.2%. Overall, unemployment is at more than 25% – click for better resolution.

 


 

Anyway, it was always clear to us that  the 'troika' would eventually release further funds to Greece, in spite of all the threats and cajoling.  After all,  the euro's 'irreversibility' must be maintained at all cost.

 

Den of Corruption

This brings us to the main point: for a number of reasons, it simply makes no sense to pour more money down this black hole. One of these reasons is that Greece's political and bureaucratic elite always was and to this day remains hopelessly inefficient and corrupt.

As German magazine Der Spiegel reports in this context, „Corruption Continues Virtually Unchecked in Greece“:


„How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros?

These are the questions that tax fraud investigators will have to ask of a number of individuals whose identity has so far only been made public in the form of initials. For instance, a "G. D." stands at the top of a list with the names of 54,000 Greek citizens who relocated major assets abroad between 2009 and 2011. The list stems from the Greek central bank and is now in the hands of the Finance Ministry.

It is the longest of four lists that are currently circulating in Athens. Each contains the names of people whose financial circumstances — bank balances and real estate holdings — do not correspond at all with what they claimed on their tax returns. But hardly anything is being done about it. The Greek reality is sometimes paradoxical: While the governing coalition was busy squabbling with international creditors over how many hundreds of euros can still be trimmed from teachers' and nurses' paychecks, and Athens continued slashing employee pensions, wealthy Greeks moved billions abroad with relative impunity.

The odyssey of the "Lagarde list," as it's known, exemplifies the typically lax attitude toward tax criminals. For many months, it was thought to be lost, but then it resurfaced in early October. Now, the public prosecutor for financial crimes has a copy. It lists 1,991 Greek owners of Swiss bank accounts, and reportedly includes many prominent individuals from the realms of politics, business and culture.“

 

(emphasis added)

It turns out that among the various lists of offenders there is one that is  especially politically charged: a list that has only politicians on it. This list is the proverbial 'hot potato'. The 'untouchable' members of the country's political elite that grace this list in turn are shielding their proteges and benefactors elsewhere in the system. It seems corruption not only pays well in Greece, but it also represents absolutely no obstacle to one's political career when discovered. According to the Spiegel article:

 

 

There is yet another, shorter list, which despite its diminutive size is even more politically charged. Greek tax authorities are currently investigating the assets of some 60 politicians, and the probe apparently extends beyond suspicions of tax evasion alone. The speaker of the Greek Parliament, Evangelos Meimarakis — a member of the governing conservative Nea Dimokratia, or New Democracy party — recently stepped down due to corruption allegations, and he is not the only one implicated. A number of high-ranking former ministers are also suspected of involvement in sham transactions and money-laundering schemes.


Corruption allegations still don't necessarily interfere with a political career in Greece, as exemplified by the case of the former prefect of Thessaloniki, Panagiotis Psomiadis. He allegedly personally received nearly €1 million for public works projects that were never built. Psomiadis is also suspected of being connected with a mafia ring of loan sharks. None of this has apparently damaged him. In May, Prime Minister Samaras made him his election campaign organizer for northern Greece.”


 


(emphasis added)


 



 


Panagiotis Psomiadis: alleged to have skimmed off funds for public works projects that were never built – his political career continues without a hitch so far.

(Photo via facebook.com)

 



 


We are certainly no fans of the coalition of Marxists and various other leftist groupings that form SYRIZA, but we have to agree with Alexis Tsipras on one point: the current Greek coalition is without a doubt a case of 'meet the new boss, same as the old boss'.



“"We are very bad now as a society. We have become bad. We are greedy and asocial," says Costas Bakouris, 75, chairman of Transparency International Greece. Bakouris sounds very different than many European politicians who suddenly find that things are taking a turn for the better in Greece. Now that it's clear that the creditors will continue to pay, he says people are turning a blind eye to the inevitable.

In reality, says Bakouris, an incompetent political class continues to govern the country — the same people, the same story. For decades, they have created a sick system that permeates all segments of society.

Indeed, it's not just former ministers and parliamentarians who have squirreled away millions of euros of dubious origin in their bank accounts. Investigators even discovered €2.8 million — none of which had been declared — in an account belonging to the deputy mayor of a town of only 14,000 inhabitants in the Thessaly region. The man receives a monthly salary of approximately €1,500.

Greece's largest social security organization, IKA, has been used by many in the country as their personal piggy bank. The fact that IKA coffers are actually empty hasn't stopped department heads or low-level employees from continuing to transfer money to friends and relatives who are not entitled to receive any payments whatsoever. But even everyday citizens take advantage of the system: Of the supposedly 700 blind people on the island of Zakynthos, for instance, in reality there are only 60 who truly cannot see.

 

(emphasis added)

Corruption is so endemic and has for so long been an accepted fact of life in Greece, that it is very difficult to see how it can be rooted out. Giving more money to Greece's government probably only encourages the political elite to continue down the same path. Change will require pressure, but this pressure is removed whenever creditors ship over the next tranche of funds. Of course, they only do so out of their own interest: the great bulk of these funds is immediately sent back to creditors to pay off old debts. Still, this allows the political elite in Greece to continue with what it regards as business as usual. 

As to the long tradition political corruption has in Greece and the studied equanimity with which it is regarded by everyone, consider the conclusion of the 'Spiegel' article:


The legacy of corruption goes back generations. In the days when Papandreou the elder governed the country, after the story broke that the head of the state electricity provider had lined his own pockets with some 1.5 million drachmas, the prime minister reacted with the following quip: "We all agree, of course, that we are allowed to give ourselves a little present from time to time. But please don't make it too large."



 

Andreas, the elder Papandreou, arms spread wide so as to better receive gifts: “let us give ourselves a little present from time to time, but make it not too large”

(Photo via strategic-policy.net)

 


 

 

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