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September 28, 2011 / trajsingh

To austere or not to austere?


The Greeks are being urged, by the EU-IMF-ECB troika, to cut spending. This is a pre-condition to receiving the handouts that would prevent Greece from defaulting on its debt – at least now anyhow.

But many economists would say that austerity measures will only make things worse, slowing economic activity and reducing the tax intake needed to fund government spending. Indeed, many of the constituent parts of the EU horse of the troika are arguing that they themselves should increase spending, to avoid just such a fate.

The Greeks are being punished, in some sense, perhaps to show ‘contrition’ for things that, in large part, they didn’t do (although they voted in the government that did). Sentiment in other eurozone countries is running high, making it difficult for them to act rationally (particularly so for Angela Merkel).

The issue in Greece is more that the ability to collect taxes that are already in place has been compromised by years of unchecked corruption between the state (politicians), tax collectors and tax payers. In Belgium they always say the the Belgians are rich, but Belgium is poor; Greece has the same issue. The only good part of the new Greek property tax is that if you don’t pay it, they automatically cut off your electricity. Running a few tax collectors out of town might not be a bad idea either.

If the Troika helped the Greeks put in place ways to persuade tax payers to cough-up what is rightfully due, wouldn’t that be a better use of everyone’s time and money?

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2 Comments

  1. trajsingh / Oct 19 2011 3:25 pm

    Update on Greece. According to McKinsey, the relatively few Greeks who actually work, work longer hours than anyone else in the EU, but are less productive. So there you have it, the Greek debt crisis explained. http://www.cnbc.com/id/44944435

  2. trajsingh / Nov 1 2011 5:50 am

    Further update, Papandreou is calling for a referendum on the bailout conditions. Impressive and audacious politics. Awful and dangerous leadership. http://www.guardian.co.uk/world/2011/oct/31/greece-euro-bailout-fresh-crisis

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