The Thinker: Rich Galen


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It's All Greek to Me

Rich Galen

Monday July 6, 2015


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  • Let me say, at the outset, that I am so far out of my depth in this issue, that if I look up all I see is a sea of numbers. If I were you I would roll my eyes, sigh loudly, hit the DELETE key, and return to a close examination of this morning's postings by your Facebook friends.

  • If you're still with me, hang on.

  • Voters in Greece, yesterday, rejected an austerity program that would have allowed the European Central Bank (the European Union's Fed) to lend money to Greek banks so they would have enough Euros to pay depositors.

  • Here's the English translation of the ballot issue:
    Should the deal draft that was put forward by the European Commission, the European Central Bank and the International Monetary Fund in the Eurogroup of June 25, 2015, and consists of two parts, that together form a unified proposal, be accepted? The first document is titled "Reforms for the Completion of the Current Program and Beyond" and the second "Preliminary Debt Sustainability Analysis."

  • I gotta tell you. If I were Greek and even if I believed the Greek government had to begin acting like a rational government and not like, say, California, I would have read that and said: "Um … nah."

  • According to the New York Times, the EU countries (read: Germany) and the International Monetary Fund have cut off new aid to the Greek government and the Greek banks until they agreed to "yet more pension cuts and tax increases without any hint of debt relief."

  • According to Eurostat, the EU statistical arm, Greece leads the EU in percentage of GDP that goes to pay pensions: 17.5 percent. Although we think that every dollar we earn is going toward someone's pension in the U.S. that number is about 6.8 percent of GDP.

  • The official retirement age in Greece is 65 (although many economic sectors allow much earlier retirement). The average retirement benefit is about 96 percent of average national wages for working people. According to the Organization for Economic Cooperation and Development (OECD) "Only 44% of [Greek] workers aged between 55 and 64 are still at work, compared with an OECD average of 52%."

  • Over one-in-five Greeks is over 65 (and receiving a pension) but to feed those pension funds requires a thriving workforce. Youth unemployment in Greece is 49.7 percent. Not only is half the young population not contributing to the national pension system, but they are largely receiving unemployment benefits so it's a double fiscal whammy.

  • The overall unemployment rate in Greece is 25.6 percent. During the Great Depression in the U.S. unemployment peaked at 24.9 in late 1932. The standard unemployment benefit is �360 ($396) per month. There are about 1.3 million Greeks who are unemployed meaning the annual unemployment cost to the government is something north of �5.6 Billion.

  • Forgetting about anything with the word "Billion" attached, the Greek financial system is approximately where the U.S. financial system was on September 15, 2008 when Leyman Brothers declared bankruptcy. Remember how there were murmurings that banks would not be able to reload ATMs quickly enough to satisfy frightened customers' desire to get their hands on actual greenbacks?

  • Yeah, well, Greek banks have been closed since last Monday with a mandated limit on withdrawals from ATMs at 60 Euros (about $66). Pensioners were permitted a on-time withdrawal of �120 but there was no indication of when - of if - they would be able to get more of their money.

  • The EU, as noted above, wants Greece to raise taxes. My vast understanding of big-time economics and global financial systems tells me that's not going to mean squat.

  • It has been noted in many other places that Greeks consider tax evasion a "national sport."

  • A 2012 study as reported in the Washington Post indicated that, on average, Greeks' real income was 1.92 times the amount they reported (and paid taxes on). That, alone, accounted for between one-third and one-half of the government's annual budget shortfall.

  • Assuming I got any of this right, the situation in which Greece finds itself should be required reading for every Democrat running for office in the United States.

  • A system that has the government spending more and money on more and more people, while depending on fewer and fewer people to pay the higher and higher bills cannot sustain itself.

  • On the Secret Decoder Ring today: Links to the OECD study, to the Washington Post report of the Greek tax evasion study and to the NY Times summary of what it's all about.

    Also a very excellent Mullfoto from my trip through the California-Nevada-Arizona-Utah desert last week.

    -- END --

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