Greece Drags The Euro To Hades

I was once chastised by a passing reader about my post on Greece's problems both on the economy and as a nice holiday resort with the words "Never heard so much Rubbish. Simply not true" ..... well I hope that the anonymous reader picks up on the recent news from Greece.

My blog listed all the problems about Greece's spiralling public debts pointing out that Greece was:

• Not as cheap as it used to be
• That 'tourists have looked for cheaper, but equally sunny holiday destinations' elsewhere.
• Greece's economy after many years of strong and uninterrupted growth is today at a critical crossroads
• Its public debt was almost equal to its national output
• Youth unemployment stood at about 19% and overall joblessness at 7.2%

and whilst I can't claim to be a a Nostradamus, if anyone from the German or French finance ministries had read my comments, they might have just been able to tackle to crisis that has affected the Euro currency 15 months later.

Now Greece is in turmoil, as it finally admitted to effectively cooking the books for years (including those used to enter the Euro Zone in the first place) .... could all have been avoided if anyone had looked closely at Greece's finances and social indicators. They didn't match then, and they don't match now.

Here's some interesting facts:

• In the last completed tax year in Greece, and with a population of nearly 12 million, only six (yes 6) people declared that they earned more than €250,000 pa ... I repeat, only 6 people in the land of shipping millionaires and surgeons on 700,000 pa, were even that honest (and these 6 are all likely to have earned 10 times that amount).
• Greece's black economy is estimated at 30% of official gross domestic product.
• The European Commission says it will take Greece to the EU's top court to recover state aid, which it says violated EU single market rules.

Finally the Greeks have resorted to the politics of the scoundrel i.e. Nationalism .... The Prime Minister Mr Pangalos has accused Italy of being more inaccurate with its financial statistics (probably with some element of truth), and said that Germany should not criticise Athens now because of its own actions during the Nazi occupation of Greece.

"They took away the gold that was in the Bank of Greece, they took away Greek money, and they never gave it back. This is an issue that has to be faced sometime in the future," he said.

Not All Ruins In Greece Were Germany's Fault

Germany paid Greece about 115m Deutschemarks in 1960 to compensate victims of Nazi persecution, but has refused more recent demands for more money .....after it closed the matter in 1990 when it signed the Two Plus Four Agreement with the former Allied countries of the United States, United Kingdom, France, and the Soviet Union, but not Greece.

As someone once said "Greece is a poor country, full of rich people." 

UPDATE JUNE 2019:

I have taken a brief re-look at this story and can add this update: Alexis Tsipras, leader of the Syriza party claimed in January 2015, that he was going to ignore the austerity program imposed by the “troika” (the European Commission, the European Central Bank and the International Monetary Fund), but in fact the Greek government was forced to accept even harsher terms from its creditors after he assumed power.

Now 4 years later Greeece has been in primary fiscal budget surplus for the last 4 years, and is predicted to remain so for the next foreseeable years. The economy also returned to growth in 2017 and has remained so since ..... but the cost has been huge.

GDP fell 26 per cent in the crisis, and is still 20 per cent smaller than at the beginning of the crisis of 12 years ago. It is not predicted to return to its pre-crisis size until the early 2030s, and that assumes the economy growing at 2 per cent a year, which isn't by any means certain. So the Greeks have lost at least a quarter of a century or more of growth.

They may not have brought down the euro, but they damn near ruined Greece ..... At one time Greek real GDP per head was about 80 per cent of German levels (at purchasing power parity), and it was this, living like Germans but working like Greeks, that nearly destroyed them. Now real Greek GDP per head runs at about 55 per cent of those levels.

Of course this being Greece the threat of backsliding is huge. For instance the planned 11 per cent jump in the statutory minimum wage, combined with the abolition of the sub-minimum wage for young people, plus the reversal of reforms to collective bargaining agreements dont augur well. The government has also cancelled the pre-legislated 2019 pension reform, while the courts are threatening to reverse the pension reforms of 2012 and 2016.

So this could all re-emerge in the near future, especially if there is another recession .... or if the UK tourists stop going following Brexit.