This piece from the New Yorker caught my attention last week and quantified for me something that had long been written but never detailed so simply. Most people know that Tax evasion is a National Past time in Greece and the less tax paid is the source of much pride of many Grecians. However the level of avoidance has recently been quantified by the central bank at around 33%. That is, for every dollar of tax that should be paid, the Government is only collecting 67c. Coincidentally this 33% shortfall in tax is also roughly equivalent to the countries annual budget deficit (with these deficits then being financed through debt). You can therefore make the argument that IT IS the responsibility of the Greek people and if they simply paid their tax this would at least go along way to helping reduce the problem.
Perhaps even more startling was the fact that their shadow or black market cash economy accounts for 27.5% of their G.D.P. As we do each month we send a piece to our clients and contacts on an issue that is currently making news so I thought I would also inlcude two recent pieces on this issue which you might also find of interest.
The first, and shorter piece, was from the Big Picture blog and looks at who will actually benefit from the bailout, which has some parallels with the bailout of AIG at the height of the GFC panic and goes someway to explain why the people were rioting. The second piece by Jacob Funk Kirkegaard from the Peterson Institute is a more measured look at the overall situation discussing the issues from a number of different perspectives and some of the background on why the process has been more difficult than just providing more money.
After the vote and the release of money by the I.M.F. this piece was followed up noting that whilst the crisis had been averted but more problems lie ahead down the road. If you have some time I can highly recommend a read as it looks beyond the pictures of rioting and the “20 second” analysis from the nightly news.