Saturday 1 October 2011

Does Greece want to be saved?

News headlines in Greece have been reporting the various attempts by public sector employees to bar members of the Troika’s audit mission from meetings in various Greek ministries. This occurred on both Thursday and Friday in Athens, and included the finance, transport and health ministries, as well as ELSTAT, the Hellenic Statistics Authority. The protestors were heard shouting “take your bailout and go home.”

A good friend and journalist called me Thursday while I was still in Washington, asking why these events were taking place, what they meant. I tried to explain the political symbolism involved, the role of the unions, etc. in modern Greece.

But at the end of the explanation, our discussion boiled down to one simple question: “Don’t they understand that unless the Troika releases the sixth instalment, there is no money to pay salaries and pensions in October?”

It’s an excellent question, and one which cannot possibly be answered by the strikers.

As long as Greece has a primary state budget deficit i.e. a deficit of regular central government operations without taking into account the cost of debt service and interest, the government needs external funding to pay its bills.

Greece total state budget deficit (including interest costs) was EUR 18.06 billion in January-August 2011. Remove interest costs of EUR 12.749 billion, and the primary deficit is EUR 5.3 billion.

However, the state deficit does not include two other expenditure lines. Greece had a further EUR 5 billion in general government payments for social security funds and approximately EUR 7 billion in payments in arrears that are not included in the EUR 18.06 bln deficit.

Add these together, and we see that Greece has unfunded liabilities, or a cash flow deficit, of EUR 17.3 billion in the first 8 months.

If we assume that are 880,645 public servants in the wider Greek public sector, then the deficit year-to-date is EUR 19,645 per public sector employee.

If we assume there are 4,172,280 gainfully employed people in Greece at present, then the deficit per employee is EUR 4,146 year-to-date.

So if you are a public employee, there’s little point in “throwing out” the representatives of the unfortunate creditors who have agreed to finance your wasteful mechanism in the first place. Unless, of course, you agree to far harsher and more permanent measures regarding the public sector, pension and healthcare expenditure, and tax collection.

Perhaps the Troika inspectors should simply go to the airport and return to their respective countries. Issue a communiqué stating that they are unable to work since they are blocked from entering public buildings in Greece by illegal action. Turn off the tap on the sixth installment, wait a month, and then ask the unions whether the Troika should return or not. If it were my money, this is what I would do.

As for the government, I’m [not] surprised it hasn’t taken more active measures. Were these strikes legal? Are striking workers permitted to block access to public buildings? Was anyone arrested for disturbing the peace? Was anyone’s pay docked? Was anyone fired for breaking the law?

The answer to all five questions is “no.” Perhaps that should be the Troika’s answer as well. 

Ultimately, Greece will only be saved if its citizens in fact want to be saved. Do they?

© Philip Ammerman, 2011


  1. Well then its fair to ask, "Was anyone arrested for concealing the debt all these years??" Blocking access to public buildings is small fries compared to that crime. And yes the citizens of Greece want to be saved, but we see that the troikas policies is doing anything but that.

  2. I agree with part of what you are saying. No politician or corporate enabler has been arrested in Greece, and I doubt anyone ever will. This has been clear to me and probably most people for some time now: look at these posts for confirmation:

    Greece’s million Euro website

    The EUR 83 million Greek submarine mystery

    Greece’s corruption non-scandal

    But on the other hand, blaming only the Troika isn't enough, is it? The Troika are probably the last people in the world who still want to pay for Greece's mess. And here we have some of the prime architects of this mess--public sector unionists--actually preventing the Troika from doing so, by disrupting their work.

    We can also broaden the debate. According to the budget and audit figures, Greek companies continue to evade tax, as do independent professionals. Greek salaried workers and pensioners are bearing the brunt of the austerity cuts and tax rises. The Greek government, or at least the political elite, continues to spend ridiculous amounts of money on trophy projects and business travel. Almost nothing has been done in terms of making tax revenue collection more efficient, nor has much been done on addressing the root causes of tax evasion (low public services; high tax rates; no enforcement). Not a single opposition party in Greece supports the bail-out plan or its subsequent policies. The government still does not audit bank accounts or offshore accounts on a systematic basis.

    Are you really sure Greek citizens want Greece to be saved?

    I'm not being sarcastic or trite here. I would believe this if I saw a measurable change in personal responsibility in any sphere of public or commercial life. So far, neither my daily experience, nor the corporate and public statistics, appear to demonstrate this.

  3. "...The Troika are probably the last people in the world who still want to pay for Greece's mess..."

    if i may just come in on this.... there are a lot of people(and constantly increasing) in Greece that simply refuse to swallow this "pill" mainly because they have realized that it's a highway to even more indebtedness...even more asset sales at fire sale prices..even more cuts in fundamental social spending such as education and healthcare.

    and on a more technical note..the troika "support" works as to gain some time before the inevitable of the pan-european banking implosion...august was just the beginning.

    finally pensions and salaries CAN be paid.IF you default on your interest payments which have crowded out all other budget expenses.
    Is this not an option?

  4. As I state in my post, unless Greece reaches a primary surplus, pensions and salaries can't be paid. The unfunded liabilities (i.e. a primary deficit in the wider public sector) in the first 8 months of the year at EUR 17.3 billion. This is BEFORE interest costs of EUR 12 billion.

    So the choices facing Greece are pretty stark. Sure, they can default, but then they need to come up with about EUR 20-24 billion of added revenue (or reduced expenditure) each year. Or, they can accept and implement the terms of the bail-out (which was voted through by Parliament), and try to buy time for the inevitable restructuring.

    But, if the Troika goes home, then all those civil servants and pensions don't get paid right now. The choice is that simple.