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The bankrupt state
How will the bailout affect Greece's endemic problems of corruption and tax-avoidance?
Last Modified: 09 May 2010 06:35 GMT
Greece has vowed to tackle the debt crisis that has shaken the entire European Union [EPA]

It is the biggest multilateral economic bailout ever attempted. Over the next three years Greece will receive $146bn from Eurozone countries and the International Monetary Fund (IMF) to lift the bankrupt country out of its debt crisis. 

But Greece's fundamental problems remain unresolved: Corruption and massive tax avoidance which fuels the country's black economy.
 
And across Europe there is fear that the country's debt problems will infect other struggling economies such as Spain and Portugal.

In Greece itself popular anger is growing because of the tax rises, wage reductions and savage public spending cuts required as part of the Eurozone/IMF deal. 
 
As journalist Mark Cochran found on a journey through Athens, more fundamental social changes may also be necessary if Greece's economy is to ever fully recover.

"Governments abroad, you can trust them, they can help you, whereas in Greece, they try to screw you," Christos Kyriakousis, a taxi driver from Athens, says.

The divorced father of three spent more than ten years in New York, studying economics at college, but returned home 20 years ago.

"The biggest mistake I ever made in my life was coming back home. Ok, it was my relatives, it was my home and everybody else was here and I love the place, but the place doesn't love its people," he says.

The economic crisis was first triggered late last year immediately following the election of George Papandreou, Greece's prime minister. He claims to have discovered that his predecessors had cooked the books, that government debt had reached the equivalent of a staggering $450bn.

The government has now announced a range of austerity measures - wages and pensions will be cut, taxes increased and government spending slashed. Public servants face 10 per cent pay cuts and an end to early retirement in their forties.

'War against governments'

People are protesting against massive austerity spending cuts [AFP]

Tens of thousands of Greeks have taken to the street to protest against the government's measures.

"I have to pay more money. They ask me to pay more money and nobody knows where it goes, no money goes for education, no money goes for the medical system, no money goes for retirement," Kyriakousis says.

"We don't even know if we are going to get retirement some day, but we still have to pay more and more and more money every day.

"We are all fighting for our rights. We are all fighting against European Union rules, against Greek government rules. Actually there is a war against governments, European governments."

The protests are growing increasingly violent. Anarchists have launched a ritualised display of violence and vandalism and the images beamed out to a bewildered world do little to restore foreign investor confidence.

Tourists are scared and are staying away.

"In the last couple of days we've lost over 4,000 euros in lost earnings from people who have cancelled from our backpackers," Nick Geronimos, a second generation Greek Australian businessman, says.  

He moved to Athens with his family eight years ago. He has got 15mn euros invested in serviced apartments, a backpacker hostel, and a bar.

Geronimos says far too many of Greeces 11 million people are employed by the inefficient, corrupt public service sector and that, he insists, is Greece's biggest problem.

"I understand there are 1.025 million public servants. That's the major problem here. The major problem here is the fact that these people have to justify their existence, and also they have to be paid," Geronimos says.

His team is busily preparing for the summer tourist season, but every minor building alteration requires permission – a torturous bureaucratic process.

He describes what he calls Greece's "nonsense bureaucracy".

"In certain instances that I've had, 25 people have to vet one piece of paper to get something agreed to."

'Fakelaki'

Businessmen Geronimos says Greece's major problem is the huge number of civil servants

Small business permits, even basic services, such as getting a drivers license or treatment in a public hospital often require an illegal payment called fakelaki.

"The way I look at it with the fakelaki, with bribing somebody, if somebody works in the public sector ok, he's got a family behind him," Geronimos says.

"He makes 600, 800, 1000 euros a month. How are you going to support your family with 1000 euros a month? You can't - so you have to find different ways. You've got to get your fakelaki."

With the fakelaki comes tax evasion, which taxi driver Kyriakousis says is now a national sport and fuelling the black economy.

"The rich people don't pay taxes. There's an old saying in Greece – the more money you steal the better off you are. If you steal a few euros, a few hundred euros you go to jail ... you steal thousands of euros, we'll talk about it ... you steal a few million euros you become a hero," Kyriakousis says.

With protestors on the streets, the prime minister has been spreading his message that Greece is too big to fail.

The European Union and International Monetary Fund have offered Greece a rescue loan package totalling 45 billion euros for the first year, but the fundamental problems remain unresolved: Corruption and massive tax avoidance fuel the black economy.

Costas Bakouris of Transparency International, a civil society organisation that works to tackle corruption, says: "The black economy I used to estimate to be about one third of our gross national product. The latest information I just received from the bank – it is 37 per cent, which is quite significant - which means that our undeclared gross national product is anywhere between 80 to 100 billion more than what we officially declare."

Transparency International lists Greece as the most corrupt nation in the Euro zone and estimates that 800 million euros were paid in low level bribes last year, some of it to tax auditors.

"The corruption is quite extensive. I will say in one part which is what we call the petty corruption is almost endemic and it needs to be addressed. It is a serious problem," Bakouris says.

Protesting taxi drivers have marched on parliament, outraged by a government demand that they now issue receipts, keep books and pay more than just a flat tax rate of 1,200 euros a year.

"That's the problem that basically everybody agrees [that cuts must be made] except for himself and now we have to say that no, this has to apply to all of us. The basic issue of course in our society is that traditionally there was not a lot of confidence between the governments and the citizens. The trust wasn't there," Bakouris says.

Blaming the Olympics

Many of the facilities built for the 2004 Olympics lie now abandoned

This is a city of ruins, full of memorials to past glories, both ancient and more recent.

Many Athenians believe their economic downfall began with the 12 billion euros spent hosting the 2004 Olympic games. The world-class sporting facilities now lie largely abandoned.

Before his current incarnation as a corruption watchdog, Costas Bakouris ran the Athens Olympics Committee.

"I have seen many assessments of what it takes to make, let's say, a 15,000 seat stadium and I have seen how much it cost Barcelona and Atlanta and how much it was in Sydney and the estimate we used to have in Greece for some of those, it was anywhere between 50 per cent more to four times more," he says.

"So therefore I knew that there was probably a lot of corruption and other things and therefore it cost a hell of a lot more."

Renee Pappas, a Greek-American marketing consultant from New York who moved to Greece nearly 20 years ago, is a prominent figure on the Athens social scene. She wants people to see what she calls "the other Greece".

"You know life goes on. I mean there might be a crisis but women still buy clothes."

There is a saying that Greece is a poor country full of rich people. As the good times rolled through the 1990s and soft loans and grants poured in from the European Union, fashion was just one industry that boomed.

But even the fashion industry is now feeling the bite of the government's austerity measures, although there has still been time for some last minute bargains.

"On the news today they said, you know, they started that new luxury tax today ... Well, I think last week 14 Porsches, two Bentleys, one Aston Martin, and one Ferrari were sold in Greece," Pappas says.

Bakouris blames the easy money that flowed in from the European community during the 1980s for creating a culture in which wheeling and dealing rather than hard work guaranteed wealth. He says that a generation or more of Greeks have been lost to that mentality.

"Now for these kind of people it will be hard for them to understand that it is hard work, it is consistent, it is competitiveness, it is efficiency, it is innovation that you have to apply and not just fooling around and trying to wheel and deal yourself through," he says.

"They have to recognise that the party is over and we now have to start working very hard. So for those it will be a big shock. For the older generations, I think it's not a big surprise because they have gone through hard times before."

The bankrupt state can be seen from Wednesday, May 5, 2010 at the following times GMT: Wednesday: 0600, 1230; Thursday: 0130, 1400, 1930; Friday: 0630, 1630; Saturday: 0330, 2030; Sunday: 0030, 0530; Monday: 0830.

Source:
Al Jazeera
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