By Thanasis Delistathis* / @tdelistathis

Friends often ask me to opine on the Greek debt crisis. They are looking for some insight into what is going on and why the country is at the brink of bankruptcy. I suppose they think my heritage makes me more qualified to offer such insight.

The Greek crisis in many ways is a simple story; the predictable outcome of policies and cultural idiosyncrasies. So here is an attempt to tell the story with a few charts:

1. Define it. Why is Greece in trouble?
Greek_Crisis_debt

2. Did Greece get in trouble because Greeks don’t work hard (“you know, with those long siestas over lunch”), kind of like the Germans? No.

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3. So, if the Greeks work so hard, how come they don’t produce enough to cover their obligations?

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4. Why is productivity so low? Over the years, politicians have grown the size of government. They also love to regulate. Over the last 30 years they have passed 4,000 new laws and issued about 110,000 ministerial directives. You need a lot of people to enforce these laws. Public servants in Greece get lifetime tenure!! Politicians loved growing the government to curry favor with voters.

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5. At the same time, Greeks love to strike to fight for more benefits. Politicians were happy to offer more.

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Source: General Strikes in Western Europe, 1980–2008 by John Kelly and Kerstin Hamann

6. Speaking of state favoritism, how about corruption in general? Greece ranks at the bottom within the EU.

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Source: Transparency International

7. On top of that, on average Greeks retire earlier…

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Source: OECD estimate derived from the European and national labour force surveys.

8. And thus have a higher dependency support ratio (ratio of number of people aged over 65 plus kids up to 15 per 100 persons of working age between 15–65). In reality, this significantly underestimates the true dependency ratio, since the country suffers from high rates of youth unemployment and many people retire before the age of 65. In other words, too many people depend for their livelihood on the too few who work.

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Source: Eurostat

9. At the same time, the government is not bringing in enough revenues. How do we know this? Greece has the largest – as percentage of the economy – shadow or underground economy.

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Source: Institute for Applied Economic Research at the University of Tübingen

10. How can they escape taxes? Most of the people work for tiny businesses who conduct private cash transactions that can more easily be hidden.

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Source: Structural Business Statictics Database (Eurostat)

11. And by the way, the number of those businesses in going down…

Source: Eurostat
Source: Eurostat

12. While the VAT taxes remain high relative to others in Europe…

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13. So, to sum it up Greece doesn’t seem to be a great place to do business.

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14. How bad? One group ranks the country 130th in the world…

Source: The Heritage Foundation and The Dow Jones Company, 2015 Index
Source: The Heritage Foundation and The Dow Jones Company, 2015 Index

15. OK, so catch me up. What has happened to date?

Source: edited from BBC News
Source: edited from BBC News

16. Has Greece actually accomplished anything during this process? Greece actually grew during the first 3 quarters of 2014.

Source: National Statistical Service of Greece
Source: National Statistical Service of Greece

17. Say, what happened in Q4 of 2014? Looking at Chart 15 you might appreciate why Greeks were fed up with ongoing non-stop austerity measures. So they decided to elect a radical left coalition party that promised to undo the former policies. However, it seems consumers don’t have much confidence that the new leftist government will be able to reach an agreement with its eurozone partners.

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18. As fears also grew among investors, the cost of borrowing from the markets spiked…

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19 a. What does Greece need to do? Here is a list of policy recommendations from OECD for sustainable recovery, similar to the spirit of the reforms proposed by Greece’s EU partners.

Source: OECD
Source: OECD

19 b. To date, the Syriza government has not shown any signs of agreement with the eurozone partners, choosing instead to comply with campaign promises of undoing many reforms by the prior government. Some in the left coalition government are openly advocating a default, exit from the Euro and return to the drachma. In fact, there are some economists who say this would be best for Greece as it would enable it to become competitive in global markets. While good in theory in an open well-functioning economy, the first time Greece elected a socialist government that followed similar policies, the drachma had quite a ride, downwards…

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20. In this era of uncertainty, businesses and investors have postponed investments and reversed economic growth, prompting the European Commission to slash growth estimates.

Source: European Commision
Source: European Commision

At this point, the future is indeed uncertain. Will the Syriza government agree to EU/IMF conditions for further loans and implement the program or choose to gamble with an exit from the Euro? We are days or weeks away from finding out.

*Thanasis Delistathis is the founder and managing partner of New Atlantic Ventures, an early-stage venture capital firm based in the Washington DC Metropolitan Region and Cambridge, Massachusetts. He has invested in entrepreneurs whose technology brought text messaging mainstream in the United States, movies to the Web, radio to your phone and the ability to buy couture straight from the runway.


  • Phil

    Not a bad article…. but GR blows it in the end by trying to justify communists running Greece. It notes the mentality of populist demanding more money… claims it’s against it…. but in the end Greek Reporter gets back to their old Pasok mentality of trying to justify more government spending with the line….

    “Looking at Chart 15 you might appreciate why Greeks were fed up with ongoing non-stop austerity measures. So they decided to elect a radical left coalition party that promised to undo the former policies.

    Reality check. Greek Reporter irresponsibly lamented for years against cuts (and continues to do so) and large number of allegedly “moderate” left Greeks just voted communists into government.

    Our goal should be to make it as easy as possible to run a business in Greece. To encourage technology and entrepreneurship. To do this we first need to ween leftist Greeks off their mentality someone owes them money otherwise they are going to continue to harm our country.

  • Phil

    Which is precisely what Samaras was trying to do. Unfortunately most Greeks are pretentious self-righteous leftist morons that are now so extreme they’ve voted for communists. Aside from their treasonous undermining of our territorial integrity by supporting mass illegal immigration they also undermine our private sector and keep arguing to expand our government with money we don’t actually have. (the exact opposite of what we should be doing)

    With no private sector… no tax revenue for public one. That’s the formula.

  • SKYLOS

    Ok, the guys that commended below, you are either complete morons or you have simply no clue whatsoever of what’s going on in Greece:

    1) The debt that you are trying to “understand” today, has been created by the two main political parties that are running the country during the last 38 years in Greece; parties that YOU are now favouring by criticising the party of SYRIZA that just came to power now for the first time ever. Your political shortsightedness is beyond me…

    2) The article above described nicely that although Greek citizens work harder than average Europeans, the country goes worse and worse. The huge corruption and money-spending that occurred in Greece the last 38 years shows WHO has consumed Greece’s money.. And it was definitely not the common people or SYRIZA…

    3) Greece’s main “products” in land or for exports are either tourism or fruits/vegetables. During the last 20 years, the US and European elit countries like Germany, France, UK, have pressured Greece to buy billions of euros worth of “hard industry products”, like weapons, ships, submarines etc. So, Greece exports olive oil and buys submarines. Do the math and you’ll figure out why the debt.. Of course, the main political parties that secured these deals got their cut….

    4) ALL the bailout money that Europe and the IMF have given to Greece have gone to the banks, not the people. Only 2% of all that money have reached the true economy. In return, the creditors are asking for return measures that call “reforms”, where in reality mean cuts in pensions and salaries. So the bailout plans meant more money to banks, less money to people. If you think this is fair, you’re a degenerate.

    5) ALL the bailout money that have come to Greece are ALL in the form of loan from investors, with minimum money coming from European governments. In 2011, Europe “bought” the Greece’s loan from investors, in return of their favouritism to their own countries. So now Greece’s debt is owned by Europe & IMF. All this debt is being paid back with INTEREST. So no European country lost any money to date, in fact they are making profit! To make things more interesting, look at this example: Greece is asking now for 7 billion euros for the next three years, 5 of which will come back as loan payments within these three years!

    6) One would think that since Greece is taking money from IMF & Europe, their debt should decrease. Wrong. If anything, Greece’s debt rises more and more. It’s like you’re trying to pay your credit card bill by taking a loan and at the same time paying your living expenses, your debt will grow! This simple fact PROVES that austerity measures are simply NOT working. If you need a country to grow, no matter how low you make the salaries you won’t be able to increase the country’s power to produce more. Making Greece the equal of China at pay levels will simply not do it! All the political decisions to date are CLEARLY not working simply because they CONSERVE the ill system that has brought us here. This is why SYRIZA came to power for the first time, not because it promised higher salaries…It came to power simply because it offered a TRUE solution: if you want a country to grow, then money have to flow within the country.

    One last example that shows you how idiots in Europe are running things: privatizations. You have a country that has no hard industry, but has some core business that are actually profitable (Electricity Company, Ports Management, Athletic Prognostics Organization, to name a few). Instead of using those core businesses as REVENUE for the country itself, the Europeans are pushing for selling these companies to investors with the excuse that this will bring quick cash. The true reason is that these “investors” are always large companies from Germany, France, Italy, Austria, etc, who have their own agenda of grasping the last few resources of Greece. It’s all about money. Nobody gives a shit about Greece or its citizens. What we have here is a relationship like the British Empire and India. It’s all about controlling and exploiting a country..