NFT: Greece is broke

who got his tax refund, spent it all on a bottle of Cristal and is asking you to pay for half. No matter who is in power there, they can't figure out how to make everyone, especially the top 1-5% wage-earners, pay taxes, which is why they are in awful shape

except the barkeep has seen his tax refund and the BMW he just bought and still opens him a tab. Greece deserves a good deal of the opprobrium that has been heaped on them but Germany and their other creditors are the Countrywide Mortgage of international finance.

It's long, but has some marvelous examples of the artistry of Greeks in modern times. Ancient Athens has noting on these guys.

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The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.” One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases.

Link - ( New Window )

400 pts down. Oh well, I'm not retiring anytime soon anyway.

all the bad Greek debt that will be in trouble if they let Greece walk away.
If Merkel and co stick to their guns, theyll only be punishing themselves.

If you doubt this, then how come whenever Greece announces bad news, OUR markets all crap the bed?

Along with the balance of the Eurozone...

In comment 12347137 NoPeanutz said:

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all the bad Greek debt that will be in trouble if they let Greece walk away. If Merkel and co stick to their guns, theyll only be punishing themselves. If you doubt this, then how come whenever Greece announces bad news, OUR markets all crap the bed?

Except for the part where you said "Greece isn't in trouble" you're right...

But Greece is pretty much boned no matter what they do and most of it is their fault because they haven't collected revenue effectively for decades

Greece can walk away and try to rebuild their own currency and debt structure on their own. And the what happens... nobody is going to do any business with Greece? Somebody will step in and fill the void (Russia? Emirates? China?), and liquify/ launder any New Drachma debt. It's not like they're under sanctions.

The euro, on the other hand, will have undergone an unprecedented crisis of confidence. And how will Germany get their still at large problem children under control? Clamping down on them, encouraging them to follow Greece? Or playing nice, showing that they needlessly forced Greece out along the way?

IMO, the only rational course is that Greece needs to be CONVINCED to stay. And they should be, if EU leaders are interested in attracting investment and stabilizing markets.

In comment 12347117 Dunedin81 said:

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except the barkeep has seen his tax refund and the BMW he just bought and still opens him a tab. Greece deserves a good deal of the opprobrium that has been heaped on them but Germany and their other creditors are the Countrywide Mortgage of international finance.

Yep Germany had a nice little EU racket going. Lend them money and pretty much force them to buy German goods with it. Greece definitely deserves a heap of blame but the Germans are not blameless for this euro mess.

In the long-term for Greece, but the short-term stands to be massively painful for the Greeks....significant contraction in GDP, inflation, capital controls...

In comment 12347137 NoPeanutz said:

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all the bad Greek debt that will be in trouble if they let Greece walk away. If Merkel and co stick to their guns, theyll only be punishing themselves. If you doubt this, then how come whenever Greece announces bad news, OUR markets all crap the bed?

There are countries with larger economies at risk. Bribing Greece into staying would be setting a bad example for them. Watching Greece degenerate into chaos (and even a benefactor like Russia isn't going to save them from several years of economic hell and likely social disorder) would serve as a better example. It's going to hurt the Eurozone, but the last several years has bought the states and the exposed banks and corporations time to limit their exposure and cut their losses, and I'm sure they have.

somebody said, Greece has zero tax enforcement. They also made far too many promises, pension and otherwise.

In comment 12347119 buford said:

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400 pts down. Oh well, I'm not retiring anytime soon anyway.

Sort of at arbitrary number. The U.S. Futures were down about 2% today.

Interested to see how bad this damages the Euro in the short term.

in pensions, so most of the issue is internal. Where the Germans and EU screwed up was allowing them entry in the first place (and Goldman Sachs also takes some blame here for helping Athens cook its books).

But the majority of the problem is rampant tax evasion from Greece's wealthy

looks like the first, Democracy, is going to lead to a bit of the second.

Blame the rest of Europe all you want. The Greek people refuse to pay their taxes and cooked their books for years. That aint Merkl's fault.

In comment 12347193 dpinzow said:

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in pensions, so most of the issue is internal. Where the Germans and EU screwed up was allowing them entry in the first place (and Goldman Sachs also takes some blame here for helping Athens cook its books). But the majority of the problem is rampant tax evasion from Greece's wealthy

Too much money going out. Not enough coming in.

and actually does represent currency.

Sell her estate in Greece for the last few years. She's from Greece and has the stubbornness of the society, so isn't willing. I fear that property is going to be taken by the government in a matter of days.

In comment 12347119 buford said:

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400 pts down. Oh well, I'm not retiring anytime soon anyway.

The market has basically doubled since 2008. You're sweating 2%?

Greeks are a lost cause. If the EU wants to survive, they need to dump them. It's going to happen sooner or later anyway.

In comment 12347222 schabadoo said:

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In comment 12347119 buford said: Quote: 400 pts down. Oh well, I'm not retiring anytime soon anyway. The market has basically doubled since 2008. You're sweating 2%?

I could do the same thing and point out the market is up a mere 11% over the last 15 years couldn't I? If you don't believe it I can show you an S&P 500 mutual fund I bought and held on to since 1999.

is it not a good time to visi t Greece now?

that was always epitomized best by Greece.

Weak, corrupt craphole economies need to be able to devalue and reform at the same time, in order to become competitive.

Locked into the Euro, Greece couldn't devalue, and locked into ridiculous promises and corruption, it couldn't become competitive even if it did devalue.

I could never figure out how this was going to actually work. Greece has practically nothing to sell that anyone anywhere else in the world wants, other than tourism. And meanwhile, cutting spending without devaluing just leads to one recession after another. Germany continuing to throw money down a bottomless pit makes no sense.

The bottom line is that leaving the Euro, defaulting and devaluing seems like the only possible combination that could stop the economic erosion.

No winners here. The best hope is that the EU can shut the door after Greece leaves without anyone else needing to follow them.

In comment 12347208 bradshaw44 said:

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Sell her estate in Greece for the last few years. She's from Greece and has the stubbornness of the society, so isn't willing. I fear that property is going to be taken by the government in a matter of days.

If it hasn't already been squatted in.

.

Most of the bonds and long-term obligations were discounted several years ago. So the net impact on the EU, Germany in particular, is expected to be manageable.

Obviously is cheaper to kick them out than let them stay on their terms.

Hope it doesn't happen, but it looks like the EU will be cultivating its own "developing economies"/countries, like we have with Latin America.

but to is Puerto Rico.
PR broke - ( New Window )

In comment 12347317 giants#1 said:

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but to is Puerto Rico. PR broke - ( New Window )

I was just about to post that. $73B in debt they can't pay. How much fear is there that Greece will spread to at least some of the other PIIGS?

I think this is the best thing for Greece in the long term. This is the major flaw in the Euro monetary system. When individual countries go through recessions, the typical remedy is to devalue your currency to incentivize foreign investment. That is difficult for the smaller EU countries, because the Euro is held afloat by the larger economies of Germany and France.

What Greece has going for it is tourism. With a cheap drachma, foreign tourists will hopefully take advantage of cheap Greek currency to vacation there. The challenge for Greece is to provide adequate security.

In comment 12347246 GentleGiant said:

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In comment 12347222 schabadoo said: Quote: In comment 12347119 buford said: Quote: 400 pts down. Oh well, I'm not retiring anytime soon anyway. The market has basically doubled since 2008. You're sweating 2%? I could do the same thing and point out the market is up a mere 11% over the last 15 years couldn't I? If you don't believe it I can show you an S&P 500 mutual fund I bought and held on to since 1999.

They have charts for these sort of things, trust is not really necessary.

It is some interesting timing, as the Dow had tripled from '93 to '99. Bad luck I guess.

In comment 12347308 WideRight said:

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Most of the bonds and long-term obligations were discounted several years ago. So the net impact on the EU, Germany in particular, is expected to be manageable. Obviously is cheaper to kick them out than let them stay on their terms.

Exactly. These are intelligent people, both in government and in business. The last few years have been about planning for and managing the inevitable. That's why there isn't much of any push to find an accommodation. Now that isn't to say they can anticipate the second and third order effects of this or the impact on the confidence of investors in other struggling economies (PIIS I guess at this point, though I understood - perhaps dated though - that Ireland was relatively stable), only that the direct consequences of this for their banks, their firms and those of their respective countries have likely been anticipated and mitigated.

a Eurozone exit is. There's no mechanism for a member to be kicked out, or even exit voluntarily. You may have to amend the EU treaty, which would require a unanimous vote - including Greece's. Institution fail.

is dragging down the global economy. Greece. How the fuck did we get to this point?

down global equity markets, not the global economy as of yet.

weaken against the shekel... I got a pretty sizeable bill due (in Euros) for French oak barrels...

I went all over Europe the summer before Euro notes were distributed. Even as a 22 year old, the common currency didnt make any sense to me. After visiting Italy, I thought you couldnt pay me enough money to throw in my lot with that country. The Greeks just beat Italy (and maybe Spain) to the punch. Notice how Italian bond yields spiked today.

Imagine if this was Italy instead of a piddling Greek economy.

At least damn near it?

Why not hedge out that risk, take that piece of uncertainty out of your business? Or are you able to adjust your prices to recover higher barrel prices?

Without EU funding they can't pay their people's pensions, and they can no longer create Govt jobs (which I believe is like 80% of the jobs there). Also they will have to come back with the Drachma, which means re-positioning it a lot lower versus the Euro. The estimates I have seen say that peoples bank accounts will be devalued by ~40%. Germany and the others can get by without the loans being re-payed, Greece will be left with nothing.

can someone explain as if I'm 5 years old how it got to this point? How was there rampant tax evasion and no enforcement?

In comment 12347485 Ten Ton Hammer said:

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can someone explain as if I'm 5 years old how it got to this point? How was there rampant tax evasion and no enforcement?

Tax evasion is an art form in Greece going back to the days when they were under Ottoman occupation. Back then it was considered a form of civil resistance. The problem is, the idea of tax evasion never left (helped vs. the Ottomans but screwed themselves royally here)

To join the Euro, you essentially had to have a modern, functioning economy and had to meet certain metrics like inflation, debt/GDP, budget deficit, etc. Greece in no way resembled the economies of Germany, France, Holland, etc. but they wanted to join the Euro because under the Euro, they're borrowing costs would be much lower. So they cooked their books (Enron, WorldCom had nothing on them) to make it look like they met the necessary criteria.

They reported numbers that suggested a normal modern economy, which made it possible for them to borrow money in the capital markets. In reality, they were an economic basket case. Tax evasion was systemic, they didn't report several major costs and liabilities (i.e. they kept them off the books), there really wasn't a viable private sector, etc. Several years - and billions of Euros borrowed - later, the facade came off. Now they can't borrow money like they used to repay the old loans and their creditors (EU, ECB, IMF) made them adopt draconian austerity measures that torpedoed their economy and contributed to social hardship and unrest.

The Greeks then elected the relatively new Syriza party to power. Syriza is a fringe leftist/populist party that promised to end austerity in negotiations with creditors. The creditors are saying NFW and here we are.

and then cried poor (or were actually too poor) to even begin paying back?

If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country.

but Greece has been at the forefront of 'bad shit coming' for years.

no real surprise, nor is it a surprise that markets will use the opportunity to freak. This am I told the wife that stock will drop, oil will rise (despite Greece not producing oil). Stock is a no brainer. the market freaks when a mouse farts. oil is more or less the same.

In comment 12347522 Ten Ton Hammer said:

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and then cried poor (or were actually too poor) to even begin paying back? If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country.

The other detail being that the folks running the Eurozone had every reason to suspect that the Greek economic outlook wasn't as rosy as was portrayed in their application, but didn't look very hard. They wanted to let them in to gain market for their exports (that wouldn't be affected by adjustments in currency markets) more than they wanted to screen out high risks.

1. Are there any figures on how rampant (%) tax evasion is there?

2. Are there civil movements there urging for an end of the tax evasion?

places.

The strong European economies want access to cheap markets and raw materials (including labor), but don't want to let the immigration of these elements into their sphere of influence.

It's always been the Eastern and Southern Europe question; how much do you expand membership along these margins, knowing that they are likely very high risks.

in 26% lower tax receipts.

And no large scale civil movements against this; this type of "corruption" is largely seen as a cost of doing business in Greece.

In comment 12347538 Enoch said:

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In comment 12347522 Ten Ton Hammer said: Quote: and then cried poor (or were actually too poor) to even begin paying back? If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country. The other detail being that the folks running the Eurozone had every reason to suspect that the Greek economic outlook wasn't as rosy as was portrayed in their application, but didn't look very hard. They wanted to let them in to gain market for their exports (that wouldn't be affected by adjustments in currency markets) more than they wanted to screen out high risks.

Frankly they were complicit in cooking the books. The blame has fallen to Goldman and of course GS usually gets what it deserves but plenty of people in Northern Europe made a buttload of money exporting to Southern Europe. They're not stupid, they knew the bill would eventually come due, presumably they thought that either they'd get out before the shit hit the fan or that the government (European or national) would backstop them.