Rehn and Almunia can reverse the galloping catastrophe of Greece

Rehn and Almunia can reverse the galloping catastrophe of Greece


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Despite the recent change of attitude of European leaders towards Greece, culminating with the visit of German Chancellor Angela Merkel to Athens earlier this week, the Greek quest remains a complex matter. Indeed, as none of the issues that brought Greece to the present deadlock have been addressed, the solution to the Greek problem is likely to come bottom up, regardless of the implications.

The Germany steered European Union, wants to keep Greece in the Eurozone at least till the next German election. As we had the opportunity to stress more than once, if Greece withdraws from the Euro currency, the latter will strengthen significantly and consequently, German exports will suffer significantly.

So far, the European Union policy makers have forced the Greeks into decreasing income by raising taxes and reducing salaries and pensions. The result is galloping poverty and increasing rates of unemployment while none of the real problems of Greece have been addressed.

The biggest problem of the Greek economy is not tax evasion as the European Commission thinks. While it is not a minor problem, it is a side effect of the deeply rooted corruption in the public sector.

Bloated civil service

The public sector is the real ‘big’ problem of Greece. Unproductive and highly populated, it has an excess of something between 600,000 and 1,000,000 civil servants who at all levels of the administration, horizontally and vertically, wherever there is a need for citizens to come in contact with the administration for any reason apply a “transaction fee” (permits,certificates, taxes, social security, medical and hospital services, etc.). This commonly accepted form of bribery (“miza” in Greek) must be paid to the employee in charge so to process or expedite the case.

The magnitude of the “miza” depends on the legitimacy of the request and must be paid CBF (cash before delivery).

Referring to tax evasion, it should be noted that according to the outgoing Secretary General of the Ministry of Finance who resigned a few months ago, “only 20% of what citizens pay in taxes ends up in the state budget;” the rest deviates to the ‘system’ which involves, auditors, supervisors, political parties and many more.

A modest(?) proposal:

The solution to the problem is quite simple. Dismiss all civil servants who directly or indirectly handle citizens’ issues and replace them with electronic solutions to be set and operated by IT services providers. Dismissing only 600,000 employees at approximately 32,000 Euro annual cost each, will benefit the budget with about 20 billion Euro and this is the solution of the primary and secondary deficit. In this way Greece will permanently resolve the two big problems of its economy, (a) corruption in the public sector, which makes investments and development impossible, and, (b) the budget deficit. This is it, end of file, and it is worth wondering why a good and efficient Commissioner like Olli Rehn cannot understand this.

The reply to the legitimate question why the Greek governments do not do that is simple. The various governments claim that the Greek Constitution prohibits dismissal of civil servants. The counter argument to this, simple and clear, is that there is no need to violate the Constitution to dismiss civil servants.

It is perfectly legal to dismiss them after abolition of their positions in the organograms. The real reason, however, is that ruling parties do not proceed with lay-offs as the civil servants to be fired constitute their “political armies.” As to the “mizas” they get with the tolerance of the politicians is their remuneration so to remain faithful to them.

The second big problem of the Greek economy is that Greece is not producing anymore and is importing the great majority of its consumption requirements.

Think that this summer in Greece, the only fresh tomatoes one could buy in the super-markets and the open-air markets were …Belgian!

Big meeting, big words

This comes back to the first issue. Corruption in the administration is the prohibitive factor for development, as it does not only affect big multinationals but also (and primarily) small family business that for decades have been the backbone of the productive Greek economy.The third (though it deserves more attention) Greek problem is the cartelization of the Greek market. This is an issue that has been left unaddressed.

It is worth reminding the case of the General Manager of the Greek Competition Authority, a detached European Commission functionary who in September 2006 was flagrantly caught (and at the time jailed) for a bribes related case from a dairy company under investigation. To this day the Greek milk cartel is still functional.

Today, in full crisis mode, with salaries and pensions in Greece lowered by at least 30% and the amount of people living in poverty exceeding 20%, the retail price of fresh milk  in Greece remains 40-50% higher than in northern Europe. If this is not the result of a cartel, how else does Joaquin Almunia interpret it?

Earlier this week in Athens, Angela Merkel had a long working meeting with Demetris Daskalopoulos, the President of the Greek Industrialists who happens to also be the Chairman of Vivartia S.A. the largest fresh milk company in Greece.

Big meeting, big words, big pictures but bullshitting aside, if Merkel were properly briefed by her services and by the Commission services, she would have asked Daskalopoulos two simple questions:

For a litre of fresh milk, the Greeks pay about €1,30. In the dairy shop around the corner from the Chancellery in Berlin, Angela Merkel pays only 90 cents. Why?

Why could the Chancellor not find any German (or Dutch, Italian, etc.) fresh milk in any dairy retailer in Greece, while is able to find plenty (below one Euro per litre) in Spain or Portugal?

Paying the unnecessary price

But alas, milk is just one case, which we’ve mentioned in detail because Merkel met with the Greek dairyman. Greece is full of cartels, at all levels, being the most cartelized national market in Europe, involving most consumer products and services, from airliners to dairies and from cement to construction materials.

Just think that in Corfu, a touristic island in the Ionian sea only 12 miles from the mainland, for the past 30 years fresh fruits and vegetables have been, and continue to be 30% more expensive than in the mainland.

We owe our readers the truth and the truth is that if Europe and Germany want to address efficiently and pragmatically the Greek problem, they have to do two major interventions. One political (Olli Rehn), forcing the dramatic decrease of the size of the public sector (with subsequent impact the total eradication of systemic corruption) and one technical ( Joaquin Almunia), by addressing the cartelization of the Greek market, through a series of rapid investigations of DG Competition into the Greek cartels.

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