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Tax evasion is indeed widespread in the country. Several studies estimate that Greece may be losing as much as $30 billion per year, and despite offering several amnesties — including one last September in which the government offered tax cheats the opportunity to completely settle their bill for fifty-five cents on the dollar — evasion remains an endemic problem. Further complicating the problem is Greece’s legal system. Greeks who appeal tax bills wait an average of 8 to 10 years before their cases are settled, and there are more than 300,000 cases backlogged in the system. According to the Wall Street Journal, unreported income was “25.1% of gross domestic product in 2007, according to Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria, and corruption among tax payers–and tax collectors–is rampant.”
Dionysis Gousetis, a columnist writing for the newspaper Kathimerini, is contemptuous of the I Won’t Pay movement. “Now, with the crisis as an alibi … the freeloaders don’t hide. They appear publicly and proudly and act like heroes of civil disobedience. Something like Rosa Parks or Mahatma Gandhi. They’re not satisfied with not paying themselves. They are forcing others to follow them,” he wrote. Prime Minister Papandreou was of like mind. “You think that lawlessness is something revolutionary, which helps the Greek people,” he said in a parliamentary rebuke of Coalition of the Left party leader Alexis Tsipras. “It is the lawlessness which we have in our country that the Greek people are paying for today.” Political analyst Takis Michas also concurred: “There is clearly a breakdown of the rule of law, and without the rule of law there can be no economic development. It is organised lawlessness spearheaded by the hard left,” he said.
The I Won’t Pay tactic has proven momentarily successful. On Monday, the socialist government will announce reductions of up to 50 percent in road toll fees hoping to appease the protesters and restore a measure of lawfulness to the country. Yet such concessions do nothing to alter reality. Despite last May’s bailout, Greece remains mired in a recession which has exceeded the most dire predictions of the IMF and the EU, and further austerity measures are likely to enrage a population which sees them as unnecessarily stringent at best, and utterly futile at worst. And despite Prime Minister Papandreou’s vehement insistence that Greece will continue meeting its obligations, counseling a default as “catastrophic for the country,” other government officials are less optimistic. “It’s better to have a restructuring now … since the situation is going nowhere,” said Vasso Papandreou, head of the Greek parliament’s economic affairs committee.
Greece is faced with three possible solutions. One, continue to muddle through in the hopes that economic conditions improve and protesters can be kept in check, even as more stringent austerity measures are enacted. This option is the most daunting, and as the I Won’t Pay movement and upcoming union strikes indicate, it is also the most explosive. Two, work out some sort of debt-restructuring settlement between Athens and its creditors in which the owners of Greek bonds accept that they won’t get all their money back. This is a somewhat illusory fix, since it would substantially raise future borrowing costs for the nation, as bondholders would demand higher returns for greater risk. This in turn would lead to a far longer period of only marginally less austerity. Third, abandon the euro as their national currency, return to the drachma, and devalue the currency to attract outside investment into the country.
Number two would cause large losses for German and French banks and other European nations struggling with debt, as Ireland and Portugal would be tempted to follow suit, leading to an even wider Continental crisis. Number three? The end of the European Union as it is currently constructed.
If world renowned economist Nouriel Rubini is correct, option one is already off the table. He believes default is no longer a mater of “if,” but a matter of “when,” due in large part to government debt projected to reach 159% of GDP by next year. Yet it is also obvious that ordinary Greeks are exacerbating the problem, even as they are quick to blame a combination of government corruption and cronyism for undermining their future. The I Won’t Pay movement is a testament to the general economic illiteracy of a public desiring to starve the same socialist government beast that they have long relied upon to underwrite their profligate lifestyles. Many Greeks believe they are entitled to go on living off “other people’s money” absent any realistic restraint — or any more money. And as evidenced by record levels of interest required to finance more debt, ongoing austerity, or default and debt restructuring, “other people” markedly disagree. Greeks will be brought, perhaps kicking and screaming all the way, to reality. Or they will divorce themselves from the European Union.
Divorce might not be the worst option, the reason for which was illuminated long before the current crisis began. As it was bluntly stated more than a year ago, one can only wonder how long Germans who retire at 67 will go on underwriting Greeks who retire at 53.
Arnold Ahlert is a contributing columnist to the conservative website JewishWorldReview.com.
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