Aasof’s Reflections

Der Spiegel reported in May 2010 that without bribes virtually no foreign company could do business in Greece. In How German Companies Bribed Their Way to Greek Deals, Der Speigel claimed that the money from bribery enriched industrialists, civil servants, the military and politicians. Certainly Greece has an economic élite, whom it is suggested have been transferring their ill gotten gains into Swiss bank accounts.

In October 2011 VoxEurope, reporting on opinions in the German press, quoted the ‘Bild’ newspaper headline as “Greeks stash 200 billion euros in Swiss bank accounts!” the article claiming, “While Europe struggles to help Greece with multi-billion euro bailout plans, more and more Greeks are transferring their money out of the country”. The Financial Times Deutschland, argued that “Switzerland should extradite the Greek money.”

Given the report in Der Spiegel, this may seem like ‘self-righteous indignation’. As Transparency International reports, bribery – in whatever form it comes – is endemic and global.

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Ìn March 2012 the EU Observer reported that EU figures show crisis-busting arms sales to Greece. EU countries sold Greece over €1 billion of arms while negotiating the 2010 bail-out. France was by far the biggest seller, with a €794 million aircraft deal, it also sold €58 million of missiles and €19 million of electronic equipment. The Netherlands and Germany together sold almost €90 million of military equipment, with Italy and Spain adding another €85 million to Greece’s odious debt.

As author Jason Manolopoulos claims in his book (left): ‘When the former French finance minister Christine Lagarde said in 2010 that the Greek rescue package was not like the USA sorting out California, it was a tacit admission that the EU had created something that it could not manage.  There was a single currency but not a single political or fiscal framework’. (sic)

On January 26 2015 Public Finance International reported that it was a travesty of democratic process to make the electorate think that the recent Greek election was about competing parties proposals to deal with ‘Greece’s huge and unsustainable debt’. Had it been recognised that Greece’s net debt is actually less than 20% of GDP, the election outcome may have been a lot different.

Greece’s gross debt is widely reported as being 175% of GDP, yet measured according to International Public Sector Accounting Standards (IPSAS), the gross debt of Greece is 68% of GDP. This figure reflects the unprecedented huge effective debt reduction brought about by the 2011 and 2012 debt restructuring.

This restructuring pushed debt maturities far out into the future and significantly reduced interest rates. In reporting the lower number for gross debt, international accounting standards reflect both the economic reality and the time value of money, a principle that has been recognised at least since the thirteenth century.

However, gross debt is not the best measure of debt burden or fiscal strength, governments with strong track records in fiscal management regard net debt as the better measure. Greece’s net debt is 18%, the difference between 68% and 18% reflecting the financial assets of the Greek government. At 18% Greece’s debt burden is markedly lower than that of most European governments.

Now the election is over, it is time to face the facts. Greece does not have a debt problem, but that does not mean it does not have a problem.

Other References:

The Trojan Börse (28 November 2011)