Why is Greece a basket case?

Why is Greece in such a mess?

Well it’s because they are typical lazy southern Europeans isn’t it? They knock off work at mid-day, have long lunch breaks then never really go back. They spend the rest of the day idling in the sunshine.

Or do they? According to the OECD, the Greeks work more hours per week and per year than the citizens of most other member countries and certainly more than anyone else in Europe.

Average hours actually worked

Hours per year per person in employment

So it’s not lack of a work ethic that’s messed Greece up? Then it must be because their government just spends shedloads on welfare and other social provision.

But that doesn’t really stand up either. Greece is fairly low down in the social spending league table.

Public and private social expenditure

As a percentage of GDP, 2005

What about other public spending? Maybe they just have really great public services.

Nope. In the period before the recession, Greece spent slightly less as a percentage of its GDP than the UK did.

General government expenditures

As a percentage of GDP

Do they just retire earlier than the rest of us then? A bit, perhaps, but only a few months earlier than the Germans and still not as early as the French. Early retirement on its own wouldn’t be enough to completely cripple the economy.

So why the mounting public debt and the threat of default?

Many commentators blame the shortfall in public finances on the Greeks’ refusal to pay their taxes. According to the Telegraph, Greece loses €15bn a year to tax evasion. I couldn’t find any figures comparing levels of tax evasion by country but this Economist article reckons that Greece’s unofficial economy accounts for some 25 percent of its GDP.

Greece is top of the Dodgy Del Boy league, closely followed by Italy, Spain and Portugal.

Richard Murphy puts the figure even higher, at close to 30 percent of GDP, and argues that, if Greece could only collect its taxes, much of its fiscal pain would be relieved.

So the Greek government is hiring more tax inspectors to collect the taxes, right?

Er, no. When you make drastic public spending cuts you sack lots of public servants. Tax collectors are public servants so you sack them too. Logical isn’t it?

One explanation offered for Greece’s culture of tax evasion is the long period of Ottoman rule. After nearly half a millennium of foreign domination, taxes became associated with the oppressors and so evasion became a way of life, or so the story goes. As a government spokesman explained:

Dimitris Georgakopoulos, the man in charge of taxation at the Ministry of Finance, says the attitude dates back to the 400-year-long Ottoman rule over Greece, when people evaded taxes as a form of resistance.

Which, of course, is another great Greek tradition. When things go wrong, blame the Turks.