Understanding Greeks: What is Going On-2 (The Enemy That Lurks On the Outside.)

To a large extent, the comfort for many Greeks contains a scapegoat; now it is the Eurogroup and the Germans.

In years past it was the Americans. Generally speaking. Any demonstration -- many of which took place as a matter of course or tradition, a commuters-annoying fiesta if you will -- would end up at the American embassy.

Of course Greek politicians, probably Europe's most corrupt and ineffectual, need "bad guys" to explain away the dismal situation of their country and its abysmal financial state.


What is the situation at this moment:

1) Greece's government is misinforming the country as to what is going on in the negotiations, trying to support the "bad guys" concept and putting forth the notion that its the bad guys who are imposing austerity that the Greek government is resisting.

2) Some Greeks, (4.5/10) who voted for this fascist - left wing coalition government insist on burying their heads in the ground and looking elsewhere when reality is staring them in the face; they voted for a magic wand that would make everything OK (syriza) and they could start consuming again.

3) The media are between two stools about stating the obvious and reporting reality: they fear
a) a drop in their viewer ratings(because people do not want to be troubled by the truth -- which they know intuitively anyway. Greeks want to shy from the truth.)
b) be labelled the unpatriotic propagandists of foreign powers

4) So, by and large, a large slice of the Greek voting population remains unaware of what is really going on.


Despite all, a demonstration last week labelled gathered thousands "We are European"


So, what is really going on?


AFAI understand:
The lenders have decided to take a hard stance as regards cost cutting by insisting on a positive current account balance. 

This means that the Greek government must either raise its income with increased new taxation (ref, talks about vat, etc) OR reduce spending. The latter is preferable for the future.

The lenders have accepted that the debt (approaching 450bill euro) is not sustainable. It will probably be restructured in the form of a write-off quietly sometime in the future. 


(Greece produces little value adding and the state bureaucracy and the public service agencies inertia  doe not allow for much initiative and change. Spectacular growth figures for the future, needed to service this debt, are not on the visible agenda.)


For the write-off to take place, Greece has to step into the path of sustainable growth. 
I.e. two things have to happen to the satisfaction of lenders (and, largely, to the good of the country): 1) Greece has to show it will not run a similar debt yet again 2) make reforms that testify to its pursuit of more competitive path as a country and ones that will bring it into the 21st century (free investments, allow excellence in education, allow efficiency in medical care, reform closed professions, reduce the abysmally reactionary and huge public sector, maybe even contain corruption).


The present Greek government does not want to reduce its spending because it is afraid of losing its voters. Also, in order to win the elections it promised to do away with austerity - in other words, to give away money. It is also supportive of the civil service and hostile to investment, so it is unsure of how to promote "growth". 

Greek Government organised rallies in favour of the government's efforts are organised in Athens in an effort to give evidence of support and sway European leaders and public opinion.

 
And this is the gist of it. As it trickles down to the negotiations saga:

whenever lenders say, "reduce spending",

the Greek government quietly says:
"how about we agree on implementing equivalent, income-increasing measures? Like say, increase VAT?"

The lenders / Eurogroup probably answers:
"that's not a good idea, that would hit a critical industry, hospitality. Also, increasing vat on drugs would affect the weakest...".

The Greek government comes back home and declares publicly:
"the lenders wish to impose high VAT on us. They are inhuman!"


And the saga lives on


Close to 70% of Greek state spending goes to civil servants' salaries and pensions (early pensions make up 45% of the budget for pension; about 30% of this in the form of subsidies to state owned corporations' special retirement benefits (chiefly PPC & Hellenic Telecom).


The Greek government does not want to reduce spending