Greece. That poster child for the profligate Euro social welfare state.
Or at the least that’s what “they” tell us. “They” being pundits both media and financial. I’ve always been skeptical of what “they” say. However I had always accepted at face value the claim that the public sector in Greece was…well…large. I knew there was story behind it: Greece went through a civil war, which many Greeks still remember, and the so-called “jobs for life” civil service was a way to bring the losers of that war back in to society. When certain German journalists suggested a “Corfu for bailout money” swap The Economist blogger Charlemagne rebuked:
I have been visiting Corfu for nearly 30 years, and have some very old friends there. I know it well enough to know that just off the shore in the bay of Corfu Town, for example, there is a little island covered in pine trees, that looks an idyllic spot for a picnic. That was where Communist prisoners were taken to be shot, in the hearing of their wives and children in the town.
So imagine my surprise when I discovered this chart:I never thought for a second that the alleged size of the Greek public sector was one of the roots of Greece’s debt, and now I really don’t think it (if you read Charlemagne’s post you might start to get the idea that one of the major causes of Greece’s debt isn’t spending, but efficient and effective revenue collection).
Greece does have large debt. It’s public debt is currently 142.8% of GDP. It had been hovering around 110% of GDP for much of the last 10 years before it leaped up with the start of the financial crisis, and that is more than likely because the Greek economy shrank nearly 7%. But Japan’s is 183.5% and no one is worried about Japan.
So what caused Greece’s debt? Some point to the Olympics, and I’m sure that contributed to a limited degree. Others point to military spending – Greece spends about double what other European countries spend on their militaries (if the Turks buy 50 tanks, Greece must buy 60, etc). Over the years that can add up.
But I don’t really know. I’ve tried to find a breakdown of the source of Greek debt and have so far been unable to do so.
But I do know it wasn’t the size of the Greek public sector, or Greek public sector wages, or Greek public sector pensions that caused the financial crisis.
Maybe, instead, they need to hire more tax collectors.