The Story of the Greek Debt Crisis in 20 charts
By Thanasis Delistathis
Friends often ask me to opine on the Greek debt crisis. They are looking for some insight into what is going on and why the country is at the brink of bankruptcy. I suppose they think my heritage makes me more qualified to offer such insight.
The Greek crisis in many ways is a simple story; the predictable outcome of policies and cultural idiosyncrasies. So here is an attempt to tell the story with a few charts:
- Define it. Why is Greece in trouble?
Source: OECD data
- Did Greece get in trouble because Greeks don’t work hard (“you know, with those long siestas over lunch”), kind of like the Germans? No.
Source: OECD data
- So, if the Greeks work so hard, how come they don’t produce enough to cover their obligations?
Source: OECD data for 2014
- Why is productivity so low? Over the years, politicians have grown the size of government. They also love to regulate. Over the last 30 years they have passed 4,000 new laws and issued about 110,000 ministerial directives. You need a lot of people to enforce these laws. Public servants in Greece get lifetime tenure!! Politicians loved growing the government to curry favor with voters.
Source: “The Greek Puzzle” by Kruhøffer & Johansen, 2012
- At the same time, Greeks love to strike to fight for more benefits. Politicians were happy to offer more.
Source: General Strikes in Western Europe, 1980–2008 by John Kelly and Kerstin Hamann
- Speaking of state favoritism, how about corruption in general? Greece ranks at the bottom within the EU.
Source: Transparency International
- On top of that, on average Greeks retire earlier…
Source: OECD estimate derived from the European and national labour force surveys.
- And thus have a higher dependency support ratio (ratio of number of people aged over 65 plus kids up to 15 per 100 persons of working age between 15–65). In reality, this significantly underestimates the true dependency ratio, since the country suffers from high rates of youth unemployment and many people retire before the age of 65. In other words, too many people depend for their livelihood on the too few who work.
- At the same time, the government is not bringing in enough revenues. How do we know this? Greece has the largest – as percentage of the economy – shadow or underground economy.
Source: Institute for Applied Economic Research at the University of Tübingen
- How can they escape taxes? Most of the people work for tiny businesses who conduct private cash transactions that can more easily be hidden.
Source: Structural Business Statictics Database (Eurostat)
- And by the way, the number of those businesses in going down…
- While the VAT taxes remain high relative to others in Europe…
- So, to sum it up Greece doesn’t seem to be a great place to do business.
Source: The Heritage Foundation & Dow Jones Company
- How bad? One group ranks the country 130th in the world…
Source: The Heritage Foundation and The Dow Jones Company, 2015 Index
- OK, so catch me up. What has happened to date?
Source: edited from BBC News
- Has Greece actually accomplished anything during this process? Greece actually grew during the first 3 quarters of 2014.
Source: National Statistical Service of Greece
- Say, what happened in Q4 of 2014? Looking at Chart 15 you might appreciate why Greeks were fed up with ongoing non-stop austerity measures. So they decided to elect a radical left coalition party that promised to undo the former policies. However, it seems consumers don’t have much confidence that the new leftist government will be able to reach an agreement with its eurozone partners.