Sunday, February 19, 2012

"Greece 1858 – plus ça change"

Hat Tip up front to the Wall Street Journal's Jason Zweig.*
From the Frankfurter Allgemeine Zeitung:

"The Acropolis" by David Roberts (1796-1864). Oil on canvas, David David Gallery, Philadelphia.
"The Acropolis" by David Roberts (1796-1864). Oil on canvas, David David Gallery, Philadelphia.

Crippled by debt, propped up by European powers, handicapped by an ineffective administration: uncompromising diagnoses of Greece’s ills are not new. The text that follows, drafted by 19th century French writer Edmond About, has re-emerged in the European press.
Greece is the only known example of a country that has lived in bankruptcy since the day that it was born. If such a situation were to prevail in France or England for just one year, we would see terrible catastrophes. Greece has peaceably lived with bankruptcy for more than 20 years. All of the country’s budgets, from the very first to the one just out, have been in deficit.

In civilised countries, when the sum of revenues is not sufficient to cover the budget for expenditure, the difference is made up by an internal loan. However, the Greek government has never tried to obtain such a loan and any attempt to do so would have been in vain.
The powers that protect Greece have been obliged to guarantee the solvency of the Greek state so that it can negotiate with external lenders. But the loans thereby obtained have been squandered by the government without any benefit to the country: and now that this money has been spent, the guarantors have no other option but to have the good grace to pay the interest, which Greece cannot reimburse.

Wealthy property owners succeed in frustrating the state

Today, the country has given up all hope of paying off its debts. And if the three powers continue to pay indefinitely in its stead, Greece will not be much better off because its outgoings will always be greater than its income.

Greece is the only civilised state where income tax is paid in kind. Money is so rare in the countryside that there was no option but to adopt this method of collection. The government initially appointed tax collectors who courageously set about their task, but thereafter failed to fulfill their obligations to the state, which was powerless to constrain them. Now that the state itself has taken charge of the collection of tax, the costs have proved considerably greater while the income obtained has barely increased.

The taxpayers have followed the example of the tax collectors: they do not pay. Wealthy property owners, who wield significant influence, succeed in frustrating the state by bribing or intimidating its agents. The agents, who are poorly paid and may be dismissed at every change of minister, do not defend the interests of the state as they do in our country....MORE
*We have some history with Mr. Zweig. From 2008's  "Nightly Business Report: Jason Zweig on Green ETF's (PBW; PZD; KWT; TAN)" to last month's "For some comments on the Keynes (attributed) quote "Markets can stay irrational..." see Jazon Zweig's MarketBeat post "Keynes: He Didn’t Say Half of What He Said. Or Did He?"."