Let’s start with a very simple question: What is the first thing someone has to do in order to solve a political or economical problem? Someone must find the cause of this problem and eliminate it. In order to eliminate its roots you must first realize them and then you must have the will and desire to solve it.
In Greece the great majority of citizens and politicians, is falling into two categories. The first includes those who don’t realize the cause of the Greek default and the second includes those who have realized the cause of the problem but don’t want to do something about it because their short-term personal economic interests will be affected negatively.
So, which is the core problem of the Greek economy?
Why Greece has defaulted? Everybody agrees and the numbers show that Greece defaulted due to excessive government expenses. Greece has almost 1 million public servants (nobody knows the exact number) and a population of almost 11 million people. In 1980 the number of public servants was almost 300,000 without the computers and the technology which naturally eliminates paper work and augments the productivity/employee. The Greek population at the time was almost the same.
Someone could make the quite safe assumption that due to the technological advance the number of public servants should have fallen to 200,000 or even less. What happened and after 30 years their number is more than tripled.
The answer is simple
The majority of politicians were buying the votes of citizens by giving them jobs as public servants. In order to pay their salaries governments had to borrow the money. Before the entrance of Greece into the Eurozone borrowing wasn’t very easy because of high interest rates, but after the entry and the low rates at which Greece could borrow money as a reliable Eurozone member, this practice skyrocketed and led to the Greek default.
Who is responsible?
Almost 100% of politicians and the citizens who were selling their votes for a quite relaxing and well paid job. By politicians we mean every government and opposition party that has set foot on the parliament right or left. The dream of many Greek citizens had become a public servant job in exchange for obedience to a political party on every election date.
Who had been paying all these public servants?
The Greek tax payer and the low interest rate loans that Greece could take as an EU member. If you have a company and your expenses are irrational and very high what will you do? Will you cut these expenses or rob your grandmother’s pension in order to keep them high? The Greek governments the last 30 years have chosen the second. The fake opposition from supposedly leftist parties with totally unrealistic view of the contemporary world is greatly helping in the destruction of the Greek economy and society. The greatest of these parties SY.RIZ.A is an admirer of third world countries like Venezuela and Argentina and they are promising their voters everything they want to hear. How this country will be transformed to a modern economy if it hasn’t the right prototype to follow?
In a Greece almost in the verge of the cliff, SY.RIZ.A formed something that hardly reminds a political program, let alone a solution for the Greek destruction, three weeks before elections. Many of its members are remnants of an old world with no knowledge of modern economy.
And who is going to pay them now?
Now that borrowing is out of the question only the tax payer remains and this is exactly the practice of the Greek government at this moment. The draining of every euro of disposable income in order to monetize a totally irrational, corrupted and super-sized public sector. So, instead of fiercely cutting off all the unnecessary public jobs they are destroying every day the productive private sector via high taxation. The estimated direct and indirect tax that a citizen has to pay as a percentage of their annual payroll is almost 60% and it keeps rising dramatically. In Greece people who are get paid €500-€600 net per month are paying taxes to cover public servants that take €800-€2000 or more per month. The reluctance of the government to lay off its voters is approaching extreme levels as it is constantly denying the dismissal of 15,000 public servants who have evidently caught to steel or making other kinds of punishable acts.
Private vs public sector
The majority of Greek politicians and citizens cannot understand, or have interests not to understand, that the preservation of a super-sized public sector is against the private productive sector and against the future of the Greek people. The survival of the two sectors as they are at this moment is mutually exclusive. Anybody who argues that public servants must not be dismissed is in the best case ignorant. For every public servant three private sector employees are losing their jobs due to high taxation and the accompanying reduction of disposable income. The cost of the preservation of a super-sized public sector far exceeds the benefits.
Why Greek government is not laying off public servants?
Because it is difficult to lay off your voters, those who give you the right to earn a high payroll as a member of the parliament and many other benefits, not to mention the ‘’right’’ to get bribed by big companies as a holder of key government positions.
What needs to be done?
A ten year plan to cut at least half of the current number of public servants in combination with the full computerization of every aspect of the public sector in order much less public employees to fulfill the same needs. This must be done in cooperation with companies specialized in the restructuring and computerization of public sectors.
Who will do it?
Surely not the same parties that led Greece to a dead end. A new and totally clean party without any dependence from voters must do the job, but this party has yet to form in a country which strongly refuses to adjust itself in the new era.
Written by Kostas Konstantatos
October 25, 2012