The way the Greeks live! Not difficult to understand why the country is in such deep trouble....

Everyone’s seen the crippling impact that Greek crisis is having on the economy around the world. The Greek government has been borrowing heavily over the years.....to fund what now appears to be a lifestyle that is simply unsustainable. While its economy has been de-growing for the last three years, its debt has been climbing inexorably. The Greek crisis came to the fore last year when the government was about to default on its loan repayments. It now has to borrow to pay. It’s a classic debt trap. To emerge from this debt trap, the Greeks have to cut back on their luxurious spending habits. They have to get used to pay cuts, lower pensions, tougher tax laws and the like. Who likes cuts in their salaries and perks....especially if you’ve got used to them for so many decades?

Some of the most startling stats of where Greece stands today:

• Greek debt totals $540 billion while its economy is only $310 billion. Worse, the GDP has been de-growing and Greek banks are about to default of loan repayments. GDP shrunk by nearly 5.5% in 2011 after shrinking by 4.5% in 2010 and 2% in 2009. So the GDP has been shrinking and the debt increasing. A typical debt trap! (For India, the same figures are: GDP $1.7 trillion. Debt $750 billion. Economic growth rate 8.5%).
• Standard and Poor’s rates Greek government debt as CCC which means “ below junk” status. The interest rates on Greek bonds have climbed to 15% or so. In case of default, banks that have leant to the Greek government could lose as much as 30-50% of their principal. (Indian debt is rated BBB – “stable” by S&P).
• The fiscal deficit in Greece is more than 15% of its GDP....this means that the government needs to continue borrowing more each year just to meet its expenses. (India: approx 5% of GDP).
• 20% of Greece is now under poverty (defined by European standards as anyone earning less than 6000 euros per year). (India of course is much higher at some 35% and at much more modest income definitions!).
• Its forex reserves are down to some $7 billion....which is equivalent to just one month’s imports.....(India some $300 billion....about a year’s imports).
• Unemployment has risen to 16%. Amongst the youth, its 35%. (India 9%.....but again, the real numbers may be higher because of what is called “partial” employment or “hidden” unemployment).
• The bureaucracy in Greek is way more than in India. One idea is to sell off Greek islands to raise monies. But to sell an island, eight ministries must sign off. 2500 official licenses and permits are need to conclude the sale!
• Bribes are rampant. Every sixth Greek pays a bribe of 1500 euros per household....or 1 billion euros nationally per year! (I am sure India beats Greece hands down on this score!).

Now the reasons the country has got into this mess. Though we’ve heard of Greek profligacy, some of these facts are sure to raise anyone’s hackles:

• Huge public sector: One in three Greek (33%) works in the government sector. Government salaries are better than private sector. (India less than 2% and we thought we had too many government employees!). There are four times more teachers per pupil than the “best in education” in Europe – Finland. These are all government jobs!
• Under a liberal pension system in the country, many people have managed to retire in their 40s. Pensions paid to these retired people continued to be paid even after their deaths in thousands of cases....some for many decades. Now the government insists on a personal visit from the pensioner at least once a year!
• The government contributes as much as 700 million euros to the pension fund of merely 25000 employees of the state power company. This is annually! (What does that come to: 28,000 euros per person per annum?). More than 8 billion euros have been contributed in the last 12 years or so! The Greeks are surely rich!
• Apparently (and not so unexpectedly), half the government employees don’t turn up for work! This is why there is a special bonus for them which is based on their punctuality!
• The government is obviously a great place to work for. Some civil servants claim a bonus for washing their hands regularly. Some get a bonus for just having to use a xerox machine. Others get five days a year in a luxury hotel of their choice!
• When a tax crackdown was ordered, the government used satellite imagery to detect 17000 unregistered (and hence untaxed) swimming pools in just Athens! 17,000? In a city with a population of some 7.5 lac people. Wow!
• A former Playboy model, Angela Gerekou was the culture minister of Greece before she was ousted for her husband’s tax evasion of 5 million euros! Her husband was a pop singer. What a glamorous government!
• Tax evasion is massive in Greece:
• In a random survey in front of popular Athens nightclubs found that 6000 people who had annual incomes of only 10000 euros owned cars that were worth more than 100,000 euros!
• Just like in India, the tax authorities were raking it in. In the case of many tax officers, they were found to own properties worth up to 3 million euros when there declared income was only 51000 euros!
• Greek yacht owners avoid 23% VAT on their yachts by showing them as belonging to Philipino tourists. On a yacht worth 1 million euros, that’s a saving of 230,000 euros!
• Such tax evasion adds up to some 500 million euros but the Greek government is loathe to collecting it.
• Some 40% of “small consumers” in Greece have stopped paying their electricity bills claiming they can no longer afford to pay. In reality, they are just following their politicians who do the same out of greed and perfidy (not inability to pay).
• Until recently, the rules allowed political parties to fly in Non Resident Greeks free of cost to come and vote for them! But the political parties refused to pay to the state owned Olympic Airways leading to its shutdown in 2009. Imagine flying in NRIs to vote in India!

The real truth is just that on the one hand, we must make sure we don’t repeat what we are seeing in Greece. On the other hand, we must learn to appreciate our own performance. When we look at the standards of governance in much of Europe (the famous PIGS nations – Portugal, Ireland, Greece and Spain – and now even extending to Italy), we’re now getting surprised at their own governance standards. We have often mistaken their quality of life to mean good governance. In reality, it was just a loot. The Europeans have been enjoying their life at the expense of the rest of us around the world. The time has come for this to change. It’s not difficult to see why the world is looking at Asia both with envy and hope.