Sunday, July 05, 2015

Greek Economy

I were the King of Greece,
I'd push things off the mantelpiece (AA Milne).
Tomorrow the people of Greece vote in a referendum on the tough terms of European rescue package. After doing a bit of study, I found that things are not quite as they are portrayed in the media. Here is some background information about the Greek economy.

1. GDP
The Greek economy is not just tourism and olive oil. 15 percent of the world merchant shipping is owned by Greek shipping magnates. Greece exports cement, ships, petroleum, electronic goods, pharmaceuticals and agricultural products.

2. Decline
The Greek economy has been hit hard by the GFC. Between 2010 and 2013, the GDP declined by an average of 6 percent. This has exacerbated the debt problem.

3. Exports
Exports have continued to increase from 2010 to the present.

4. Unemployment
The unemployment rate in Greece is 26 percent. More than fifty percent of youth under 25 are unemployed.

5. Pensions
Greece has been criticised for its generous pensions, but they have been significantly reduced in the last few years. The main problem is the inefficient system for managing pension funds and payments.

6. Aging Population
The cost of pensions is high because the aging problem has hit Greece earlier than other countries reflects and the aging population. 20 percent of the population is over 65.

7. Taxation
Greece has a problem with collecting taxations, but that is not the full story. The GST rate is 26 percent. The rate on food is 6 percent. The highest income tax rate is 42 percent. The problem is that the oligarch families that control most of the economy are able to evade taxation. For example, income from shipping is tax free. The bosses of energy and construction companies and football clubs avoid tax.

8. Budget Deficit
The Greek government have always spent more than they earned in taxes. Between 1995 and 2015, the average budget shortfall was 7.1 percent of GDP.

9. Military spending
Greece has always had high levels of military spending. Although it is now down to 3 percent of GDP, it got as high as 7 percent of GDP. I presume this is partly the legacy of Greece the military junta that ruled Greece from 1967 to 1974. I presume the military elite dominate of part of the economy.

10. Normal People
The people of Greece are no different from people all over the world. Some are wise, some are foolish. Most work hard, and only a few are lazy. Many would just like a decent job. The Greeks are not an evil people that need to be punished.

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