1621

It’s also an excellent way for companies to pay less social security (false self-employed people, still subject to severance). It is a very complex issue, and it’s not clear a self-employee earns more than a salied person.

But we know salaries in Greece are low as fuck, as we showed before (using data from regular salaried employees, which is accounted properly).

1622

I guess this is the first post in which we agree. ;)

Greece would have to tackle this in a pragmatic way. Create the necessary law, find a few hundred tax collectors, make a list of top candidates and then start at the top collecting very aggressively.
The problem is though that only ca. 500 families own the majority of the money, and the same families are well connected to government, parliament, courts, etc.

1623

It would be interesting to see the stats on the scope and type of work for the “self employed” in Greece.

Based on the description above, the US has basically the same thing, but we call it “day labor”. Groups of (mostly) men meet every day in a commonly-known spot and wait for work trucks to arrive to pick them up. It’s almost always “unskilled” labor (mowing lawns, landscaping, crop harvesting), and the rates are negotiated between the workers and the job supervisors. Typically it’s immigrants - both lawful and illegal - but not always. After a while, the relationships can become semi-formal, with the same trucks picking up the same workers every day because they’ve proven themselves good workers or good employers.

The pay is almost always under the table, and it’s rare that anyone pays taxes on the work.

The US state and federal levels would certainly like to get their hands on the tax income from this, but in general it seems like the effort necessary to get a handle on it is not financially or politically worth the effort - it’s not like these people would be in a positive tax bracket. I’ve no idea what the scope of the practice is, but I’ve always assumed it was a fairly minor number in terms of percentage of the work-force (I’m sure the actual numbers are large - UCLA thinks there are 20,000 day laborers in LA and San Diego alone).

1624

It is the reality of the self-employed in Spain. Based on geographical, economic and cultural paralelisms I would bet that the same is true for Greece. But of course I don’t have the data.

1625

But we’re not talking about emergency aid. Nobody would veto that.

At this point the whole EU except Greece believes that the reasons for the Greek problems are internal. That’s why they demand changes.

1626

No, GDP has fallen since 2009. It’s true that GDP growth was reported for the 3rd quarter of 2014, but those numbers were supplied by Greece itself and are questionable. There’s no question that GDP is falling faster now than last year, though, for obvious reasons.

Not even Syriza wants to touch tax collection and corruption, let alone the more-pensions-than-pensioners problem and the gazillion no-show civil servants.

What are you basing this on? Syriza has consistently said that it would do this, and it has presented proposals to that effect to the Eurogroup. What makes you think that they don’t want to do it?

Everybody I know and pretty much 100% of the press expect that the money given to Greece is lost.

Greece got a much better deal. They got a 100bn€ debt cut for free. They already got 380+bn€, did very little for it … and are in a worse situation than ever.

Actually, that debt relief was for private creditors only - many of whom were Greek banks - so it was a cheap round for the Eurogroup. That said, assuming that there are no further haircuts, and as you say, all remaining debt is lost, the people who took those haircuts got the better end of the deal. Of course, there’s no way all debt will be lost, as creditors will keep demanding their money even after a Grexit, and Greece will eventually pay at least some of it back.

What they really need is a zero tolerance law against corruption. Fire everybody on the spot who gets caught. Offer 5k in cash to everybody who brings enough evidence for a corruption case which holds up in court. Won’t happen though.

The Greek police has a tax department, which is responsible for investigating tax fraud. The Greek government is reportedly currently investigating 80,000 Greeks suspected of hiding money in foreign bank accounts. I don’t know which CD’s full of Swiss bank accounts you’re talking about, but the goverment is using the Lagarde list and has also initiated greater cooperation and information exchange with Swiss banks.

The current government is already much more aggressive than previous government, but hiring a few hundred extra tax collectors is nowhere near enough, especially given that the problem isn’t just at the top of society. As mentioned up-thread self-employed professionals are also a big problem, as is reporting of sales taxes. The whole tax report system needs to be overhauled and modernized, and audits need to be stepped up further, and possibly also the sentences for tax evasion. This requires a lot of manpower, and not just in the Ministry of Finance, but also in the police and courts. And apart from the very wealthiest, it requires a sustained effort that is likely to take years, before tax evasion starts dropping off. This is of course difficult at a time when you’re facing budget cuts, not to mention the possible issues of finding enough qualified manpower, while at the same time firing all the corrupt ones (like you suggested).

More money for Greece is not the solution. They need to clean up their stuff first.

Everybody already agrees that more money is not the solution, but it’s necessary to avoid an immediate Grexit. You seem to expect them to clean up very deep structural problems within the span of a few weeks.

1627

This was discussed before Juan. Greece has among the lowest productivity in Europe.

Further, yet again, the statistic stems from structural issues in Greece that you have always shied away from acknowledging or addressing.

Greece has less than half the average EU part time employee rate, 12% less female labour force participation, and 2.5x as many self employed people. The actual hours worked by each segment is the same as German counterparts, the difference is Greece has very few female or part time workers and far too many people running their own struggling and inefficient businesses.

Please don’t talk about prejudice.

1628

Various German press reports. The press here wrote that Syriza reversed some of the already implemented reforms and slowed down others - and this actually caused the increased problems this year. It’s true that Syriza said they would do it, though.

Actually, that debt relief was for private creditors only - many of whom were Greek banks - so it was a cheap round for the Eurogroup. That said, assuming that there are no further haircuts, and as you say, all remaining debt is lost, the people who took those haircuts got the better end of the deal. Of course, there’s no way all debt will be lost, as creditors will keep demanding their money even after a Grexit, and Greece will eventually pay at least some of it back.

Agreed. But only part of it. At some point it will be reduced by 50% or so.

The Greek police has a tax department, which is responsible for investigating tax fraud. The Greek government is reportedly currently investigating 80,000 Greeks suspected of hiding money in foreign bank accounts. I don’t know which CD’s full of Swiss bank accounts you’re talking about, but the goverment is using the Lagarde list and has also initiated greater cooperation and information exchange with Swiss banks.

The Lagarde list and a couple of others. See Wikipedia. The German article on the Lagarde list mentions that investigations are progressing slowly, especially because staff at the SDOE (police tax dept.) has been reduced. If you read the English page you get an idea how the Greek governments before Syriza have done whatever they could to avoid using the lists. Various government officials had family members on the list.
Regarding the Swiss banks I’m sure I’ve watched a TV report the other week saying that the Swiss are willing to negotiate about a cooperation, but they haven’t heard back from Greece for a long time. The other piece of info in this docu was that Syriza plans a flat tax of 21% to legalize all undeclared Greek money on Swiss bank accounts. There are pros and cons for this. IMHO such a pragmatic choice isn’t bad, but the tax should be substantially higher.

The current government is already much more aggressive than previous government,

My impression is different, but impressions can be wrong. Maybe they’re really trying to improve things. In that case they should work on their external communication.

but hiring a few hundred extra tax collectors is nowhere near enough, especially given that the problem isn’t just at the top of society. As mentioned up-thread self-employed professionals are also a big problem, as is reporting of sales taxes. The whole tax report system needs to be overhauled and modernized, and audits need to be stepped up further, and possibly also the sentences for tax evasion. This requires a lot of manpower, and not just in the Ministry of Finance, but also in the police and courts. And apart from the very wealthiest, it requires a sustained effort that is likely to take years, before tax evasion starts dropping off.

All correct. Corruption and tax issues are interwoven. It’s a lot of very difficult work. But it’s a chance too: These are exactly the areas in which the EU partners want to see progress. If there are hard facts about progress Greece might be able to leverage this to get boni from the EU. Here’s one weird example: “For every 1bn€ in additional taxes you collect through “law x” you get 250m€ debt reduction.”

This is of course difficult at a time when you’re facing budget cuts, not to mention the possible issues of finding enough qualified manpower, while at the same time firing all the corrupt ones (like you suggested).

Difficult but possible. German experts estimate that every German tax investigator brings in between 1 and 2 million € per year. So budget is no problem. These people pay for themselves, even if you pay them generously. It sends an important signal if you start hitting potential tax evaders. This drives people to the emergency exit: retroactive declaration of taxes. Let’s say taxes plus 20% on top, but no trial and no jail.
The German government is very reluctant to hire new tax investigators, btw. You know, if you search actively you might find something you don’t want to know … Effectively every business can expect to be audited every 3-5 years, depending on size and luck. There’s a random element in it to keep the audits surprising. ;)

Everybody already agrees that more money is not the solution,

Unfortunately no, even in this thread.

but it’s necessary to avoid an immediate Grexit.
It’s not clear at all that a Grexit would be worse than the new package.

You seem to expect them to clean up very deep structural problems within the span of a few weeks.

No. It will take years. But they could have started serious reforms 5 years ago. Instead they did some half-assed stuff. What I expect them to do is get up to speed with reforms and then stay in motion. With or without grexit, a tax reform & accompanying things and anti-corruption measures are unavoidable. So get started already.
And what they’re really going to do is the same shit again and a Grexit in 3 years.

1629

The original comment I was replying to was suggesting Greeks worked few hours (impliying they were lazy). If you don’t read it like that I suggest you read it again.

And those implications are false. And came from prejudice. Are you really disputing this?

The structural problems in the Greek economy have fuck nothing to do with how hard Greek people work, or for how long, or their work ethic. It has much more to do with their business structure (which is a disaster), so does unproductivity.

As for the number of self employed. Don’t be naive. In Spain (with similar if lesser structural problems) the estimate is that between 60 and 75% of self employed are not real self employed (the ones I described earlier are were the real self-employed). The false self-employed works in exclusivity for a single company, in terms similar to those of a salaried employee, and with economic dependence, but with fiscal benefits for the company (and not the worker, who pays more taxes unless he makes over median). It’s fraud. And this happens because many companies refuse to hire unless the person looking for a job accepts this arrangement (they even lose most or all unemployment benefits). There are not that many people running their own struggling business as the number of self employed might indicate. Does tHis hold true for Greece? I haven’t seen the estimates, but even if the umber is not as crazy high as in Spain, I’m sure it’s in the ballpark.

1630

If you take the population as a whole they do work few hours, because the labour force participation rate is very low.

The structural problems in the Greek economy have fuck nothing to do with how hard Greek people work, or for how long, or their work ethic. It has much more to do with their business structure (which is a disaster), so does unproductivity.

Unproductivity of labour has nothing to do with the productivity of labour.

Right Juan, everyone else is biased and prejudiced.

As for the number of self employed. Don’t be naive. In Spain (with similar if lesser structural problems) the estimate is that between 60 and 75% of self employed are not real self employed (the ones I described earlier are were the real self-employed). The false self-employed works in exclusivity for a single company, in terms similar to those of a salaried employee, and with economic dependence, but with fiscal benefits for the company (and not the worker, who pays more taxes unless he makes over median). It’s fraud. And this happens because many companies refuse to hire unless the person looking for a job accepts this arrangement (they even lose most or all unemployment benefits). There are not that many people running their own struggling business as the number of self employed might indicate. Does tHis hold true for Greece? I haven’t seen the estimates, but even if the umber is not as crazy high as in Spain, I’m sure it’s in the ballpark.

So you’re telling me not to be naive, then stating that you have no idea if your premise holds true for Greece, you have seen no evidence, but you’re sure that you’re right regardless.

You are incredibly disingenuous and dishonest.

1631

I honestly am at a lost at what you are trying to say here. The original comment (to which I replied) was calling Greek people lazy because they worked few hours, and I picked up an statistic that proves that was a lie, and that therefore the prejudices of the original poster (saying that Greeks worked few hours) where wrong. Nothing more nothing else.

What are you trying to say tying unemployment to this conversation? All I can come up with is that you are implying Greeks are lazy (or at fault of not working enough) for being unemployed. Suporting the original comments assumptions by bringing unemployment into the counting. And I sincerely doubt you mean that. What are you fighting here?

You keep thinking I say things I’m not saying. Fighting against windmills. I wasn’t saying unproductivity of labour has nothing to do with the productivity of labour (obviously). I was saying that unproductivity of labour has nothing to do with work ethics, or how hard people work. Or at least not necessarily.

So let’s rephrase: unproductivity of labor has nothing to do with how much people work, but on what they are working towards. It does not necessarily follow from laziness or relaxed worked ethics, but with a badly structured enterprise (the structural problems you keep saying I don’t address but I keep addressing nonetheless). The clear example would be a farmer collecting vegetables by hand for 12 hours and another using a machine and harvesting 4 times the amount in 4 hours. Of course, the second case is a much healthier enterprise, and productive, but the unproductiveness of the first farmer is not due to laziness or lack of hard working. It’s due to the business he’s engaged in (manual harvesting) is inefficient by itself. This is a reasonable simplification of how a lot of southern european economies work. This is your main structural problem.

I brought up an statistic. You brought up other statistics trying to reframe the original statistic (which doesn’t disprove the original number, just contextualizes it. People in Greece, according to your numbers, either work as much as other Europeans or don’t work at all -that is, there are few part time workers-. And I think that’s a fair assessment.

However you made another assumption, linking self-employment to people managing struggling businesses. What I did was tell you that that is not as simple a relationship as it somehow seems. That the number of self-employed might not really relate to number of businesses unless you look further into the numbers. I’ve been (and worked) in Greece and Spain for reasonable amounts of time. The business structure I saw in both countries was similar enough to assume certain parallelisms.

But since you raise the question, let’s bring data in and stop relying on personal anecdotes. How do we estimate the number of bogus self-employment in Spain? By taking the number of self-employed people who themselves don’t employ anybody and contrasting that to the number of self-employed. That is, the percentage of self-employed that don’t employ anybody else (contractor or salaried) are much more likely to be bogus self-employed (not all, but a significant amount). Moreover, that number being unusually high points to an structural use of bogus-self employment by companies for tax evasion (that is, the higher the number is, the higher he likelihood that those in the category are indeed bogus self-employed, at least according to Spanish analysts).

In Spain this number stands at 71% and thus that’s why official estimates bring in between 71% and 56% bogus self-employment (the estimates I used in the previous post (75-60) were old, it seems).

What is the number for Greece? 79%. The fourth country in the EU with the higher percentage of possible bogus self employment. In Germany (a country with little tax evasion) this number is only 55%. So we can safely assume that Greece has a much higher number of bogus-self employment than the european average.

Since we can also assume that most struggling businesses (what you implied the number of self-employment in Greece means in your post) will at least hire somebody else, and given that in Greece only 21% of the self-employed employ somebody else themselves, we can safely say that the long hours self-employed Greek people put in has not that much to do with struggling businesses but with very different structural problems more related to lack of work safety and tax evasion from businesses (again, being a bogus self-employed is perjudicial economically for the employed and beneficial for the employer).

1632

In other news, Donald Tusk on political contagion, giving a clearer voice to some of my own concerns:

For me, the atmosphere is a little similar to the time after 1968 in Europe. I can feel, maybe not a revolutionary mood, but something like widespread impatience. When impatience becomes not an individual but a social experience of feeling, this is the introduction for revolutions. I think some circumstances are also similar to 1968.

I am really afraid of this ideological or political contagion, not financial contagion, of this Greek crisis. Today’s situation in Greece, including he result of the referendum and the result of the last general election, but also this atmosphere, this mood in some comments – we have something like a new, huge public debate in Europe. Everything is about new ideologies. In fact, it’s nothing new. It’s something like an economic and ideological illusion, that we have a chance to build some alternative to this traditional European economic system. It’s not only a Greek phenomenon.

Edit: and a former director at the IMF offering an alternative. Gerxit (German exit). I can’t tell if he’s being serious, though…

1633

Grexit and Gerexit - two roads to the same destination - a North-East/South-West split.

1634

Please stop with this.

Juan is posting in good faith by any definition. That you disagree with him makes him neither dishonest nor disingenuous.

1635

Seriously, Juan is one of the nicest and most consistently mellow posters here. You don’t need to insult him to have a discussion with him.
We always disagree, but we don’t insult each other over it. Because what’s the point? No one’s gonna say, “Oh man, that guy laid down a totally sick burn! He must be right!”

1636

See, even Timex can be right once in a while!

:P

1637

Well as a fellow European Juan seems to know his stuff, links to his points and is coming from the correct direction especially as he is Spanish and Spain has many similar issues to Greece so I have a tendency to listen to his points well as he is coming at it with a lot of understanding.

Still no issue with not agreeing with someone, be a little boring without it

1638

Good to see that germany has been able to get the vote through their parliament and it seems Greece will be getting much needed extra funds, they just need to sort out their economy to make this a longterm viable thing :)

1639

How long until Greece needs the next bail out?

1640

what are we…friday…um next week? (i was joking but it might be the plan, i’m not sure what has been agreed): http://www.theguardian.com/business/live/2015/jul/17/greek-debt-crisis-germany-bailout-package-lagarde-debt-relief-live