Monday, March 1, 2010

Greek economy: Diagnosis schizoid

According to economists it takes 5 years for a country, any country to get out of a recession. What about Greece though. It never follows any sort of economic trend. Last year during the height of the GFC - Global Financial Crisis, Greece imported more luxury Mercedes-Benz automobiles than any other European country.

This is because there is more than one 'economy' operating in Greece.
There is the black economy which according to some estimates is as large as 40% of the total economy.
This economy not only includes those catchy sounding professions as Pimps, human desperation traders and drug dealers, but it also includes lawyers, doctors, taxi drivers, petrol station and car park owners. These professions are notorious in Greece for not paying taxes and working 'off the books'. Here in Greece its just common knowledge.

The second economy is the Public Sector. 40% of the national budget gets sucked into this black abyss. These people do pay taxes. However they are not taxed on their fringe benefits, benefits that is more than their initial wage. They get higher pensions and their pension funds have never been looted by any government. They have access to free child care the envy of any first world country. Some civil servants can get a fixed home loan at 3%. In the last nine months of the previous administration many civil servants booked 90 hours overtime a month - on days they didn't even turn up to work. Try that anywhere else.
More tragic however is that bright minds get attracted to work here. Sure its dull and boring in the civil service, but 6 hour work days plus the benefits - where else can you get that.
This has left the third economy weak and anemic.

The third economy is the economy that those abroad understand and live in. People selling their goods and services on the dirty market. It is not a free market in Greece. There are restrictions as to who can be employed as what and if so how many hours they can work at what compensation rate. For example, though previously employed as a writer at a large company, i was never officially one, instead i was hired as a mere office employee. If i was a writer the government demands that i be paid extra money and that i work for no longer than 40 minutes in front of a screen etc... While well intended - these do more to hinder the 'free market' than support it. And looking at all the building sites with workers with no safety helmets, more has to be done enforcing laws than merely writing them.

Many professions are closed shop, such as movers and journalists. Red tape can kill small businesses. If you are self employed in Greece - factor in at least 35 days a year that will be lost to red tape.

Despite this there are some companies that are doing well. These include the Mastiha cooperative that is investing in their niche product Mastiha. Korres which is selling worldwide. Intralot which is one of three companies that competes in the world that provide lottery systems. Coca-Cola 3E, a local franchise, that through local hard work and entrepreneurial spirit is now the second largest bottler in the world after Atlanta and operations across the Middle East and Eastern Europe. These are just a few companies - that despite the roadblocks that the other two economies place in their way have managed to do well.

If Greece is to get out of this recession - it is to this third economy that Greece must look towards as being the engine of growth. No more must it coddle the public sector, a sector which sucks the fire out of the real economy. No more can it turn a blind eye to the black economy, which tears down any progress made in the real economy.

The more we wait however, the more anxious we become.


  1. I've just had an interesting MSM chat with a young woman I know personally in Greece and guess what, it's all the German's fault, every bit of it. Until Greeks can understand that you can't always blame someone else the problems will exist. Funny about the Mercedes, I thought I saw more those around last summer along with bigger yachts, lol...ciao