When my acquaintance Phil told me he was building a house in Greece, I didn't think much of it. I already knew Phil was rich, and had lots of toys. What intrigued me was how he was financing it: He was getting a low interest loan from a Greek bank, and had negotiated a 10-year tax holiday from the local authorities. I realized that anyone with enough money for a down payment could probably build themselves a luxury villa on the Greek coast--you didn't have to be an Onassis.
More below the orange filo...
This was in the late 1990's, shortly before Greece joined the Eurozone. In the years following, two other friends of mine, one Greek, one not, built their dream villas on Greek islands, with cheap financing from Greek banks and generous tax holidays. They told joyous stories of all the free stuff you could get by playing footsie with the local authorities, most of whom were more concerned with keeping money out of the hands of Athens than actually collecting taxes. When I asked why Greece was so welcoming, my Greek friend ruefully confessed "Greece doesn't have anything anyone else wants, except olive oil and history--and our beautiful lifestyle. So anyone willing to bring their money is welcome." In retrospect, I could have seen what was coming.
We can all agree that the hard line being taken by the Austerity gang is going to have cruel consequences for the Greek people. Paul Krugman and others have spared no ink taking the Germans to task for their heartlessness. What is surprising and disturbing is that they are not focusing on the most important aspect of this story: Whether the Eurozone ministers get their way, or Tsipras gets his way, it will be another dramatic case of wealth transfer from the poor and working class, to the already wealthy.
It was not the Greek taxi drivers, teachers and shopkeepers who reaped the benefits of the good times, it was the contractors who got rich building luxury second homes instead of infrastructure. It was the public officials who borrowed to finance vanity projects and who encouraged frivolous consumption. It was the politicians in Greece who rode a few years of popularity by fueling this massive party. And yes, it was the moderately wealthy, some of who are not even Greek, who took borrowed money to finance lavish toys. And who can blame my friends? If I had been of retirement age and had enough money, I might have done what they did--the deal sounded too good to be true, and that's how it has turned out.
This debate has been framed as win/lose, between the heartless German bureaucrats and the feckless, lazy Greeks. Both points of view are wrong. The Greek working class do not deserve, for example, to lose pensions they already earned. But working class Germans and other Europeans are justified in their anger at having to bail out the Greeks--they, too, were ripped off, their taxes subsidizing this theft and misuse of borrowed money. That is why they support the Austerity crowd. Unfortunately, they can't target their anger at the small minority of Greeks who deserve it.
Meanwhile, if Tsipras wins, the new bail-out goes to...you guessed it!..the banks. The same banks that flushed their country's economy down the toilet. Either way, it is the working class who will bear the cost of whatever happens, while the people who stole all the money in the first place have completely escaped any consequences. Why Krugman is not harping on this latest example of the rich privatizing the commons is inexplicable.