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Greek finances face 'credibility gap'

By Shaun Ley
BBC News, Athens

Athens demonstration, 17 December 2009
Protesters marched through Athens last week to protest public spending cuts

Greek Finance Minister George Papaconstantinou calls it a "credibility gap".

How far can the statistics for Greece's public finances be trusted?

The Bank of Greece says the budget deficit in 2009 will be 12.7%. Two months ago the previous government said it would be 6.7%.

One problem is that Greek civil servants have no accurate picture of how much their country is worth. The International Monetary Fund (IMF) thinks one third of wealth is undeclared; some analysts think it could be nearer half. Tax dodging is commonplace.

Yannis, an Athens landlord, says: "I appear in the taxes like I earn 2,000 euros (£1,780) a year, which is ridiculous... I earn approximately 70,000 euros a year."

It is corrupt, you give money to the tax collector, it won't go in streets or in schools
Yannis
Furniture maker and landlord

He does not declare his income because he does not trust the system.

Demonstrators march under a banner claiming Greece's main labour union, GSEE, is collaborating with the SEV employers' federation during a protest in central Athens in the middle of December.

"It is corrupt, basically," says Yannis. "You give money to the tax collector, it goes to a Greek organisation with hundreds of employees there who will vote for the politician who hired them. It won't go in streets or in schools."

Tax avoidance is one explanation for the difficulty the Greek government has in meeting its obligations.

Its debt level is expected to reach 125% of GDP next year. But honesty is at the heart of the crisis now gripping Greece.

Prime Minister George Papandreou has pledged to curb the deficit, for example, by freezing the pay of public employees who earn more than 2,000 euros per month.

Georgios Papaconstantinou, file pic from 2 December 2009

People do not believe our numbers or what we're saying
George Papaconstantinou
Greek Finance Minister

In future, there will be fewer of these workers; only one worker will be hired for every five who retire.

Yet the markets have been unimpressed. Two of the credit ratings agencies have downgraded the value of Greek government bonds, suggesting they are not completely convinced the country can pay its debts. That is not a decision which pleased Mr Papaconstantinou.

"They're not reflecting current initiatives, which are in the right direction; of course, much more needs to be done," he says.

"The main problem at the moment is a credibility issue. People do not believe our numbers or what we're saying."

The rhetoric is positive, but talking to people in Athens, it is difficult to see how quickly the change can be delivered.

If you visit the doctor in Greece, the chances are you will present him or her with an envelope - not your test results, but a gift.

Cash-stuffed envelopes

These gifts of envelopes generously stuffed with euros illustrate how the Greek culture of hospitality and of showing appreciation for good service has mutated into what is basically corruption.

Even the prime minister says it is endemic. The question is whether it can be eliminated.

Georgy, a taxi driver who lives in Athens, says people are generally conservative, and want to keep things as they are.

"Greece is a country of routine," he says. "Whatever interrupts this routine makes people nervous."

European debt and deficit figures

Asked how politicians stay successful, he says simply: "The secret is keep your voter happy. That's it."

This is perhaps the biggest problem for Mr Papandreou. The scion of a political dynasty (both his grandfather and father served as prime minister), he leads Pasok, a Socialist party which has grown as a result of the culture he's now seeking to purge.

Last Thursday the communist union organisation held a day of protest.

In future, it could be the mainstream trades unionist backers of Pasok who are taking to the streets.

Nicos Papageorgiou, who represents catering workers in the capital, says the cuts the government is proposing will be fought.

Asked how he responds to claims that there isn't enough money to pay for the relatively early retirement age many Greeks expect to enjoy, he replies: "Come on… I mean, who believes that?"

'Sins of our fathers'

So the "credibility gap" works in several directions: other governments in the eurozone do not trust official statistics from Greece; citizens do not pay their taxes because they do not believe the money will be well spent; and many simply do not accept that things are as bad as the politicians say.

A Greek man sells tissues outside closed store
Greece is trying to reassure markets about its economy

"People don't see this in terms of national well-being," says John Psaropoulos, former editor of the respected Athens News, Greece's oldest English-language newspaper.

"They really don't seem to see that our children, and their children, will be paying for the pensions of the current pensioners."

He offers a more pithy explanation of the cause of the budget crisis. "I am paying for my father's pension; but the trouble is that I've got something like three or four fathers to support," he says.

The sins of those fathers are most definitely being visited on the sons and the daughters of Greece.

Shaun Ley's report can be heard on The World This Weekend on BBC Radio 4.



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SEE ALSO
Greek unions protest against cuts
17 Dec 09 |  Europe
Greece PM in anti-corruption plan
15 Dec 09 |  Europe
Greeks fear times will get tougher
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Greece unveils big spending cuts
14 Dec 09 |  Business
Greece says no chance of default
11 Dec 09 |  Business
Greece's debt reaches 300bn euros
10 Dec 09 |  Business

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