Open letter to German readers: What you were never told about Greece

I am having a hard time getting that from this message:

>My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to.

>Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits.

There will have to be some money injected somewhere in Greece, but not in the same way, and the point is to get away from loans.

A CNN article from 2010 referenced 2008 government documents that said "6 in 10 Greeks don't pay income taxes" source: http://www.cnn.com/2010/WORLD/europe/12/31/greece.taxes/

I don't know what the rate of tax evasion is in other western countries, but I'm willing to wager the situation in Greece is dramatically worse.

I remember reading a NYT article from the same year that provided further insight:

Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems.

The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all. source: http://www.nytimes.com/2010/05/02/world/europe/02evasion.htm...

I haven't seen more recent numbers, but it makes me wonder about citizens' culpability in the government's debt crisis.

Maybe I'm overestimating the role of taxation in this debt fiasco, but it does seem as if the attitude of a lot of Greek citizens needs to change, if it hasn't already.

>So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding.

Despite the rhetoric this is the problem of not just Greece but many other developed governments, notably Japan. Central banks have been goosing the time value of money in an effort to spur 'growth' because if an entity can become richer faster than their debt will grow then it's a win-win situation.

This one sentence sums up what I think is the fundamental problem: "An insolvency problem was thus dealt with as if it were a case of illiquidity." That is, the problem isn't some ephemeral panic where people are temporarily unwilling to lend. The problem is there are massive capital losses that have yet to be acknowledged. The problem is that Euro politicians believe that by continuing to bankroll Greece they will stem a wider panic. But as John Mills observed in a speech given to the Manchester Statistical Society in 1867, “panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works”

The losses must be acknowledged. The only question is by whom? By the people who made the loans? Or will the taxpayers of Europe be called upon, as the taxpayers of America were, to eat the losses?