Greek Olive

Maybe it's because of his last name, but whatever the reason may be, the Toronto Star's erratic business columnist David Olive has decided he knows enough about the Greek debt situation to offer his opinions about it.  He doesn't.

So much of the article is wrong that it's hard to know where to start.  Maybe a good place to jump in is the old and much quoted canard that Greeks don't pay their taxes.  This is simply not true.  OECD data for 2014 (which took me less than a minute to find online; you really should try this sometime, Mr Olive) show that the country's tax/GDP ratio was right on the OECD average, and significantly higher than that for several major economies, including Canada, the US and Japan.

This is not to suggest that the Greek tax system is ideal. The same OECD report shows that the country depends to a more-than-average extent, and probably more than it should, on consumption taxes and not enough on income taxes. This leaves plenty of room for the wealthy to avoid paying their share, and there's certainly evidence of that. See this swimming pool story from a few years back, for example.

The fact is,  the average Athenian-in-the-street, the one getting whacked by the austerity measures, has been paying his or her share of taxes.  On the fiscal side, as Olive at least partly acknowledges, Greece's problem is one of excessively generous social programs, rather than inadequate taxation.

Olive's analysis of how Greece and its creditors got into this mess is also wrong -- and I'm actually personally insulted by his version.  He suggests that it was an "open secret", when Greece was admitted to the Euro, that the country had been cooking the books. At the time I was working in the London dealing room of one of the Big Five Canadian banks. We weren't lending to Greece but we were following the situation closely. As the date for adoption of the euro approached,  all the candidate countries were required to comply with a set of tests collectively known as the Maastricht criteria. Each country's performance was monitored by the ECB and European Commission.  These bodies duly reported that Greece was converging towards and then meeting the criteria. It's on this basis that investors, in good faith, bought Greek bonds.

It was only several years later that investigations showed that the Greeks had systematically and repeatedly lied about their true situation in order to gain euro admission. A small number of money centre banks had helped them to do so, using derivatives transactions to conceal the real picture. (If David Olive wanted to attack the role played by the financial sector, this would have been a good place to start). The players representing Athens at the negotiating table have changed, but this pattern of past deception is surely a key reason that it's proving so hard to make a deal today.

Have you noticed that there are more external links than usual in this blog post? I'm sort of trying to make a point. Finding all of these stories and linking them into the text took me, in total, less than five minutes. Real journalists like to sneer at us mere bloggers, but at least we do our research.