The True Tragedy
While such structural problems have been noted for a while, their magnitude seems to have been underestimated. The true Greek tragedy is that a country that could potentially be on a solid growth trajectory is instead facing chaos because of the way the public sector (and its associated political system) interferes with the use of public resources. The press has been part and parcel of this corrupt system, impeding the understanding that would help resolve the issue. More consequentially, it has proved convenient for the stakeholders in the crisis -- in particular the European Union -- to avoid confronting the real nature of the problem. Doing so would require the sort of far-sighted action and pragmatic leadership that is -- perhaps understandably -- lacking from politicians concerned with re-election and administrative units vying for relative power.
As a result, kicking the can down the road has become the de facto solution, in the hope that things get better. The EU and the IMF have been treating a cancer with patches and aspirin. They have been busy addressing symptoms of the sickness, without daring to address the underlying cause. The EU task force, for one, has neither the skills nor the mandate to engage in the massive change management needed. So for all its short-term risks, it's time the Greek electorate addressed the problem head-on, confronting the state-induced sclerosis and sending a message to populist politicians from the left and the right alike.
The problem in Greece is three-fold. First, the public sector has proven to be a woeful manager of its own resources. The Greek public administration lacks accountability as well as a stable backbone of senior civil servants. It relies on formalistic rules to guide every step of the operation of public administration, as opposed to focusing on how it can substantively serve its purpose. These personnel issues, along with poor information and management systems (or data of any sort), mean that the public output related to expenditure is disappointing.
Serious problems exist at the top of the structure. The political system is highly influential and self-serving; its beneficiaries are able to carve out excessively compensated positions within the broad public sector, which means diverting funds from where the need exists. One such need, not surprisingly, is the growing number of Greeks living below the poverty line, as well as increasing criminality. Finally, an extremely important problem in Greece is tax avoidance -- Greece has only 30 percent of its GDP as tax receipts; the EU average is 37 percent. The inability to tax fairly has hit not only public finances, but has also created a sense of unease and social discomfort with taxation, especially under conditions of duress.
Second, the interface between the private and the public sector has seriously skewed the productive tissue in Greece. The Greek state has been a purchaser of services for construction, armaments, technology, and more mundane goods and services. Side-payments are often inherent to such procurement, as the scandal with PASOK's former strong man Akis Tsochatzopoulos, now behind bars, showed. Exposed to a corrupt system (...)
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