The Full Catastrophe | James Angelos

Summary of: The Full Catastrophe: Travels Among the New Greek Ruins
By: James Angelos

Introduction

In James Angelos’ ‘The Full Catastrophe: Travels Among the New Greek Ruins’, the complex Greek crisis is meticulously examined, tracing its roots from the moment Greece entered the eurozone in 2001. This book summary highlights key events and themes including the country’s unsustainable credit bubble, the shocking revelation that Greece faked its numbers to join the eurozone, the effects of the credit bubble bursting, and the intervention of the ‘troika’ comprising the European Central Bank, the International Monetary Fund, and the European Commission. The introduction pays special attention to the political turmoil and the desperate plight of Greek citizens and refugees amidst the ongoing crisis.

Greece’s Economic Deception

When Greece joined the eurozone in 2001, its economy was thriving, and Greece’s strong growth rate of 4% each year appeared sustainable. However, this growth was supported by a credit bubble instead of investment in industry and technology. The government increased wages, pensions and benefits rather than improving industry performance. Consequently, the country failed to export enough goods to cover its rising debts. Greece falsified its numbers to meet the eurozone’s criteria for membership when it didn’t meet them. In 2009, the government’s accounting revision revealed Greece had a projected budget deficit of 12.5% of GDP, instead of the previous estimate of 3.7%, and previous “widespread misreporting” was identified.

The Greek Debt Crisis

The Greek debt crisis caused a series of downgrades in its credit rating, which led to investors pulling out of the country and skyrocketing borrowing costs. The situation caused devastating effects on the Greek economy, with companies failing, unemployment rising, and banks closing. The crisis also had significant repercussions on the entire eurozone, as much of Greece’s foreign debt was held in German and French banks. Other eurozone nations were also in financial trouble, and the support from more “stable” countries like Germany and France was crucial to limit the crisis. Discover how international bodies and creditor groups intervened to counter the crisis.

Crisis in Greece

In 2009, the troika comprised of the European Central Bank, IMF, and European Commission stepped in to offer Greece a package of debt relief and loans. In exchange, Greece would have to enforce certain political and social reforms. The biggest debt restructuring in history followed, with Greece receiving €245 billion in loan pledges and a reduction of €107 billion in debt. The country, however, had to implement a series of austerity measures causing protests and riots by its citizens. The public sector wages were cut, limiting spending power and, consequently, weakening the economy. Though the bailout had a negative impact on Greece, its situation caused a revolutionary change in the country’s political ranks.

The Political Fallout of Greece’s Debt Crisis

When Greece faced a debt crisis, its social democratic party, PASOK, was in power. EU ministers demanded PASOK Prime Minister George Papandreou accept a second bailout program, causing public outrage. Papandreou cancelled a public referendum on the issue and resigned, leading to Lucas Papademos being sworn in as prime minister. The extremist parties gained power in Athens, leading to a parliamentary election in May 2012. In June, New Democracy formed a new government with PASOK but Greece continued to struggle financially. In 2015, anti-austerity platform Syriza with leader Alexis Tsipras won elections, enraging European creditors and setting up a showdown.

Greek Disability Fraud

The Greek government was plagued with a disability and pension fraud crisis during the economic downturn. One of the most notable cases was on the island of Zakynthos, where hundreds of locals faked blindness to receive monthly disability checks, with the help of local doctors. This resulted in a rate of supposed blindness that was nine times higher than other European countries, and collected over €9 million in state benefits. The issue wasn’t limited to Zakynthos, as Greeks across the country would fake disabilities in exchange for bribes. The state social security system had no central database, resulting in pensions being paid to deceased individuals. The government eventually began compulsory checks, discovering that 36,000 people were receiving fraudulent benefits. However, the greater issue was tax evasion across the country.

Greece’s Economic Woes and Tax Evasion

Greece’s economic crisis has shed light on the country’s long-standing issue with tax evasion, especially among the wealthy. While middle and lower-income citizens bear the burden through raised taxes, wealthy individuals often evade paying their fair share, with some even declaring earnings far below their actual income. The government’s efforts to address tax fraudsters have been lackluster, with few facing court cases. Meanwhile, corruption among tax auditors allows the wealthy to escape punishment. Despite promises to address the issue, the government has raised taxes on small businesses, exacerbating the economic struggles of the middle class. Greece’s economic problems continue to be a topic of concern, with tax evasion among the root issues needing to be addressed.

The Untouchables

In Greece, the public sector is a haven for job security with a guaranteed pension plan. Protected by law, public servants cannot be fired even with a change in government. The result is a bloated bureaucracy with untouchable employees, regardless of their work ethic or behavior. Despite efforts to reduce costs and eliminate positions, early retirements and reinstatements maintained a surplus of high-pension retirees on the books.

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