“Why should the European taxpayers bail out the profligate Greeks?”
That’s the mantra I’ve been hearing for some time now, even though a way bigger, and darker, cloud slowly builds up on the other side of the world.
As almost all mantras there is a small nugget of truth in here, even if things are not at all as some want us to believe. this almost prophetic article for Reuters, more than two years ago.wrote
First of all I’d like to quote the definition proposed by Investopedia.com for ‘moral hazard’:
“The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.
Moral hazard can be present any time two parties come into agreement with one another. Each party in a contract may have the opportunity to gain from acting contrary to the principles laid out by the agreement…..
Moral hazard can be somewhat reduced by the placing of responsibilities on both parties of a contract….”
After all it’s their responsibility, isn’t it?
It was them, the Greek voters, that have elected the corrupt politicians in the first place. It was them, the Greek voters, that didn’t do anything when they noticed that their Government was corrupt. Even more, some of the ordinary Greeks must have helped the corrupt politicians – nobody can be corrupt by it’s own, somebody must be at the other side of the deal. On top of that dodging taxes was, and still is, a national sport in Greece – well, that’s actually a rational thing to do: ‘who in it’s right mind would willingly pay his taxes, knowing that most of the money would be squandered away’?
Let’s presume that a completely different Tsipras somehow convinces the Greek people to accept pension cuts, tax hikes and, lo and behold, to pay their taxes in an honest way.
We have just established that in a democracy the voters have the final responsibility for the actions of those elected/hired into meaningful positions.
And what did the elected officials, from Brussels as well as those from the rest of the EU capitals? Turned a blind eye when Greek politicians ‘cooked the books’ before Greece was admitted into the EU and, after that, into the Euro zone? Then, when the private banks that had unwisely extended credit to the profligate Greeks had troubles recouping their money, the same elected officials said nothing while Jean Claude Trichet, the then president of the ECB, helped transfer the entire burden – mind you, no ‘haircuts’, unto the ‘wider’ shoulders of the European tax-payer? Who said absolutely nothing!
The situation is made worse by the fact that Greece has become independent rather lately, specially compared with the Western Europe. Furthermore, the process was a lengthy one, it started in 1821 and ended right after WWI, only to recommence during WWII. Add to that the long list of authoritarian leaders and you’ll understand the deep mistrust between the people and the Government – which is not at all ‘their’, despite Greece calling itself a democracy. I have a distinct impression that even those who work for or do business with the Government doesn’t really trust it – they know too much about what is going on there. Small wonder, in these conditions, that dodging taxes is a national sport…
For these people to reach an agreement both sides have to admit failure: the European leaders must accept the past errors and take responsibility for them and Tsipras must convince his constituents that they need to change their attitude. Completely.