Dr. George D. Vardangalos

(RIEAS Development Manager)


“The three aims of the tyrant are, one, the humiliation of his subjects; he knows that a mean-spirited man will not conspire against anybody; two, the creation of mistrust among them; for a tyrant is not to be overthrown until men begin to have confidence in one another — and this is the reason why tyrants are at war with the good; they are under the idea that their power is endangered by them, not only because they will not be ruled despotically, but also because they are too loyal to one another and to other men, and do not inform against one another or against other men — three, the tyrant desires that all his subjects shall be incapable of action, for no one attempts what is impossible and they will not attempt to overthrow a tyranny if they are powerless.”

Aristotle: Politics, Book V Chapter 11.

Greece’s accelerating collapse (final stage) and IMF’s withdrawal after the usual “Mission Accomplished”…

Greece revised on 5

h October the depth of the recession it suffered last year, saying that business activity had contracted by 7.1 percent instead of a previous estimate of 6.9 percent. The Greek statistics authority issued the new estimate of GDP based on 2010 prices. [1] GDP for 2011, calculated at 2010 prices, amounted to 206.4 billion Euros compared with 222.2 billion Euros for 2010 (7.1% reduction).

The change was made in the context of the revision of the GDP figures for the period 2006 to 2011. The greater decline in last year’s GDP means the targets for the 2013 draft budget that was tabled in Greek Parliament on 8

th of October will have to be revised. This first draft sees Greece’s GDP shrinking to 200.9 billion Euros this year and to 193 billion in 2013. Once the revised figures for 2011 are factored in, the estimates will also drop further, rendering the picture of the country’s economy even weaker. [2]

It is already clear that Greece will not again meet its deficit targets, the main reason being that cuts to the budget have led to a much steeper recession than official forecasters had predicted. The Greek government now expects the economy to shrink 7% in 2012. That compares to the decline of 4.7% that the IMF projected for Greece back in April.

This was not just the first time that the IMF and other official forecasters had badly underestimated the severity of Greece’s downturn. In April 2011, the IMF had predicted that Greece’s economy would grow 1.1% in 2012, after shrinking just 3% in 2011. In fact, Greece’s economy shrank by almost 7% in 2011. And, in April 2010, the IMF was projecting that Greece’s economy would be on a slow and steady growth path in 2012 after shrinking by just 1.1% the prior year.

The IMF said on 9

th October 2012 that according to its expectations Greece’s debt will reach 181.8% of the gross domestic product (GDP) in 2013 [3], which requires revision of the plans

for financial recovery of the country, a representative of the fund announced at a press conference. The IMF hiked its April prognoses on Greece’s debt by 21 points. Let’s not forget that Greece had a debt of 115% of GDP before IMF-ECB-EC intervention.

All these recent announcements give the excuse IMF needs to begin withdrawal from its participation in Troika’s “rescue plan” in the following months. Greek debt is unsustainable, as it was obvious from the first “rescue plan”. EU called IMF to participate in it because of its “technical expertise” from previous implementation plans. After 2.5 years of implementation of the classical IMF measures during the last decades, the main aims of this “rescue plan” have already been succeeded: the destruction of the middle class, the pauperization of large proportion of Greek population, the general disintegration of the Greek society. And as it was written [4], the initial “rescue plan” killed any probability of growth in Greece for the next 3 years at least. The economy couldn’t proceed to growth paths, when there are continuous huge tax invasions in the middle class income. This method is again followed by the next 13.5 billion Euros (and maybe more, up to 18 billion Euros) austerity measures, that are ready to be voted by the Greek government. It gives a “guarantee” that growth won’t come again for the next 3 years.

The Greek Great Depression

2012 was the beginning of the “Greek Great Depression” and “Greek Yeltsin-like” era [5]. There is a lot of data describing the present situation in Greece; the most characteristic is presented below:

Greek unemployment rate hit again another record high 25.1% in July, according to data released by the Hellenic Statistical Authority (ELSTAT) [6]. 1.26 million Greeks were unemployed,

with more than 1,000 jobs lost every day over the past year. In the worst-affected 15-24 age group, unemployment was 54.2 per cent. In July 2008, a year before Greece’s acute financial crisis broke, there were only about 364,000 registered unemployed.

The important data is again the labor force participation rate, which is getting continuously smaller. The number of employed during December 2011 was estimated at 3.899.319 people. The inactive workforce was 4.424.562 people. July’s data show the number of employed at 3.763.142 people and the inactive workforce at 3.356.276 people. 1 million were “lost” in numbers during the last 7 months. Moreover, according to the rules of unemployment measurement, self-employed and owners of small businesses can never be counted as unemployed. As a conclusion, in fact,

nearly two million people in Greece are without work now, including those whose year-long benefits have run out.

Furthermore, taking into account that employees paid by the public sector, one way or another, are 1.0-1.1 million people,

the percentage of unemployment in the private sector is already 50%. In August there were thousands of businesses that did not paid salaries, hundreds of thousands of Greek households with no income that month. There are also companies that do not pay their employees’ salaries for months. The special secretary of the Labour Inspectorate said data show that 120,000 businesses have not paid their salaries on time. So, more than 400.000 workers were not paid on August [7], and over 400,000 families

are without a wage earner [8]. That also means that

one in two Greeks that is being paid a salary nowadays belongs, one way or another, to the public sector.

It is obvious that Troika still “supports” public sector in order to be able to pay especially the guardians of the tyrannical regime-Greek government, so as to proceed to the final stage of the “rescue plan”, as soon as possible (“fast track”): to buy Greece’s public wealth at 10% or less of its real value. Everything is going to be privatized. That will be the end of troika’s plan orchestrated by Germany, transforming Greece into a German protectorate, with a standard of living similar with that of the Third World countries. As an exchange, Troika has promised to a certain part of the corrupted Greek political and financial elite that they will remain in local power afterwards.

Another critical sector collapsing at an accelerating pace is healthcare [9]. Healthcare in Greece is already at crisis point with hospitals running out of vital supplies and drugs. Cancer patients have to source their own prescriptions as pharmacies fail to stock vital drugs due to the government not providing funds to pay for them. The insolvent country’s worsening liquidity has led to public insurers being unable to pay bills and prescription drugs running dangerously low.

Thousands of people have no access to public healthcare. Doctors estimate that right now, at least 40% of Greeks are either uninsured or cannot get public healthcare, and the trend is likely to grow. Furthermore, hospitals are under increased pressure as austerity has resulted in many people abandoning hospitals of the private for public sector. Additional strain is placed on hospitals due to the needs of illegal immigrants who have not contributed towards social security funds.

Greece’s overall public healthcare system is on the verge of collapse. Public hospitals are under-staffed and under-supplied. The government owes millions of Euros to pharmacies and medical staff.

Finally, the most important thing: The serious economic crisis will have serious repercussions for even the youngest swathes of the population. The physical and psychological development of youngsters in the country is at risk because of malnutrition caused by poverty. The alarm has been raised in a report of April 2012 on the situation of young people in Greece drafted by Unicef’s Greek committee and by the University of Athens. The report says that 439,000 children in the country are currently living below the poverty line – underfed and in insalubrious conditions – in families that represent 20.1% of Greek households [10].

The final blow

Under this depressionary financial situation, Troika demands from Greece to adopt austerity measures worth 9 billion Euros next year, rather than the 7.8 billion Euros it had planned for in the 2013 budget. The total package for 2013 and 2014 is worth 13.5 billion Euros in spending reductions and tax hikes (in order to give 2-years extension, they demand measures worth 18.5 billion, according to latest information).

Almost 5 billion Euros of the cuts next year will come from pensions, which is likely to mean larger reductions for pensioners who earn more than 1,000 Euros a month than had originally been planned. About 1.7 billion Euros will be cut from civil servants salaries, rather than the planned 1.4 billion. Welfare payments will be slashed by 1.2 billion Euros. The measures will include an increase in the retirement age from 65 to 67.

These austerity measures will add more pain and recession to Greece. My first estimation is that recession will be 5-7% in 2013. Now, it is not known if there will be a 2-years extension for the implementation of austerity measures, but taking into account the fiscal multiplier effect IMF describes in its latest report, it seems highly probable that in the following 2-3 years Greek GDP will have a further decline of 10-15%.

In its latest report [11], IMF has an extended reference to fiscal multiplier. It admits that it made a huge mistake in its estimates for the recession as a result of austerity measures. In their latest researches they found the coefficient on planned fiscal consolidation to be large, negative, and significant. These researches suggest that actual fiscal multipliers were larger than forecasters assumed. In the case of Greece, fiscal multiplier has actually been over 1.5. Maybe, it can even be about 2.0.

Returning back to the austerity measures, the government orchestrates the final attack to the private sector. The wages of the employed in the private sector are cut down to Chinese standards in a completely de-regulated labour market. The tax measures taken, concerning especially the very weak self-employed and the owners of very small businesses, continue the “peaceful” procedure in concept like Kristallnacht in a Greek version against this part of private sector. The aim is now obviously the elimination from the market of the self-employed and the owners of small businesses, as soon as possible.

In 2011, two anti-constitutional tax measures were implemented on self-employed: a) a fixed tax of 500 Euros was paid by every self-employed person, in fact as a penalty for being so, b) the amount of money paid by self-employed in health care and pension professional funds (flat amount, independent of income, paid even if there is no income) was not considered as expenses. On the contrary, it is considered as income, and it is taxed additionally.

Among the tax measures the Greek government has in mind to implement on self-employed next year, two more anti-constitutional ones have been proposed/decided: a) self-employed will pay tax from the first Euro of their income, b) this tax will be 35% of their income (now there are thought for a range of 20%-35%).

What does it mean for the self-employed? Taking into account the real income of 80% of self-employed this period, he/she must pay 60-70% in average of their income for taxes and payments to health care and pension professional funds. In the case of tax range, that payment is up to 50%. That means that self-employed won’t survive in the following months, because of the government’s tax measures giving them the lethal blow. I have to remind that self-employed are never considered unemployed by law, they don’t take any aid when they are unemployed, they have to pay each year 4000-8000 Euros to health care and

pension professional funds (this money range is valid for the latest voted law for self-employed engineers).

So the 10% of self-employed and owners of businesses that gather 90% of the wealth will gather more money from the hundreds of thousands that will be out of the market, sooner or later. Most of the money of tax evasion is obviously and mathematically among this 10%. But nothing is done for this. On the contrary, the tax reforms that Greek government “advertises” are in fact significant reduction of taxes in the wealthiest part of the society and raise of taxes to the remaining part.

Big private businesses say also the tax hikes are suffocating them. In the worsening financial climate, two of Greece’s largest companies have announced they are pulling out of the country. Coca Cola Hellenic (CCH) announced that it was switching its primary listing from Athens to London, and moving its corporate base to stable, low-tax Switzerland [12]. Its move follows Greek dairy group FAGE’s relocation to Luxembourg this month [13]. There are rumours that many other large companies are preparing to pull out of the country.

In addition with the latest information about large companies not paying September’s salaries, Greek private sector is near a credit crunch that could create conditions for immediate collapse of the Greek economy without any warnings. These conditions are similar with the ones happened in Capital Strike in US in 1937-38. The usual commentators will say simply, it was a Black Swan event.

This collapse must be prevented immediately, or else it will cause an unprecedented event with chain reactions that will affect EU, the wider region of Mediterranean and the Middle East. I won’t say much about the measures that have to be implemented, starting even before the American elections of November. In brief, they are needed:

 120-160 billion Euros haircut in Greek public debt (mainly OSI)

 A long extension to the loans taken from Troika, reduction of their interest to the level ECB is lending banks now

 Recapitalisation of banks (debt will not been included in public debt, in fact this money is created out of thin air) and at the same time separation of banks in their commercial and investment parts under a law like the old Glass-Steagall Act in U.S.

 Immediate implementation of a New Marshall Plan for the reconstruction of the Greek economy. The damage that has already been done by Troika’s “rescue plan” is irreversible.

Big countries are responsible for the destruction of the Greek economy because of the Troika’s “rescue plan”. Even if some of them didn’t force its implementation, they allowed other countries to make this hubris that caused and causes thousands of deaths among the Greek population. Now, they must support by any means the reconstruction of the Greek economy. For the countries mainly responsible for this destruction, Nemesis is already under their way.


[1] Greece says 2011 recession worse than first thought,

[2] Greek Statistics Authority: Estimations for 2011,

[3] IMF: Greece’s debt to reach 181.8% in 2013,

[4] Greece on the brink of depression and the myths accompanying the EU-IMF “rescue” plan, RIEAS, January 2011,

[5] After the last EU summit: Greece’s “Yeltsin-like” era ante portas, RIEAS, December 2011,

[5] Greek unemployment rate hits 25.1 percent in July 2012 (in Greek, ELSTAT data),

[6] Greek unemployment rate hits 21 percent in December 2011,

[7] 10% Of Greek employees works but does not charge your salary,

[8] The EU Turning Greece into a Failed State,

[9] Austerity brings Greece’s healthcare system to its knees,

[10] Crisis: Greece, more than 400,000 children hungry,

[11] IMF: World Economic Outlook, October 2012,

[12] Coke Hellenic to leave Athens, relist in London,