Beware the wrath of tax-paying Greeks


Christine Lagarde is paying the media price for some unwisely strident remarks about the plight of Greece. Asking during an interview over the weekend whether she felt any sympathy for ordinary Greeks struggling against the background of deep spending cuts and big hikes in tax, the IMF head honcho remarked that she get in with it and pay their taxes, reserving her sympathy for”children in Niger”.

 

Predictably, newspaper letters pages and TV news reported the – entirely justified – furious reaction of Greece to this latest international humiliation.

 

Lagarde’s comments were politically maladroit considering that the IMF and the EU are terrified at the prospect of the GReek people electing anti-austerity parties led by the left-wing Syriza in the country’s second election in as many months. Having yet another international politician criticise their failure to keep their house in order is hardly likely to increase the election prospects  of Pasok and the centre-right New Democracy.

 

They were also aimed at the wrong target. Most Greek people paid their taxes and were not big beneficiaries in the relatively untroubled first seven years of Greece’s euro membership. The spoils of the boom went to Greece’s wealthier professional classes  and the establishment. They are now the ones expected to foot the bill thanks to the corruption and incompetence of successive governments and the venality of their business class.

 

In fact, Lagarde’s ire should have been aimed against wealthy Greeks who for years regarded tax paying as an optional extra and got their cash out of the country when the scale of the debt crisis became clear in early 2010.  The scale of tax evasion in Greece has been estimated at around €8 billion most of which is the result of tax-dodging by the rich. It is an open secret that the property markets in London and Paris have and continue to enjoy the patronage of rich Greek ex-pats getting out before the ship sank.

 

However, before we dismiss Lagarde’s patronising and insensitive remarks out of hand, it is important to note that she is not the only alone. The reality is that she was voicing the opinions held by millions of Europeans and most political leaders in the EU, impatient at the two statistical frauds committed by the Greek government and reluctance to implement the terms of the rescue package. From my own, albeit limited, anecdotal evidence, I can say that most of my British, Dutch and German acquaintances would endorse what Lagarde said. After two years of bail-outs along with constant political and civil unrest the well of patience is now well and truly dry.

 

It goes back to a point I made on this blog a couple of months ago about ‘reform fatigue in the south and support fatigue in the north’. When asked about the scale of the cuts required by Greece, many people point to the equally tough austerity measures in 2008 and 2009 made by the likes of Latvia and Estonia and, more recently, by Ireland and Portugal as part of the terms of their own rescue package. The reforms were accepted without complaint by their citizens.

 

Regardless of whether they stay in or leave the eurozone living standards in Greece are going to deteriorate for a number of years. More than any other EU country, Greece lived far beyond its means, and two of its governments fiddled the figures on an impressive scale . For this reason, while the EU and IMF would be well advised to pull out all the stops to keep Greece inside the eurozone and be more compassionate to the considerable suffering of millions of Greeks, one of the central points made by Lagarde’s is true: it is time to pay-back. The only question is how.