In recent times, we have witnessed many explanations of what is happening in Greece. Most, argues that Greece is at the mercy of ruthless lenders and subject to extremely high interest rates. I belong to a minority who thinks that this is not true, because I think that Greece has reached this situation simply because they spent more than they could produce.
In 2012, the troika approved a second rescue plan for Greece, for which the Greek government obtained extremely beneficial financing conditions.
Before the crisis, the ratio of public debt and government revenues, was 250% (Source: Eurostat). In Germany, by way of comparison, this value was 150%. However, after the crisis, the debt shot up to 400%.
The hypertrophy of the Greek State just does not have similar in Europe, especially if we consider how it was financed: Greece not only was one of the countries that increased public spending, having as immediate consequence to resort to debt and this led to the transfers from the government for debt payments have exceeded by 17% the amount of revenues, that is, the problem was not the interest rates, but the even greater increase in indebtedness which was much higher than the interest rates, which obviously raised the absolute value of interest rates.
European partners presented as a solution the cut of the Greek state spending, but this thought the solution could not be so radical, that is, the problem was not the patient but the remedy. Therefore, in the years of worsening crisis, the Greek government has increased public spending on education, social policies and health from 24.6% of GDP in 2004 to 31.1% of GDP in 2012.
When Greece was bailed out, its population was against the austerity measures and demanded wage increases and tax cuts. This situation becomes even more difficult to understand, if we think that a country suffering a financial measure because it is on the verge of bankruptcy, see their revenues fall steeply and did not fall because the state has suffered an intervention, but because the economyHe was in tatters. So it is easy to guess that unfortunately for Greece the revenue from the tax collection not only did not remained, but it was reduced, making the relationship between government debt and government revenues to rise to about 403% and most obviously greatly increasing the weight of interest on a debt in expanding that reach about 17.1%.
I do not think that’s entirely fair that Greece wants to compare to other countries and defend being victims of discrimination because these countries as well as have decreased their public spending, increased their revenue. Thus benefited from lower interest rates until, relative to the weight of these rates, the debt burden has decreased.
What we see in the last six years was something surreal. Since most of the countries decreased their spending, decreased their debt, cut spending on social benefits, increased their revenue.
Greece discriminated, increased spending on social benefits, lowered its revenue from tax collection. All this at the expense, of course, by contracting more debt, which means that at the moment Greece can not even meet the most basic principle of debt: Comply with the payment of interest rates.
I have to be fair that, with the disastrous Greek GDP falls, has the consequence that the absolute costs in terms of public spending, have actually increased, since there was a contraction of GDP, but the government was unable to reduce spending public leading to this situation.
I conclude these my exhibits on the Greek issue, to see that the emperor has no clothes and many people refuse to see that the emperor has no clothes.They prefer to believe that the fault lies in others and not in Greece. Greece is not in this situation because it has ruthless enemies, but it was its own fault, because it spends more than it receives.
But the Portuguese people should not be deceived, because Portugal did exactly the same mistakes as the Greek people and is in the same situation. Simply, we are a little later than Greece and perhaps, by having carried out some reforms, it may have given us time and room to negotiate and we may not come to the point that Greece is.