What the EIB makes the ECB unmakes: The latest from the Greek front

“We just showed that good news is possible in Greece”, said a beaming Greek minister the other day when it was announced that the European Investment Bank (EIB) was about to start funding investments in Greece again, after it withdrew toward the end of 2011 (in fear of losing its triple-A rating by associating itself with investments in an economy due to be thrown out of the Eurozone). Surely this is good news. Nonetheless, as is Europe’s wont, what one arm makes the other destroys.

Let’s begin with what the EIB’s ‘reactivation’ in the Greek context means, in terms of euros and cents. Around 600 million euros will be channelled into Greek SMEs (small and medium sized firms) during the remainder of 2012 (if all goes well and the transmission mechanism miraculously, in view of past failures, works). Then, during 2013 another 400 million will be added to the SME-reinforcement program, with a further 400 million to be disbursed over the two year period of 2014-5. Additionally, 500 million worth of guarantees will be offered to infrastructural projects that have ceased up over the past two years, courtesy of the collapse of private investment and bank credits.

Of the above figures, the very first one is the one that matters: the 600 million that was announced for the coming autumn. The reason I am saying this is that the Greek economy is in turbocharged meltdown and autumn will prove particularly trying and cruel. It may very well be the turning point, involving a truly awful ‘turn’. Let us now juxtapose this figure, of 600 million euros to be provided by the EIB, to some other telling numbers.

The first figure is 12 billion euros. It represents the monies due to Greece by Brussels – as part of the structural funds that Greece was eligible for for the period 2007-2013 and which were not spent as a result of (a) bureaucratic failures and (b) the ongoing Crisis that prevented the Greek state and Greek private companies from putting up their share of the funding. More precisely, Greece was eligible for 20 billion of which only 8 billion were disbursed. Now, of the 12 billion unspent funds the EIB has been given the go ahead to disburse 1.44 billion – a pittance by comparison.  In summary, 10.56 billion euros earmarked for investment spending in Greece by Brussels back in pre-Crisis 2007 has boiled down to 1.44 billion at a time when the Greek economy has not only been starved of investment but has lost its credit market to boot.

The second figure is 900 million euros. It is the sum of money that the bankrupt Greek state must borrow by 20th August (2012) to hand over to the ECB as profit. As profit? Yes, as profit. Here are the details. In the summer of 2010 the ECB began purchasing in the secondary market Greek, Irish and Portuguese bonds in a failed attempt to avert the three member-states’ bankruptcy. Now, some of these bonds are maturing. The 3.2 billion bundle of Greek government bonds that expires on 20th August was purchased by the ECB at a 30% discount. However, the ECB is expecting the bankrupt Greek government to redeem at par these bonds (even though Greek banks, individuals and pension funds sustained a haircut of 75% on these same bonds). In effect, the ECB is demanding that the Greek government borrows during this hot and brutish summer 900 million euros to hand over to ‘our’ Central Bank as profit!

And as if this were not enough, the other day the ECB announced that it will no longer accept the new (haircut) Greek government bonds as collateral for the provision of liquidity to Greek banks; thus, pushing them into the arms of the Greek Central Bank’s ELA (a move that is destabilising further the European Central Bank System and, additionally, increases the cost of funding of the already distraught Greek banks; at a time when the circuits of credit in Greece and dead and buried).  

When all is said and done, the picture that emerges is one of a Europe with an arm that is meekly trying to fix things while the other arm is violently destroying whatever the benign limb is putting together. The EIB announces a 600 million euros of SME funding from 1st September (tiny compared to Greece’s unspent structural funds) at the same time that the ECB (a) pulls the remaining piece of the rug from under the Greek banks and (b) demands of the Greek state that it borrows from the EFSF 900 millions so as to hand them over to it on 20th August as a pure profit payment. Does this sound like sensible policies of a currency union in trouble? Or does it look like the last stages of a currency union that has lost the will to live?


  • Yanis, not long after I had written my comments regarding your 3rd revision of The Moderate Proposal, I was presented with a free pass to the Transaction Banking Congress 2012 in Amsterdam. While there, I met with the delegate from the EIB and discussed my thinking regarding capitalising new small businesses. He seemed to be very interested and has agreed to read up on The Capital Spillway Trust. I will keep you posted.

  • Thanks for another eye-opener. Needless to say that it’s a bit hard to find trustworthy informations in Germany. The “Financial times” Germany just published (22.7) that “IWF droht Griechenland mit Zahlungsstopp” (IMF threatens to stop payments to Greece”). Other papers write openly about “the end by September”, so to speak, to “reduce the risk of infection”. Seems like we listen to news from a high-brow-madhouse-community.
    I’ll check “greek left review” now ;-).

  • You have some points here, especially regarding the maturing bonds and the face value of them. I thinkt the current actions of the ECB are targeting in another direction, not reaping a few million Euro profit from them. After all, the total exposure to Greek risks by the ECB and thus the other EMU central banks and the taxpayers all around, is more in the region of what, 300 or so billion Euro? If so, the 3.2 billion maturing now, are peanuts.

    I might of course be wrong, but for me,

    “Does this sound like sensible policies of a currency union in trouble? Or does it look like the last stages of a currency union that has lost the will to live?”

    it is neither the one nor the other. It sounds like ‘o.k., dear central banker colleagues, let’s finally face what every average guy on the european streets knew since years: no matter how much money we pump into the current version of the Greek state, it won’t be enough. So let’s take the inevitable hit now, realize and limit the losses, and look ahead’.

    BTW, just today I’ve read that in parallel to the ECB thing the IMF refuses to inject more money into the bottomless pit that is Greece, apparently because Greece is, well, a bottomless pit. It didn’t help that she didn’t deliver on most of the contractual obligations for the several cash infusions she got.

    Sounds like endgame to me.

    • vss

      “BTW, just today I’ve read that in parallel to the ECB thing the IMF refuses to inject more money into the bottomless pit that is Greece, apparently because Greece is, well, a bottomless pit. It didn’t help that she didn’t deliver on most of the contractual obligations for the several cash infusions she got.”

      Good. Very good. As long as they do it. For the bottomless and stinking pit is ofcourse themselves.

    • It is all sunk cost. Let´s cut the lines and let one of the bottomless pits go.

    • “Greece is not a bottomless pit, the Greek government is”

      Greece is a democracy and thus the Greeks themselves decided to elect and re-elect the same polit-oligarchs, who dug the pit, again and again, over decades.

      Every Greek must have seen since many years that the business model of Greece couldn’t be sustainable because it depended on the willingness of others to pay for it forever.

    • vss

      Is it that simple?
      Just because it is called democracy ,it doesn’t mean that it is.
      How about you? No democracy? How do you vote?

      Why did you vote for people that instead of following the footsteps of Friedrich Wilhelm Nietzsche ,follow the footsteps of Akerman?

      So you think you voted for the right people? Because of the average Germans’ superior logic vss?

      “it depended on the willingness of others to pay for it forever.”

      Very limited opinion vss.

      No it didn’t vss. It depended on the ignorance of the Greek people and the manipulative attacks of people in Greece like you are in Germany and the creation of events similar to what you do in your own country to cause a divide and conquer environment and manipulate your own fellow Germans.

      Give me history vss.

      Now we know that most of the wealth stolen from Greece even in modern times is at the hands of a few “Germans”.

      You just can’t quit voting for criminals on purpose ,can you?
      Since you know who you vote for. Right?

      But we have said all these things before. And your answers are always that in Germany things are more complicated. The rest of the world is simpler.

      And your excuses continue to blame everything on others.

    • The Germans cannot vote your Greek governement out of office. At least much less than Greeks can.

  • The usual: “We create problems so that you can accept our “solutions”. Your destruction ,our profit.”

    • “Drachma. The only solution.”

      There are 16 other solutions needed as well in order to fix the area formally called the “Eurozone”

  • Οικονομική ανάλυση ΣΟΚ από τον Βασίλη Βιλιάρδο που ανατρέπει όσα γνωρίζαμε.
    “BANKING megaton bomb: The U.S. have huge deficits, Japan is mired in recession for decades and European banks are more than indebted – such impasses are resolved usually with … two ways: either by debt waiver or by war.”

  • I can imagine that the last question is rhetorical we know the answer.
    Reality aside, how are these funds going to be channeled to the Greek SMEs? Through private commercial banks or through an official vehicle? In the end who is going to make the decision about essentially who is handed a lifeline and who is left behind? Your last post clearly demonstrated the corrupt and incompetent nature of the official banking authorities and the private banking world alike. Could the EIB intervene directly and bypass these two altogether in the evaluation process?
    About the ECB it has been reported that due to legal reasons the bonds that it purchased need to be redeemed at par. Is this true? Also recently it was reported that the French central bank will transfer some 700 million to Greece during 2012. This figure represents the profits from the aforementioned bond buying operation. Is this a way to bypass the legal limitations and in the end impose an indirect haircut to the Greek bonds the central banks bought? If so, can we expect similar moves from other central banks or could this be something voluntary?

    • Why shouldn´t the ECb make a profit on this highly risky “investment”?

    • @NOEUD
      Because a central bank does not operate like a commercial or an investment bank. Its purpose for the bond buying program was not to make a profit. It was supposedly an action to stabilize market prices for all the good that did. If the ECB has the option to impose an indirect haircut to the bonds it bought with no loss whatsoever to its balance books, then asking to be paid at full face value is another political game.

    • So we know. The EBC is actively profiting from “favours” it is “trying” to do for the Greek government. Let us be honest here, the ECB is not acting in the interest of the Greek people.

      Yiannis highlighted this issue of the ECB profiting on bad advice on Russia Today’s Keiser Report.

      VSS – I have no problem with the ECB profiteering, but it is portraying itself as a neutral party. If it wants to make money then it needs to declare it so people know what they are dealing with. If they want to be the “regulator” as Yannis suggests, then they should not be making a profit from the market they are regulating, that is criminal.

      I do not know why Yiannis can highlight the profiteering of the ECB and at the same time be saying they should have more power over the currency!

    • The ECB was supposed to be the clone of the Bundesbank. The Bundesbank made a profit each year and the German people profited from it when this money was transfered to the federal budget.

      So what do you think happens if the ECB makes huges losses? It needs some profits in order to make up for the losses that will come from these great “investments” in bottomless pits.

    • Profits from the Bundesbank goes to the Federal government? Please state your source I am intrigued as this is not how other central banks work.

    • Richard, everyone knows this in Germany. This contribution is even considered in the federal budget. Which caused some trouble for Schäuble when it was reduced due to the crappy currency we have now.

  • And since we talked recently about the invasion in Cyprus and the betrayal of British and American forces ,let us remind of ourselves what happened at IMIA on 31 January 1996.

    Andreas Papandreou is in his office. A counselor approaches him.
    C.: “We just got a message that the American satellites found oil and more at IMIA.”
    A.P.:”If we find out about it now then Turkey already knows. We should be prepared.”

    A.P. is admited to the hospital.
    Kostas Simitis (Aaron Avourtis) becomes “the head”.
    Tsohatzopoulos is the minister of defence.

    What happened?

    Turkish forces (as expected) try to take over the islets.
    Talks between Turkey ,Greece and NATO.
    They destroy a Greek helicopter ,that went there to check if the Turks left (supposedly the episode had ended) ,and three pilots are killed. The helicopter was destroyed by American EMI.

    The Greek forces and Admiral Lymperis are in advantageous position.
    “Give the order and we will destroy them”.

    Greek commandos took over the bigger of the islets. Turks leave.

    2 Greek commandos are hidden on the smaller one. When ,covered by the darkness of night ,12 Turkish commandos try to take over the small islet ,the Greeks arrest them.

    After a few hours the orders are clear.

    “Let them go and abandon IMIA. Remove our flag.”

    When the Greek commandos were protecting their land Pagkalos stated: “Remove it and just say that the Greek flag was blown off by the wind”.

    Later In 1996 Charalampidis was warning about future situations.
    He got silenced.

    IMIA and the surrounding area are characterized “grey zone”.
    Later in the “grey area” IMIA ,the Americans begun drilling for osmium. Thanks to their Turkish? and Greek? slaves.

    The Turkish commandos were later killed in “accidents” by their “own leaders”.


    This is the only way you can attack Greece. Betrayal. You cowardish little worms. Thieves and murderers. Abominations of the Earth.

  • Yannis, insightful as usual and most refreshing. You do a superb job of outlining the pathetic state of both European and Greek state of affairs. Whilst Europe offers band-aids to the Greek state in its last stages of both social and economic collapse, the Europeans find it appropriate to invest just over 1 B Euros when what is really needed is a turbo-charged stimulis plan to deal with a turbo-charged spirale to the bottom, as Krugman would argue. Unfortunately, while the Europeans dither, the Greeks themselves haven’t done themselves any favours either. Our present and recent past leadership have failed to rally structural policies that enable the Greek state to become a sensible destination for investment. Further, you speak of bureaucratic issues for being unable to accept the 14 or so B of unspent funds by the Greek state. How truly pathetic is that in itself when the state is incapable of filtering those much needed monies for investment? This in itself is the cancer that continues to destroy the Greek state from within. I have had my own dealings with the Greek bureaucracy over the last 3 yrs and anything short of mass structural reform won’t do in my mind. In short, we have a European Union, in my mind has lost its will to save Greece from themselves but continues to want to believe that the remainder with some exeptions is salvageable. In the meantime, the Greek counterparts, dither, continue their traditional politic of polarization, inaction, and if I may say so, a leadership like the many before the present that lack the will to make bold decisions irregardless of what broader Europe expects from them- its about doing the right thing, plain and yes, very simple. The Greeks started to burn their own house while waiting for the European Union to take out the fire all this while the leadership looks at the fire and debates as to “what”, “how” or even “if” they should embarck on doing something to at minimum, “mitigate” the flames which seem to be getting larger. The inevitable outcome for Greece, I am afraid is that the Europeans shall cut Greece loose for whatever reasons and I just hope that someone has the sense to start putting out the fire before its too late!

  • Rothschild: The coincidences continue.

    In an article published in October 2011 i had dealt with the possible existence of a cartel that manipulates interest rates LIBOR and Euribor, commenting that it is the most important internationally, as they are connected to business and consumer loans, the IMF loans, the loans of European support mechanism ,the loans of banks and eventually from them are depended, to varying degrees, the economies of the whole world.

    By affecting the rates one is involved in shaping the cost of money. “The power to control the cost of money is not just great but nuclear. If it is a proven fact that the banking cartel has that power then the ramifications are enormous “I mentioned in the article.

    Today, suspicion of attempted manipulation of LIBOR and Euribor became certainty by a fine amounting to 290 pounds to Barclays, one of the biggest international banks with a history of four hundred+ years with HSBC, RBS, and Loyds be designated as mixed in a scandal involving “at least 20 banks and hundreds of international bankers from three continents” as international media reported.

    The scandal has caused already, the resignation of the chairman of Barclays, Marcus Agius. It is interesting that Agius is a member of the famous banking dynasty Rothschild, having married the daughter of Edmund de Rothschild. It is worth to mention that one of the co-founders of HSBC, the third bank involved in the scandal so far was again a member of the family Rothschild.

    After i remind you that Barclays was who replaced the Rothschilds in place of the board that fixes the price of spot gold a few years ago ,i’ll put the whole thing as simply as possible: The Rothschild banking family is that through Barclays, formally and legally defines the spot price of gold (note: not the international gold market prices) internationally.

    Now, one of the most distinguished members of the president of Barclays and groom of Edmund de Rothschild, resigned under the weight of scandal to manipulate the prices of the two most significant international interest rates and hence the attempt to influence the international cost of money. Involved in the scandal so far is HSBC, its founder bank being a member of the Rothschild family and Loyds, where the fourth largest shareholder is Barclays.

    The British Prime Minister Mr. David Cameron commenting the events said that the scandal is extremely serious and he is committed to examine it thoroughly. Coincidentally, however, one of his grandfathers, Sir Ewen Cameron, was the chairman of HSBC in London and responsible for providing and managing loans from the Rothschilds in Asia.

    Finally, i’ll remind you that according to a British newspaper, another Rothschild had met in the summer of 2010 with Mr. Papandreou and had promised investment of several billion U.S. dollars if the country faithfully applied the memorandum with the IMF.

    Panos Panayiotou
    Stock market Technical Analyst
    Director GSTA Ltd, WTAEC Ltd

    • @ Richard

      This is a mixed blessing. Interest rates which are artifically low, thus lower than they should be, can cause huge problems. Look, for instance, at the US subprime stuff.

      Or at the problems the GIPSIFs are in.The GIPSIFs (and the rest of the world) would be off WAY better if there wouldn’t have been de facto eurobonds, which were, of course, a to cheap credit for these countries, between 2001 and 2008.

      Because then they would have been forced to restructure since long, which gave them the possibility to distribute the inevitable over a longer period of time.

    • The sub prime crisis was caused by the government back stopping the loans. Nothing to do with interest rates.

  • The ‘good news’ bollocks being put out by the Coalition stool-pigeons is somewhat at variance with the reality on the ground – dare I say in the gutter? – of everyday Greek life, and the unwarranted humiliation being dished out to ordinary citizens of the Hellenic Republic.
    Keep plugging way at the truth: there are many of us in the West to recognise and spread it.

  • Holy smoke – what are you waiting for – get out of this wretched EURO at once and stop waiting for living conditions in Greece just getting progressively worse. The EURO project is doomed for a great many reason and will not survive. To find out you need not to be a rocket scientist!!!!! Paul

    • Even Turkey, Iceland or Poland does not want to move into this burning EU/EURO hotel. Mr. Fireman!

  • In history, Italy, Greece, Portugal have systematically defaulted their debt payments. And they continue to blame some other entity for their troubles: Ther ECb, Germany, the nazis, etc. etc. etc.

    • Jacopo

      You are right Jacopo. The fact that the biggest debt transgressor is Germany itself doesn’t matter.
      The fact that the southerns and especially Greece always had external attacks and manipulation ,from Germany too ,doesn’t matter either.

      As it doesn’t matter that the children in Niger ,Lagarde cares about so much will never repay anything because of high interests and never see their country develop because all the resources are being grabbed by the IMF.

      Because there are no problems in this world except money.

      Thank you for your limited and ignorant opinion.

      And when you see someone die……take his shoes first.

    • Demetri, you need realise the problem in Greece is the Greek ruling class. Nothing to do with anyone else.

      Greece needs to sort itself out before it starts pointing fingers at other parties.

      Until Greeks can understand this, they will be lost.

    • What I’ll never get is that the average Yanis on the Greek street knows, on an intellectual level, perfectly well that the country was brought to the brink thanks to the corrupt Greek ‘elites’, which were elected by the Greek people for decades.

      But this very same Yanis steadfastly refuses to accept any responsibility of the Greek electorate (and often even of the Greek ‘elites’) for anything.

      Talk about mass schizophrenia.

    • Greeks are victims of total propaganda, just like the rest of us, it is not an mental illness, we are products of their environment.

      The propaganda is just a bit more total in Greece.

    • vss ,Richard

      The first think we did and you vss know it very well ,was to address the wrongdoings of Greece.
      Any reaction against Germans is after data that prove German manipulation and how much they are responsible for this crisis.

      We are the ones who gave you the knowledge about the doings of the elite ,any elite ,and we have emphasized the distinction between population and elite of any nationality.

      YOU vss ,try to use everything being said in this blog ,for any matter ,against the Greeks and YOU do not accept any responsibility for your own elite.

      Richard ,media propaganda is everywhere ,i do not know where it is worst ,what i know is that we have offered many alternatives and the only ones that are absolute are the Germans.

    • Demetri. We judge other people by our own behaviour. You seem to be prejudiced against Germans so you assume Germans must be prejudiced against Greeks. As I said before, show me some evidence and I might start to believe you, without evidence, what you say is just prejudiced

    • Richard

      Specific Germans in here that protect any policy of any elite and it is pretty obvious now ,who they are.

    • Richard

      vss is the evidence Richard.
      And if you continue like this ,you will be the evidence too.

      The blame game was a “German” initiative and what you do is what vss did numerous times in the past.

      Eternal denial ,reversing positions ,projecting flaws.

      I am not prejudiced against Germans , i am against specific Germans in here ,that give a bad name to the rest Germans with a brain in their head. A i am against Greeks that do the same.

      We have presented facts again and again and again

      Whatever has been said ,it has been twisted and used to pass any responsibility elsewhere. First to the Greeks ,now to the French etc. etc..

      Specific people in here do only this. You want to join them?

  • Be honest…..Most of you thought that of course Germany collects much more money (as percentage of GDP) than the Bunga-Bunga-Italians, right? I bet even Italians would think that.

    Well…..here are some figures

    Country / 2007 / 2008 / 2009
    Germany / 36,0% / 36,4% / 37,3%
    Italy/ 43,4% / 43,3% / 43,4%
    France/ 43,7% / 43,5% / 42,4%
    Japan/ 28,3% / 28,3% / 26,9%
    Denmark/ 48,9% / 48,1% / 48,1%
    USA/ 27,8% / 26,3% / 24,1%
    Greece/ 31,8% / 31,5% / 30,0%
    Ireland / 30,9% / 29,0% / 27,8%

    OECD ttl./ 35,2% / 34,6% / 33,8%


    It’s so easy to set people against other people by using their own (positive and negative) prejudices.

    Regarding the subject Greece:
    THEY are international. YOU are simply caught in your own world of prejudice . But THEY have the money. THEY steer YOU. THEY have the power. They have the lobbyists. THEY own the media.

    And THEY want to make it a warning example: “If you don’t swallow the medicine we give you (cutting social spendings, privatization and further deregulation) you will die like Greece.”

    All who cannot see THAT and all who applaud today and want the lazy, corrupt and tax avoiding Greeks to “change” will be the next slaughtered little stupid “pig”……

    • Sofia, me again.

      About your point, if the Greek government followed Germany’s recommendations instead of sabotaging the Greek economy then Greece would be richer and more independent and more powerful.

      Germany did not tell the Greek government to put VAT on property sales, Germany did not tell the Greek government to increase VAT, Germany did not tell the Greek government to massively increase property taxes, all these things were done by the Greek government, not Germany.

      If Germany has a fault it is giving money to the Greek government when they knew this is what the Greek government was planning.

    • If you are going to use economic statistics, then you should know how to use them properly — which you don’t. Those are total taxes and deductions, as % of GDP. If you exclude social security contributions (which are not really taxes) then Italy is one of the lowest in Europe and Germany is probably around the median level. (You can reset the parameters for the chart you linked to, to see these and other data.)

      If you look at other data, you will see that Italy and Greece collect almost no revenue from taxation of company profits, in comparison with Germany. This is probably partly owing to weak profits of small companies, and partly through low corporation taxes in Greece and Italy.

      I am not making any arguments about what is right or wrong — just pointing out that your figures are wrong.

    • Guest -.

      Social security payments are not taxes? Please, you have no idea what you are talking about, you believe social security contrib go into investments? You are forced to pay them, so they are taxes by definition.

      And if you look at the data, Greek government tax revenue as a percentage of GDP is higher than the UK & Germany

    • Sofia D.

      I agree except for this
      “YOU are simply caught in your own world of prejudice .”


      Because we have explained these things before and the sad reality is that certain individuals in here (mostly specific Germans) do not want or accept anything other than what they’ve been told by (you know who).

      So we attack them back not because of deep prejudice but because it has no meaning talking reasonably with them. Sometimes we just do not answer.

      Also they know their country has earned a lot ,they have revealed (by accident) their reasons for posting in sites like this one ,reasons like passing all the responsibility to the southerns.
      It seems they are here to exonerate anything their government does.

      So ,maybe anything “prejudiced” is not so wrong for these specific indiniduals.

      The elite has no nationality and these individuals in here are giving a bad name to their fellow Germans.
      They attack and when you attack back they play it reasonable.
      Rince and repeat.

    • Richard

      It must be very comforting to believe all these things you say.

      Yes ,the Troika asked specificaly these reforms ,that is why now there are talks about the so called “equivalent measures”. The Greek government wants to be allowed to find more balanced measures that will have the same affect.

      The Troika wants to give money to the Greek government and the Troika wants these money to be misused because the Troika wants to have more excuses for the most important reforms of all.

      Grabbing the natural resources of Greece. Period.

    • Richard It must be very comforting to believe all these things you say. Yes ,the Troika asked specificaly these reforms ,that is why now there are talks about the so called “equivalent measures”. The Greek government wants to be allowed to find more balanced measures that will have the same affect. The Troika wants to give money to the Greek government and the Troika wants these money to be misused because the Troika wants to have more excuses for the most important reforms of all. Grabbing the natural resources of Greece. Period.

      I don’t doubt what you say, if I can also add the last 4 years has been a plan to strip the poor and middle class of as many assets as possible so they are weak in a post default in environment.

    • Dear Sofia D
      I agree that intuitively, one would have thought that Germany would collect more tax as percentage of GDP than Italy.

      I’d say that a “european style” welfare state with some meaningful public services, social security coverage provided and also some wealth and income transfer from the rich to the poor is difficult to achieve below, say, 30% or so tax intake as percentage of GDP.

      The US spends a lot on the military, runs a budget deficit and does not provide social security and wealth & income redistribution that would be considered adequate from a European perspective. So their 24% look plausible.

      Probably a too low level for the average Europeans’ taste. Canada spends less on the military and has more of a “European” tax and social security system, so maybe we can assume their number (30% tax / GDP) is about the minimum.

      At some point (you never know quite exactly where and it depends on the culture and how the tax money is used), increasing the share in tax of GDP becomes increasingly problematic. France, Italy and Denmark are probably very near that mark (or quite possibly above it).

      However, it is not up to anybody to tell e.g. the Danish how to run their society. If they democratically choose to have a high tax burden because they want to finance decent public services and very significant transfers from the rich to the poor, this is absolutely their choice.
      Nobody likes to pay taxes but in a system like Denmark’s, it seems to work and everybody’s happy (except for the very high taxed who tend to leave the country).

      In the end neither high nor low taxes are per se great. I’d say every country should go for the minimum possible that still just allows to maintain the level of public services, social security and wealth and income redistribution that you intend.

      Above 50% is certainly not very clever (because it becomes too much of a drag on the economy and individual’s motivation if you tax that much away) and below 30% it becomes very difficult to finance a “European Style” state.

      But where you fall within the 30% to 50% range is entirely up to the individual society. A key point here in my eyes is that the money the state gets through taxation is spent wisely. From that perspective, I could imagine Denmarks’ 48% are more efficient than Italy’s 43% if Denmark uses the money efficiently (and does not blow it on some clientele / bribery / other ways that effectively steal it from the society and channel it into niches of society that somehow managed to highjack the government.

      The Swiss model seems quite good to me (I am a German living in Switzerland): The taxation is relatively low, just under 30% of GDP. This would probably not work on a European scale, because taxation in Switzerland is easier because of the broad tax base in terms of capital (assets of rich individuals and international company’s headquarters congregating here, so the tax on the income of those can be a lower percentage because effectively, you tax much larger operations / income streams from foreign sources). But I’d guess that maybe a level of 35 to 38% should allow to exlude the Swiss specifics and provide Swiss-standard public services, social security and wealth redistribution. That would be a bargain and indicates that e.g. Germany is not efficient in terms of converting the collected tax into public services, etc.

      Neither are probably France or Italy. And Greece apparently did not really focus its tax revenue on serving the public good but on special interest groups which leads to parents having to pay for private schooling (because public schools don’t provide an adequate level) and sometimes patients having to bribe doctors to get treated or citizens having to bribe the adminstration to make them do their job. From what I’ve understood from Greece, that country may be an example on how you don’t quite tax enough considering the level of public good provided by the state you are aiming for and then also not efficiently applying the resources.

      I hope this kind of makes sense.

    • @Richard

      Clearly, you are yet another uneducated malakas who tries to tell economists about economics. Your comments are just wrong. Greece has a very low total tax and social insurance take; you need to learn how to read tables.

      As far as separating income taxes from other taxes and social insurance is concerned, that is what real economists do in the real world. Social insurance is sometimes para-state and its funds cannot be used other than through legally controlled mechanisms within each fund — as in Germany. Only in the UK is national insurance sent to the Consolidated Fund and treated as a tax; and it is a right mess, too.

      Other forms of taxation do not concern individuals, but raise money for the state: Greece is missing those. And there has been excessive reliance on VAT. which is a horribly non-progressive tax when the VAT rate is not targeted on luxury goods (as happens in Greece).

      So, comparing total tax takes is a futile exercise for idiots — which is why Papandreou liked to talk about it all the time. He blamed Greece’s fiscal woes on ordinary people “not paying their taxes”, as opposed to an incompetent and corrupt state that he was in charge of.

    • Yup. The Bavarian finance minister dais so on TV this morning.

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