Even three decades after joining the EU, Greece is still ruled by feudal Ottoman tendencies. As long as clientelism continues to be fed by streams of money, people will continue to find new ways to avoid reform.Since the end of its civil war, Greece has never been as close to economic catastrophe: it is grappling with empty state coffers and exorbitant state debt, combined with strikes and social unrest. Salaries and pensions will soon go unpaid. Industrial production is decreasing. Investors are pulling back. Foreign capital hardly finds its way here anymore. Public sector spending, including expenditure on state industries, now makes up one third of Greece’s GDP. Only with the help of monthly bond issuances and European subventions is the state keeping its head above water. “The economic and financial situation of the country undermines Greece’s membership in the Union. Athens must take drastic action and finalize reforms immediately,” warns the European Commission. Spending cuts, public sector hiring freezes, tax increases, and raising the retirement age will all be necessary if the country wants to avoid becoming a ward of the IMF.
This in fact refers to Greece’s situation in 1991 – and the déjà-vu today has spectators rubbing their eyes in disbelief. Giant mountains of debt? Crushing state deficits? Warnings from the European Commission? IMF? Since 1991, nine prime ministers have promised to reform, restructure, and modernize a state that at the time of its EU accession in 1981 was still pre-modern, and that even today at its structural core is ruled by feudal Ottoman tendencies. More than €100 billion in development funds have flowed from Brussels to Athens since 1981, and yet the country is still built on sand, living from olive oil, citrus fruits, sunshine, and beaches alone.
Rather than investing in competitive technologies, real incomes rose 40 percent in the first eight years following the introduction of the euro. The bankrupt country has been saved from bankruptcy since 2010 only through the extension of lines of billions of euros in credit. How is it possible that Greek politicians have promised reforms of the health care and tax systems, of government bureaucracy, of social security, of the labor market, and of the public sector, and yet not one single thing has changed? And why does Greek society not demand these reforms itself? In order to better understand the phenomenon, let us examine some of the basics, using Euboea, Greece’s second largest island, as an example.
House-Building, an Odyssean Adventure
When Rena Voria, 44, looks out of her windows, she feels gratitude and joy. Mountains, fields of wildflowers, and knotty olive trees surround her. On foot, she can reach Krieza in just five minutes – a typical village, tiny and sleepy, with just 250 residents, a handful of streets, one plumber, two butchers, a town hall, and a church with a steeple full of nesting storks. The residents make a living selling handicrafts, the elderly keep chickens and sheep. Voria has taught high school English in the neighboring city of Aliveri for the past 13 years. Shortly before the economic crisis began, she and her husband built a house on the outskirts of Krieza.
“It was an odyssey of a thousand adventures,” she says. “The property rights were totally unclear. This piece of land had never been assessed by the land office.” Even today the state still has no exact overview of its own territory, its coastlines, mountains, lakes, or forests. It does not know where its own land holdings begin and where they end. The size, location, use, type, and ownership titles of properties get lost in approximations – and with them an exact measure of the property taxes that should be leveed. Ever since gaining independence from the Ottoman Empire in 1830, Greece has been cobbling together a land registry, one that is still unfinished. “Deeds are created out of thin air,” explains Voria. The only things necessary are a notary and an entry in the land registry. Whoever would like to own a piece of land, perhaps for their grandchildren or for a vacation home, clears the space and plants olive trees, puts up a fence, and magically produces witnesses who will testify to a notary that the land has been private property since Adam and Eve – and with its subsequent entry in the land registry, the piece of land legally becomes private property. An estimated 450,000 acres of land are thus illegally under private ownership. Until just a few years ago, land was transferred exclusively via dia logou, another way of saying inherited and sold.
The Vorias, however, were careful to buy the property only after it had been entered into the land registry.
Three years later their house was finished. Their ownership odyssey took them through shadowy worlds, past topographers, lawyers, and notaries, to the forestry agency, the archaeological and tax authorities, through the world of building permits, straight to the heart of a legion of stamp-wielding civil servants. Some wanted bribes under the table, some took an entire year to do a task that should only have taken a day, many said they were not responsible for the applications in question or their processing. Rarely was an application complete – they were forced to return with ever more additional paperwork requiring additional stamps from additional offices.
A Paradise for Tax Fraud
Further, every contractor supplied invoices far below the actual price paid by the Vorias. Not even the official receipt for the purchase of the land itself was accurate, despite the fact that two lawyers were present at the signing of the deed as required by law. This is a nationwide practice, and a situation well known to everyone involved: the land registry office, the judiciary, the tax authorities. Buying property is the most effective means of laundering money. “Even the building contractor didn’t think twice,” says Voria. He failed to account for the down payment of €2,000 in his final invoice. The couple is still waiting for him to return their money. Suing him for the amount makes little sense. “The building contractor is betting on that fact,” she says. The judicial system is simply inefficient. The administrative courts have a backlog of over 800,000 cases. To appeal a case from the lowest to the highest level takes almost 13 years; three years will pass before a case of tax evasion can even appear on the court docket.
Despite all of these difficulties, the Vorias are content with village life, untroubled by noise pollution, traffic, or frequent strikes. Yet the idyll is misleading. Since the euro’s introduction, the island has become an easy getaway for Athenians. Through 2010 Euboea was riddled with construction. Coastlines and mountains fell victim to unrestrained development. Next to Aliveri, on a bare hillside with an ocean view, a new development with 500 houses – mostly weekend homes – appeared within just eight years.
Water supply is a huge issue. Nearly every month in Krieza or the surrounding villages, a water main breaks or the pumps stop working. The dilapidated infrastructure is from the 1960s when the Regime of the Colonels delivered electricity and running water to Greek villages. Today’s crisis is the result of decades of patchwork.
“The water quality is catastrophic!” says Kostas Lathouras, 51, a painter, plasterer, and handyman. “At the coffeehouse they serve bottled water with your coffee. That’s how bad the tap water is.” It makes stainless steel rust – village residents blame lime levels, Lathouras blames other aggressive substances. He tried to view the results of the last water quality analysis at the communal water supplier in Aliveri. Two tests per year are mandated by law. The office clerk gave him the mobile number of a supervisor. Lathouras called the number, but the person he spoke to claimed that he was not in charge; Lathouras was transferred again and again until he landed back at the office clerk. For the past three years, the city has performed no tests on its drinking water quality, claiming there was no funding for it. Such an analysis costs just €200.
Vote for the Mayor, Get a Paved Driveway
Lathouras was born in Sydney, returning to his parents’ village at 21. He is proud of his Greek heritage. But the fact that the city chooses to invest its money in projects like a cobblestone square featuring a bust honoring a hero of the revolution against the Ottomans rather than in overdue maintenance of the water supply network makes him seethe with anger. Standing on the new square in Krieza, he estimates the construction costs to be around €30,000. “The actual costs, however, are almost certainly 50 percent higher,” he believes.
For such projects, the city invites tenders and collects bids. In the end, whomever the contract goes to has to negotiate two sums: the paper sum and the real one. The difference is divided by ratio and pocketed. This nationwide practice is well known by citizens, the tax authorities, and the state.
In order to maintain their offices, the mayor of Aliveri, his six vice mayors, and the 48 local superintendents start sprucing everything up shortly before the local elections. Suddenly, sidewalks are repaired, squares are renovated, and whoever votes for the mayor is rewarded with a paved driveway to his barn.
The state follows a similar, if grander pattern. How is it possible that Greece’s most powerful construction company appears to have a renewable subscription for large governmental projects? The three kilometer-long Rio-Antirrio Bridge, the Attika tollway, the new Acropolis Museum, the Olympic sporting facilities – all projects of the enterprising Bobolas family. And preceding every parliamentary election the number of state employees rises and tax revenues fall. Shortly before the European elections in 2014, Charlis Theocharis, head of the Greek tax authority and Troika-mandated chair of an independent special commission for tax revenue, announced firmer controls on and harsher punishments for tax evaders. After that, Theocharis was quickly removed from office. So long as the political caste continues to limit both the diligence and the efficiency of the tax authorities in order to guarantee its own power, fortunes, and continued political existence, Greece will continue to rack up budgetary deficits. Over €70 billion in outstanding taxes are missing from the state’s coffers.
Close behind the square in Krieza stands the town’s three-story town hall, complete with underground parking and conference rooms, built in 2006 with EU structural funds. The building is large and modern, much larger than that of neighboring Aliveri, which is counting twenty times more inhabitants than Krieza. It houses eight employees who provide birth, death, and marriage certificates and maintain the water supply. If a pipe breaks, one of the employees sends the village plumber and a bucket excavator to the site. If a water meter is broken, a repairman is sent. Or not. For years, many homes have not had functioning water meters. It does not matter whether their usage is one or one thousand cubic liters per month, the bill is always exactly the same – a kind of water flat rate in a country selling off its national fleet of limousines in order to make a show of saving money. If the issue is raised, town hall officials simply nod – but nothing ever changes. Everyone in the village waves it off. “They’re being paid to do nothing,” is a widely shared view.
Getting Ahead the Greek Way
Since Greece’s founding, the state has traditionally been the largest employer. While the salaries are not always ample, the positions themselves are rock solid, and liberal working hours and lax monitoring make it possible for many to hold down second jobs – tax free, naturally. To score a job at city hall is not difficult. Qualifications are beside the point. What is needed to get employment – or a permit, or some other benefit – is connections, pure and simple. The politician Vyron Polydoras serves as a perfect example. In May 2012 he was elected president of the parliament for a single day, preceding the parliament’s near-immediate dissolution. Without hesitation, he assumed his duties and hired his daughter to work in the president’s office.
Receiving state employment income without ever going to work, raking in money on faked health insurance invoices, paying taxes on an income twenty times smaller than the real wage, building houses how and where one likes despite strict building laws, claiming a disability pension despite perfect health, falsifying invoices and cooking the books on the side, paying bribes at the tax office, the building authority, the hospital, customs, the public health office –these large and small deceits cannot be pinned on the delinquency of any one specific group. It is a lived culture. There is no scandal that could spark true societal debate on the issue. Everyone always assumes the largest racket imaginable. Cheating is a national sport. Everyone practices it. And everyone has the same apology: “Everyone else is helping themselves. Why shouldn’t I?”
Everyone complains about the state and everyone dreams of a civil servant’s desk chair. Greeks love their nation, Hellenic culture, the Orthodox Church. But they distrust state institutions. The state is an enemy. It holds its hand out at every opportunity. It is corrupt and corrupted, it fights corruption and creates it, it often makes its citizens’ lives difficult, but sometimes also sweeter. Its bureaucracy is a nightmare, a labyrinth of long corridors filled with dusty files. Its civil servants refuse to take responsibility, are incompetent, and take anyone needing their signature hostage. At the same time, the state is a resource-rich land of milk and honey. Every accountant, mayor, and minister enters this paradise as a conqueror. The plundered booty is shared in the safe harbor of the family. This is a world view that has been passed on from generation to generation for generations. Why support reform when it results in a loss of personal gain? Especially reforms that are, in the eyes of many, imposed from outside. Reforms that require a cultural and mental shift, and therefore both understanding and consent. The responsibility for delayed, impeded, and sabotaged reforms lies not only in the hands of the politicians: the votes of citizens contributed to the country’s economic decline. And the European Union looks on without intervention.
“People are tired of reforms and demoralized by saving. The word reform doesn’t stand for making necessary improvements, but rather for digging deeper in their pocketbooks,” explains Panagiotis Karkatsoulis. He sits in his Athens office and talks himself into a fury. Karkatsoulis, 57, selected by an American organization as the best civil servant in the world, is a lawyer and reform expert. He is a policy adviser in the Ministry for Administrative Reform and e-Governance and now a member of parliament for the leftist-liberal To Potami party. Rather than first analyze the finer details of the governance jungle and then prepare the information necessary for reform, the state continuously cut salaries and fired personnel. “A short-term fiscal gain that will lead to long-term catastrophe,” he says.
The problems preventing reform of the country are enormous. “The state apparatus is antiquated, overregulated, and hypercentralized.” The administration suffers from overlapping structures. Public service positions have no clearly defined duties or responsibilities. Competencies are divided across various agencies that sometimes contradict one another. The central administration has amassed 23,142 regulatory competencies that are constantly changing. A diagram illustrating how a single competency travels between myriad state structures would look like a drunken game of connect the dots.
Greece desperately needs transparency and control. The newest set of taxation reforms had hardly been passed by the Samara government at the behest of the Troika before they were watered down and torpedoed by ad hoc minister resolutions granting exceptions, loopholes, and benefits to certain interest groups. Reforms that took months to negotiate are being undone through the back door.
The reforms which actually trickle down to the offices of the tax authorities and city halls often have no application in reality. “The biggest stumbling block in implementing reform is clientelism,” says Karkatsoulis. Clientelism is like a climbing plant that has evolved over decades into a jungle. It proliferates in laws, climbs up regulations, sets roots in city hall, in parliament, in political parties, and has anchored itself in everyone’s minds. It has them all in a choke hold. It controls them. A society built an entire state on clientelism. State administration and political parties have been eaten away by it.
“Only a big bang reform can put this ship back on course,” argues Karkatsoulis. But this would require external political pressure. The reform delays of thirty years cannot be undone so quickly, despite Syriza’s robust promises. No single government will be able to renew the entire state administration. Karkatsoulis’ call for a big bang reform will remain unheard; the political costs are simply too high. Too many profit from the system of dependency. He understands why the majority of the population supports the government in their hard tack against the creditors. “The citizens don’t want reforms, but they want to keep the euro. That isn’t a contradiction. Greeks have many identities. We are flexible. We are Europeans, and we are not Europeans.”
As long as the Greeks receive nothing in return for their taxes, as long as there is inequality in taxation and a lack of socially balanced policy, as long as politicians avoid principles of transparency and merit like the plague, as long as clientelism continues to be fed by streams of money, as long as anything and everything except the common good can find its own selfish lobby, as long as an entire society insists on its benefits, privileges, bonuses, and perks – the retirees and the state employees, the politicians, the self-employed, the union members, the farmers, the truck drivers and kiosk owners, the church, the soccer clubs, even the Panhellenic Union of Rabbit Hunters – people will continue to expend all of their energy and creativity in finding new ways to avoid reform.
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