Eurozone: Thrifty Ants bailing out Profligate Grasshoppers?

One of the most popular narratives of the Greece-Eurozone crisis is that the hard working Germans and Eastern Europeans are asked to bail out the overspending Greeks. In most cases this narrative is based upon nothing but pure prejudice. Most Northerners and Easterners visit Greece during the summer season, and spend their time relaxing and enjoying themselves. There is an observation bias in assuming that the Greeks themselves do the same. In fact they work the overheated kitchens, prepare the gyros, clean the rooms, navigate the ferries, and generally work in overlapping shifts during the entire season. As we have shown in our blogpost refuting the most popular myths about the lazy and corrupt Greeks, they work more hours per year than do Germans according to Eurostat.

There is, however, a widespread myth that is seemingly based on facts. It goes something like this: “Poor Eastern European Eurozone member states (Estonia, Latvia, Lithuania, Slovakia, Slovenia) have now reached the level of development of Greece, yet their pensions are only a fraction of Greek pensions. Why should they be asked to bail out Greece?” There is also a German version of this myth (it most likely originates from the German press in fact), which claims that “Greek pensions are higher than German ones, even thought Greece is a poorer country”.

Let us consult the data and see if we can find any evidence of these stories being backed up by facts. What we can do is to compare the GDP per capita of Eurozone member states with their per capita spending on pensions, both measured on purchasing power parity (i.e. adjusted to the price levels in those countries). Fortunately Eurostat publishes comparable data on per capita pension here. (You have to set the units to purchasing power standard per inhabitant.) Unfortunately, there are no comparable figures for 2015 or 2014, after Greek pensions have been cut by almost 50% as part of the austerity packages of recent years.

But we can still compare the last year before the crisis and the beginning of the devastating austerity that destroyed the Greek economy. Let us see how it looked in the year 2009.

 

Screenshot 2015-07-21 19.09.52

Output per head compared to pensions per head, 2009, both adjusted to local price level

 

What we see on the graph is that Greek pension levels were in line with general European trends in 2009, that is, they were appropriate for the level of development of the country. The same was true for Baltic pension levels, but in the case of Slovenia and Slovakia pensions were in fact lower than what their output levels would have allowed. This is in line with my observation in my “Open Letter to my Estonian, Latvian, Lithuanian, Slovak and Slovenian Friends” about bailing out Greece, in which I proposed that it was not Greek living standards that were too high compared to their level of development, but Eastern European living standards too low. Eastern European would be better off fighting at home for higher wages, pensions and social assistance than trying to bring down Southern European and overall European standards. I also mentioned that the share of wages to GDP in the five Eastern European OECD member states (where collective agreements coverage is very low) is a full ten percentage points lower than in the 12 Northern, Western and Southern European EU member states where collective agreements cover more than 4/5 of employees. Eastern Europe quite simply has a different model of capitalism than does the West and the North of Europe.

Trade unions with strong rights and wide membership is a prerequisite of the European Social model. This was so in Greece as well, until the Trojka eliminated it, interfering in the internal social structure of a sovereign country. Syriza attempted to restore it, but the current agreement (The Great Ceausescu Plan for Greece) bans it again, interfering in the social fabric of a sovereign nation, banning a practice that is general in Northern and Western Europe. It was also an integral part of the German growth model. (Model Deutschland, leading to the Wirtschafstwunder, the German economic miracle. See the writings of Wolfgang Streeck and Anke Hassel on these issues.)

(Latest example from Bloomberg: in spite of high growth in the Czech Republic, wages lag behind.)

 

 

37 hozzászólás a(z) “Eurozone: Thrifty Ants bailing out Profligate Grasshoppers?” bejegyzéshez

  1. KZoltán

    Thrifty ants bailing out their own anteaters.

    Válasz
  2. Attila Schwarz

    sóhaj…

    http://si.wsj.net/public/resources/images/BN-HD950_GKPENS_G_20150227115651.jpg

    Azért felnézhettek volna a gyrosos pultból és ha már rájuk omlott az ország kicsit foglalkozhattak volna a gazdasággal is, na meg az áfát is illene befizetni az eladott piták után.

    Válasz
    • Zoltán Pogátsa

      Ad 1.) ez azután van ugye, minekután a görög GDP ÖSSZEOMLOTT a megszorítások miatt. Azaz nyugdíjkiadások per GDP tört nevezője
      Ad 2.) A görögök 10 évvel tovább élnek mint pl a litvánok, azaz ő nyugdíjkiadásaik mindig nagyobbak lesznek.

      1.) This after Greek GDP collapsed due to austerity, thus the denominator of the debt / GDP ratio.
      2.) Greeks live 10 years longer than Lithuanians on average, so their pension expenditure will always be much bigger.

      Válasz
      • Attila Schwarz

        1. This picture is still more relevant. The average pension in ’09 was 1350 euros while its 850 euros as we speak. If only they could foresee the simple economic relationship between an outrageous social expenditure and a forthcoming bankruptcy, they’d never be in this situation right now. No responsible country awaits for the black knights of IMF to cut such a budget.

        2. The lithuanians want to live 10 years longer just like the greeks, but they cant afford it. Compare the standard of living, the health care system, the outgoings on healthy food just to name a few factors and you will see your argument is contraproductive at best.

        Válasz
        • Zoltán Pogátsa

          1. As I said: there was NO outrageous expenditure. But facts don’t seem to move you.

          2. My argument is solid. 🙂 I do not see why it would be counterproductive. 🙂

          Válasz
          • Attila Schwarz

            Look, this is not a matter of argument. As soon as a country goes bankrupt due to its short run unsustainable budget theres three subjects: expenditures, revenues and debt payments. The greek budget was one of the most generous social expenditure-wise, yet the worst in collecting taxes in the entire EU. The payments and interest rates were no higher than the EU average, so I think its kinda obvious where we should look for outrageous expenditures.

            2. The hungarians are 3 cms taller than the greeks, so we should get at least 5% more pensions right? The point is: if you cant afford 3 million pensioners, each worth 1300 euros every month, then you wont afford them even when you take loans out from every civilised country on Earth. I wish we could get over this and start discussing real and actual problems.

          • KZoltán

            Elöljáróban leszögezem, hogy a történelmüket tekintve a balti országokkal teljesen szolidáris vagyok. De azt azért szeretném tisztán látni, amikor a gazdasági adataikkal példálóznak, hogy az orosz ajkú kisebbség, amely nem kapta meg az állampolgárságot, hogyan szerepel a statisztikájukban!

          • Andy, the jay

            Hello.
            I hope, you have some data about
            – How much money moved to offshore accounts in the few years in Greece, and in Germany, and for example in Luxembourg or Cyprus?
            – How much taxes were not paid to the budgets in these countries in the last few years?

  3. KZoltán

    Ez a táblácsaka a lényeg http://ec.europa.eu/eurostat/statistics-explained/images/9/98/Current_account_balance_with_the_rest_of_the_world%2C_2004%E2%80%9314_%28%C2%B9%29_%28EUR_billion%29_YB15.png ! Még hogy a németek (meg a kis németek) fizetnének! Ömlik a pénz Németországba. Az más kérdés, hogy nem a német adófizetőkhöz, de azt nekik maguknak kell elrendezniük. Amíg a fizetési mérleget nem hajlandóak kiegyenlíteni, addig nem fog működni a valutaunió.

    Válasz
  4. hoci nesze

    (a szöveget töröltem – alaposabb megfontolás szándékával)

    Válasz
    • KZoltán

      Ennyit Hayek és a ‘díszes’ bécsi iskola elméletéről.

      Válasz
    • Commenter

      Az adósság/GDP arány egészen 2007-2008-ig 1994-től kezdve 100%-on stagnált, lényegében az volt a penge éle, de lassabb növekedéssel nem lehet konvergálni az unió centrumországaihoz, a lemaradás, pedig munkaerő kiáramlással jár.

      Válasz
  5. Árus Zsolt

    Tegyük fel, hogy valóban bombát akart készíteni, s fel akarta robbantani december elsején. Mitõl lesz ez az alkotmányos rend felforgatása, illetve a nemzetbiztonság veszélyeztetése? Ettõl lesz ez az egész nagy hatósági felhajtás mindenképp nevetséges (de ugyanakkor veszélyes is). Az ilyen hozzáállásal elõbb utóbb csak kiprovokálnak valamit, s félõ, hogy ez is a cél.

    Válasz
  6. Scenkhyalfi

    Sima hatalmi provokáció az egész, kellett valami a románok ünnepére.

    Válasz
  7. Ulippo

    A puccs nem az volt, hogy az ukránok kiálltak a tervezett és ígért EU-társulás mellett. A puccs az volt, hogy a tervezés és ígéretek után Putyin el akarta szabotálni a társulást, aminek a következménye az lett, hogy egy forradalom elsöpörte Putyin puccsát.

    Válasz
    • Kiss Béla

      Ülj le fiam Ulippo, hülye vagy !Ukrajnában ,igazi pucs volt és nem t és most jön a Donyeck , Lugánszk forradalom , szemiféle Putyini puccs nem volt , Putyin tette a dolgát vissza vette Oroszország keblére a Krímet.

      Válasz

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