Lagarde on Greece

There’s nothing like a bit of unexpected truth to get people upset. Christine Lagarde said this:

[W]hile this might come as a surprise to Greeks suffering under extreme austerity, some say Lagarde’s approach to the eurozone is less draconian than the IMF’s traditional policy towards developing world economies. Is it easier to impose harsh demands upon small economies, but much harder to tell difficult truths to the big ones – particularly fellow Europeans? “No,” she says firmly. “No, it’s not harder. No. Because it’s the mission of the fund, and it’s my job to say the truth, whoever it is across the table. And I tell you something: it’s sometimes harder to tell the government of low-income countries, where people live on $3,000, $4,000 or $5,000 per capita per year, to actually strengthen the budget and reduce the deficit. Because I know what it means in terms of welfare programmes and support for the poor. It has much bigger ramifications.”

So when she studies the Greek balance sheet and demands measures she knows may mean women won’t have access to a midwife when they give birth, and patients won’t get life-saving drugs, and the elderly will die alone for lack of care – does she block all of that out and just look at the sums?

“No, I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens.” She breaks off for a pointedly meaningful pause, before leaning forward.

“Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”

Even more than she thinks about all those now struggling to survive without jobs or public services? “I think of them equally. And I think they should also help themselves collectively.” How? “By all paying their tax. Yeah.”

It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time.

“That’s right.” She nods calmly. “Yeah.”

And what about their children, who can’t conceivably be held responsible? “Well, hey, parents are responsible, right? So parents have to pay their tax.”

…and got in trouble.

But for the life of me I can’t tell why. What exactly did she say that is so wrong? Is she supposed to pity Greeks with a GDP per capita of € 17.500 (give or take, no one really knows) more than, say, the people of Niger (GDP per capita of $ 800 on PPP basis)? As far as I’m concerned, the only reason why any IMF money at all should go to Greece is because it has important knock-on effects on the world economy, and therefore gives them more bang for their buck than money sent to Niger.

As for taxes, the Greeks wouldn’t even pay their property taxes when they were bundled in with the energy bill:

The cunning scheme to get Greeks to pay property taxes by bundling them with electricity bills didn’t last long. You guessed it, people stopped paying their electricity bills and now it looks like the power company – which had to be bailed out last month – has stopped even trying to collect the levy.

Likewise, they can’t be bothered to actually privatise anything. Courtesy of Tony Barber on Gideon Rachman’s FT blog:

Costas Mitropoulos, chief executive of the Hellenic Republic Asset Development Fund, otherwise known as Greece’s privatisation agency, is the most eloquent advocate of selling off state property I have ever met. Once he actually starts doing it, he will be an unchallenged master of his craft.

The long and the short of it is that Lagarde was right, just like Boutros-Ghali was right to point out that the Bosnian war was much less devastating than any of a dozen other crises that were going on in the world at the time. This is exactly what I was talking about in my Grexit post: Much as this crisis was not caused by Greek laziness in any real way, that doesn’t change the fact that there’s something rotten in the state of Greece. Plague on all their houses until they realise that.