Since the outbreak of the Greek sovereign debt crisis the dominant narrative in Europe has been that the root cause of the problem was that Greece had an excessively costly public sector.
But that is not quite true.
While undeniably there were phenomena of waste, corruption and bloated budgets in the public sector, the reality is that even before the crisis, public spending in Greece as a percentage of GDP was actually below the European average – and even lower than that of Germany’s.
The true source of the budget deficits was on the revenue side which was far below European averages. For decades tax collection in Greece has been chronically defective – and particularly for the ‘big fish’. Undeniably one of the main reasons for this was chronic political interference in the revenue service – both by PASOK and New Democracy governments. Top level decisions to look the other way while a black sea of millions in undeclared profits lapped at their feet.
For that exact reason it was one of the troika’s demands that for Greece to continue receive bailout loans that the position of general secretary for public revenues be created, a position that was independent and protected from political interference. The position was created in 2012 and sat empty for almost a year until Mr Theoharis was given the job. The general secretary was to serve a five-year term and could only be replaced by the Finance Ministry in the event of serious wrongdoing or illness. But now Theoharis has resigned a little over a year into the job citing ‘personal reasons’.
Clearly it was an unenviable position with the general secretary taking over a machinery that was at best broken and at worst non-existent, and tasked with meeting fantastical targets by drawing taxes from an angry and struggling populace. And while it would be nice to think that the wealthy players who have been dodging millions in taxes for years would finally be called upon to pay their fair share, it is also clear that most of those millions have long been taken out of the country and safely stashed in offshore havens, well beyond the short, stumpy arms of the Greek revenue service which had to make do with once again shaking down the (poorer) people closer to hand.
Yet the idea that Mr Theoharis’s departure did not have a political dimension convinces absolutely no one, coming as it has in the midst of a wider government reshuffle. It is widely known that Mr Theoharis had irked the government over some of his initiatives and it appears highly likely that Mr Samaras himself played a role in Theoharis’s departure. Kathimerini reports that among the decisions believed to have annoyed government officials was his recent attempt to tax Greek bondholders retroactively, a move that prompted a quick about-turn by the ministry.
This is why when news of Theoharis’s departure became known, the European Commission, through its spokesperson Simon O’Connor made a statement registering its ‘serious concern’ over the development. “It is essential that the government ensures full continuity in the delivery of planned reforms to improve the efficiency of the administration, combat fraud and evasion, and secure increasing government revenues,” Mr O’Connor said.
“As such, in conjunction with our ECB and IMF partners, we will continue to closely monitor the Greek government's commitment to a more autonomous revenue administration, as well as commitments to establish rigorous, transparent and merit based processes for the appointment of senior managers in the Greek public sector.”
The Finance Ministry in response said that the Commission was ‘wrong’ to issue the statement, but given the circumstances can government looks like little more than a guilty child.
Much will now depend on who is chosen to fill Mr Theoharis’s shoes, provided there is still a person left in the country with sufficient qualifications and levels of masochism / lunacy to take on the role.
The process should be clear, transparent and the new general secretary beyond reproach. Because otherwise it would appear that the government – which has implemented troika-demanded policies with such gusto on its populace – suddenly squirms when that same troika seeks to curtail its own political influence in the revenue service.
Political influence that, far more than public sector pay scales or health spending, was the main cause of the Greek sovereign debt crisis in the first place.
But that is not quite true.
While undeniably there were phenomena of waste, corruption and bloated budgets in the public sector, the reality is that even before the crisis, public spending in Greece as a percentage of GDP was actually below the European average – and even lower than that of Germany’s.
The true source of the budget deficits was on the revenue side which was far below European averages. For decades tax collection in Greece has been chronically defective – and particularly for the ‘big fish’. Undeniably one of the main reasons for this was chronic political interference in the revenue service – both by PASOK and New Democracy governments. Top level decisions to look the other way while a black sea of millions in undeclared profits lapped at their feet.
For that exact reason it was one of the troika’s demands that for Greece to continue receive bailout loans that the position of general secretary for public revenues be created, a position that was independent and protected from political interference. The position was created in 2012 and sat empty for almost a year until Mr Theoharis was given the job. The general secretary was to serve a five-year term and could only be replaced by the Finance Ministry in the event of serious wrongdoing or illness. But now Theoharis has resigned a little over a year into the job citing ‘personal reasons’.
Clearly it was an unenviable position with the general secretary taking over a machinery that was at best broken and at worst non-existent, and tasked with meeting fantastical targets by drawing taxes from an angry and struggling populace. And while it would be nice to think that the wealthy players who have been dodging millions in taxes for years would finally be called upon to pay their fair share, it is also clear that most of those millions have long been taken out of the country and safely stashed in offshore havens, well beyond the short, stumpy arms of the Greek revenue service which had to make do with once again shaking down the (poorer) people closer to hand.
Yet the idea that Mr Theoharis’s departure did not have a political dimension convinces absolutely no one, coming as it has in the midst of a wider government reshuffle. It is widely known that Mr Theoharis had irked the government over some of his initiatives and it appears highly likely that Mr Samaras himself played a role in Theoharis’s departure. Kathimerini reports that among the decisions believed to have annoyed government officials was his recent attempt to tax Greek bondholders retroactively, a move that prompted a quick about-turn by the ministry.
This is why when news of Theoharis’s departure became known, the European Commission, through its spokesperson Simon O’Connor made a statement registering its ‘serious concern’ over the development. “It is essential that the government ensures full continuity in the delivery of planned reforms to improve the efficiency of the administration, combat fraud and evasion, and secure increasing government revenues,” Mr O’Connor said.
“As such, in conjunction with our ECB and IMF partners, we will continue to closely monitor the Greek government's commitment to a more autonomous revenue administration, as well as commitments to establish rigorous, transparent and merit based processes for the appointment of senior managers in the Greek public sector.”
The Finance Ministry in response said that the Commission was ‘wrong’ to issue the statement, but given the circumstances can government looks like little more than a guilty child.
Much will now depend on who is chosen to fill Mr Theoharis’s shoes, provided there is still a person left in the country with sufficient qualifications and levels of masochism / lunacy to take on the role.
The process should be clear, transparent and the new general secretary beyond reproach. Because otherwise it would appear that the government – which has implemented troika-demanded policies with such gusto on its populace – suddenly squirms when that same troika seeks to curtail its own political influence in the revenue service.
Political influence that, far more than public sector pay scales or health spending, was the main cause of the Greek sovereign debt crisis in the first place.