Determined to go whatever lengths necessary to discover the truth for my faithful readers, I’ve come to get a first hand look at the Euro Crisis.
Let me tell you, it’s ugly. The beaches are crowded, the harbour’s so full of 100 million dollar boats you can practically walk across it, and the clubs and the bars are so pumping, that last night I had to wait a full 45 minutes for a Mai Tai.
Ok, so perhaps coming to the Greek island of Mykonos – one of the most popular tourist destinations in Europe – wasn’t the best way to get a representative sample.
Because there’s certainly no sign of the Euro Crisis here. The place is pumping. The locals I talk to say it’s the best season they’ve seen in years. They’re even using the word ‘optomistic’!
So what’s the deal? Have our media misled us again?
You’d have to think there’s a fair chance of that. But I think the mayhem in Mykonos hides two separate phenomena.
The first is that Mykonos has always been a favourite cubby house for the rich and famous. Jacqui Onassis Kennedy made put it on the radar back in the 60s, and since then it’s been a favourite summer stop-over for every billionaire with a yacht.
Down in “Little Venice”, where the white-washed houses sit literally on the sea, with nary a care in the world for global warming and rising sea levels, apparently Madonna has a little hide away for when the pressures of being rich and awesome all the time get too much. (Tour guides will take you to the street, but they can’t tell you which house is hers…)
And last month, so my cabbie told me, the Kardashians were here, film crew in tow, just doing what they do…
…which is sod all as far as I can tell.
But this is the first rule of economics. When the crisis hits, it’s the poor who go to the wall first. The rich have their riches to protect them.
And in an economic collapse, when prices and wages are falling like they are in Greece, the wealthy actually find their wealth stretches a lot further than it used to. “Another Mai Tai, James? They’re practically giving them away.”
And if you own assets, especially property, when everything else is going to ruin – when everything is unwinding in a reverse economic miracle – then you’ve got something you can bank on. Something real.
So our small statistical sample of life in Mykonos only tells us that the rot hasn’t reached as far as the top end of Europe-town.
The other story playing out in Mykonos is the pulling power of deflating prices in post (mid?) crisis Greece. A Greek holiday doesn’t cost as many euros as it used to, and savvy Germans and French, and a growing mix of affluent Hungarians and eastern Europeans are turning it to their advantage.
Apparently foreign tourist arrivals were up 24 percent in the year to May, and as the locals keep telling me, it’s looking like one of the best summers on record.
Tourist revenue is already up a massive 38.5 percent over the year. But then you’ve got to remember that a year ago, the streets were filled with protests and Greek society looked like it was on the brink of collapse. Hardly a strong pull for a retired German couple.
“I went to Greece and all I got was this lousy t-shirt and a rubber-bullet wound.”
But with GDP still falling (output has now fallen a devastating 22 percent since 2008) prices are heading south too. In large part this is driven by falling wages. The waitress who brought me my breakfast Mai Tai said that they had taken a 50%+ pay cut at that particular café.
With unemployment up at a staggering 27 percent nationally, with youth unemployment up at an inconceivable 65 percent, a job is a precious thing to have – even on half pay.
And so with falling prices, a Greek holiday is not the extravagant luxury it used to be, and cashed up Europeans are looking to take advantage.
You might hope that this tourism boom might lead Greece out of its crisis. That soaring spending might boost the taxation revenue take, and help bring down Greece’s crippling public debt.
But Greece’s problems run deeper than that.
A recent survey here on Mykonos found that 56 percent of cafes, restaurants and hoteliers were committing some kind of tax fraud.
On some islands it was up as high as 85 percent!
Scandolous! In Australia, that kind of behaviour, in the middle of a debt crisis, would end up on Today Tonight so we could all have an good, entertaining judge. But in Greece, no one thinks much of it. It’s just what you do.
And it highlights just how difficult the Greek problem is. No one feels like they caused the crisis – and in a way that’s true. Greece’s problems emerged from generations of poor public policy and governance. And so no one feels that they should bear the brunt of the burden.
Which, again, you can understand. But everyone with a Greek passport finds themselves in a sinking ship. And so the situation requires a new sense of collective and national identity – a willingness to take the problem on together.
But when you don’t have that kind of national identity and responsibility, it’s not something you can easily engineer.
And so the buck-passing, tax-dodging, and do-what-you-can-to-get-by continues. Of course it does. Can you expect little Maria in her souvenir stall in Mykonos to go out of her way to pay full tax, when there are sports-stars and entertainers who haven’t paid tax in years?
It’s a very curly problem. Almost intractable.
But Greek history is full of challenge and tragedy, and they’re still here. I think they’ve got themselves out of worse jams than this ones.
And so for my part, I’ll be doing what I can, in my own small way, to give the economy a push.
“I think I’ll have another Mai Tai please, Olympia.”
Mike says
A friend of mine did some vacation work in Greece (before the GFC), she was working as a live in nanny for a family of three. Here’s the catch – her employers both worked at a supermarket in middle management positions. Greece ‘suffered’ an incompetent PASOK government for so long that it was perfectly normal for a middle income family to have permanent live in help, due to a self reinforcing bubble of government expenditure to offset inflation (which in itself was one of the primary causes of inflation in the first place). Wages were high while government subsidies kept the cost of consumption low.
That’s where the real problem comes in – for there to be any hope of real economic recovery, the Greek people need to accept a standard of living much lower than they have become accustomed to (though much more in line with the rest of the developed world).
Linda McGaw says
Love the new look page.
Four years ago when I arrived in Ivanhoe to live from New Zealand, I saw on a building window upstairs on Heidelberg Road, a sign saying Knowledge Source. It was to be the beginning of my establishing a new beginning.
Thank you.
Costas says
Thank you for another insightful article Jon….. a great read!
Mike, whilst I don’t disagree with you, I would like to add to your comment that the “Greek people need to accept a standard of living much lower than they have become accustomed to”. This may be taken the wrong way by some who don’t know the culture.
My best information from many of my former country folk is that most Greeks are either struggling to make a living, working class people doing just OK or long term unemployed / unemployable waiting for handouts from the government.
With the exception of a small minority, Greeks have never really lived “well” – it’s just that so many of them rely on government handouts. For many, their work ethic has disappeared and those few who are working, are sick of paying for everybody else…plus of course the rich, the entertainers, sports stars and other beautiful people, who are “exempt” from taxes.
Pat says
It may seem that there is a difference between trusting a government to look after you and ripping it off. Southern Europeans seem to go the latter way.
Ken says
A Greek friend of mine told me the biggest problem was all the refugees coming into Greece and taking all the jobs. However I have heard of the tax story. I heard all the small business owners , don’t pay tax and that is why the country collapsed.
Herbert Mayer says
I love the Greeks as a whole. Especially in Australia and South Africa I found them friendly and hard working people. I don’t think it’s a mentality that got Greece into strife, but as you said before it’s the wrong type of government support and then it’s siesta time. I also think it’s the way the European common market treated Greece. Again the wrong type of support. The huge deficit should have been recognized much earlier, and the agreed on mandatory obligations applied. For sure, the Greeks will get out of this mess; but after a long time of suffering. My best wishes for them.
Daryl Reilly says
The Greeks and tax are words that do not sit well in the same sentence. Apart from the incompetence of the European Union bureaucrats when Greece joined the Union, in letting in a country with rubbish figures and accepting a series of lies from the Greek politicians, it got so much worse. I will give you an example of the incompetence/unwillingness of the Greeks to get their house in order. About a year ago I read an article while overseas which explained that in Athens the authorities used helicopters to scour the city looking for swimming pools. In Greece there is a fee payable to the govt if you have a built-in pool. The figures were outstanding – only the slightest percentage of Athenians declared their pools. Further, the pool construction companies had also not been quizzed. Now, the problem – where is the report which shows how well the authorities have chased down the fortune involved in unpaid fees/taxes on these pools ?
Greece also has one of the highest number of porsche vehicles in the world ie an indicator of a well-heeled chap. What have their tax authorities done to correlate such matters with declared incomes for tax – again, where is the follow-up article showing their progress ?
This is the problem ( ditto the likes of Portugal, Spain and Italy )- their is so little progress due to corruption and incompetence in cracking down on such evasion and tax fraud – it has been and remains rampant.
And what do the Greeks do when someone tries to bring living standards more into line with what can actually be afforded ? – they riot in the streets and cause tens of millions of Euros in damages.
I love going to Spain and in a couple of years time, once their property markets have completely tanked there will be some great opportunities, but gee you would want to be careful. Once I complete my appetite for investing in the US I will be approaching fluency in Spanish and slowly developing a network of advisors and contacts. The joys of looking at Latino markets !
Ken. says
It truly amazes me why Greece is going through their problems. It must be their government. When Hitler invaded Greece, the people armed themselves with pick handles and what ever else they could get their hands on and went out to meet the Nazis. This deserves the highest respect for their guts and determination from the rest of the world. Truly, this is my opinion anyway. Ken.
christina says
Hello 🙂 Thanks for the excellent article. My Dad remembers when he was a kid in Greece and the economy collapsed in world war 2, people from Athens were coming to the village looking for food, poor things. My Dads family used to give them what they could, because they were poor back then too. My Dad remembers one guy who they fed who ate so fast that he burnt his tongue because the food was so hot. They told him to slow down and wait till it cooled down a bit before he ate it and he said no way I’m starving and he gulped it down and burnt his tongue because he said he was scared if he waited for it to cool down he might miss out, poor thing
leo says
Hi Jon, So what would Olympia rather have done with her time over again.
Did she go missing?