The Full Catastrophe (7 page)

“So they come for us,” his mother added.

Around the time of Greece’s first bailout, a number of news stories about Greeks hiding their swimming pools appeared in the domestic and international press. Pools in Greece are a taxable luxury, and after the Greek government came under increased pressure to stop tax evasion, it announced that it had started using satellite imagery to ascertain the true number of them in the villadense suburbs north of Athens. Only a few hundred Greeks had declared their pools in tax forms, and news that authorities were looking from the sky set off an urgent pool-concealment effort and a spike in demand for camouflaging tarp. The government search
nevertheless turned up nearly 17,000 pools. Finance ministry officials at the time told reporters stories about doctors and lawyers with posh homes in rich neighborhoods declaring implausibly low incomes, often less than 12,000 euros a year, which was at the time below the taxable threshold. This all had to stop, the politicians said. This represented a change in tone, though. Before the crisis, politicians had often encouraged tax auditors not to work too hard before elections, so as not to dim voters’ views of their elected officials. Now the same politicians were publicizing their fledgling efforts to get tough. But their ability to execute substantive change was deeply limited by the Greek bureaucracy’s aptitude, which appeared to be more geared toward colluding with tax evaders than busting them. Changing this would not be easy.

One finance ministry employee, a computer science professor hired to develop programs to detect tax evasion—part of the ostensible effort to rein in the practice—resigned from his post in 2011 after determining that his efforts were futile. Senior tax officials displayed no willingness to act on the information he’d been able to collect, the ex-employee said. Tax collectors, he added, often used a “40-40-20 deal” that worked like this: If a collector caught someone who owed 100 euros to the state, the money would be partitioned in a manner that advantaged everyone, though the state less so—40 euros remained with the taxpayer, 40 would go to the tax collector for the service provided, and the state, as a token, received 20. This revelation underscored a major challenge. The government faced a shortage of scrupulous auditors to perform the prodigious task of reining in tax evasion.

This longtime state of affairs was by no means a secret to Greeks. Tax evasion was such an axiom that banks in Greece did not rely on income tax statements as accurate indicators of their customers’ true earnings. Therefore, when determining whether to give loans for cars or homes, the banks came up with “adaptation formulas” to approximate true income based on a number of
indicators not directly related to their customers’ income declarations. Using the formulas and data involving tens of thousands of credit applications provided by one large, anonymous Greek bank, three academics—Nikolaos Artavanis of Virginia Tech, and Adair Morse and Margarita Tsoutsoura, both from the University of Chicago—determined that self-employed people in high-income professions were among Greece’s primary tax dodgers. While self-employed workers everywhere tend to underreport their income, the authors found evidence of some particularly audacious underreporting in Greece. For instance, the authors concluded that from 2003 through 2010, doctors, lawyers, accountants, and people working in lodging and restaurants, among other professional groups, made overall monthly debt payments that exceeded total reported monthly income. No bank would lend to someone—let alone whole segments of the workforce—whose debt payments surpass their reported income, but Greek banks did because they knew the reported income was not a reflection of the real thing. This level of apparent tax evasion among the self-employed in Greece was particularly troublesome for state coffers, because some one-third of Greek workers are self-employed, the highest percentage in the European Union and about double the bloc’s average. The authors of the study estimated, conservatively, that 28 billion euros of taxable income from self-employed workers went unreported in Greece in 2009—the year the government’s finances were revealed to be unsustainably shaky—with lost government revenue amounting to nearly one-third of the deficit that year.

People in Germany, the Netherlands, Finland—eurozone countries that had, with great reservation, participated in Greece’s bailouts—read the stories about the swimming pools, or others about an apparently high per capita number of Porsche Cayennes in Greece, or about rich Greek shipping magnates who benefited from constitutionally consecrated tax-exempt status, and were perturbed. One documentary that aired on German public television
called
The Greece Lie
encapsulated the common sentiment, posing the question: Why should Germans help finance the Greek government when Greeks didn’t seem willing to? In the documentary, a Greek shipowner, introduced by the theatrical, menacing voice of the narrator as a “tycoon,” appears on camera looking comfortable and wealthy in a sky-blue sport jacket as he gazes over the bow of his yacht. The tycoon announces that one ought not to pay taxes to a mismanaged, corrupt state. “Would you give your money to Al Capone?”

In addition to
The Greece Lie,
the German magazine
Der Spiegel
once ran the cover story “The Poverty Lie: How Europe’s Crisis Countries Are Hiding Their Fortunes.” The article was inspired by a European Central Bank survey which found that people in Greece—as well as in Cyprus and Spain, countries that also received bailouts—had higher levels of household wealth than Germans. While Greece’s government was broke, this information suggested, its people were not. In Germany, on the other hand, people weren’t doing as well as the government, which was relatively well financed. Median household wealth in Greece was double that of Germany, largely due to the fact that Greeks far more often than Germans own their own homes, and often more than one of them. The data used in the survey was in large part collected before the economic consequences of the European debt crisis set in, and many Greek commentators claimed the statistics were misleading or propagandistic. German chancellor Angela Merkel—likely cognizant of the political consequences of her electorate feeling like it was being shortchanged—agreed the survey result was “distorted,” telling the newspaper
Bild
that it did not include Germans’ high pension entitlements or assets abroad. Indeed, there was some truth to what Merkel was saying. Germans willingly transfer more money to the state with the faith that they will see it returned to them in the form of good benefits and services. What she didn’t say, however, was that a lot of Greeks,
though less willing to give their money to the state, had been receiving pretty good pension benefits anyway, at least relative to what they had been contributing.

The Troika wanted more affluent Greek families to cough up some of their hidden wealth, and the increased property taxes, in particular, were a way of getting at it. In an interview with
The Guardian
a few months before the Hydra episode, Christine Lagarde, the head of the IMF, one of Greece’s creditors, sounded rather unsympathetic to the effects of austerity in Greece, focusing her attention on tax evasion instead. The interviewer asked Lagarde if she was ignoring the possible consequences when demanding cuts that could 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.” Lagarde replied: “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.” Lagarde added: “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.” These comments seemed rather insensitive to a lot of Greeks, and Lagarde’s Facebook page was inundated with thousands of angry messages. Lagarde then tried to make amends by writing that she was “very sympathetic to the Greek people and the challenges they are facing,” but emphasized again that Greeks, especially the most privileged, should pay their taxes. At the time, Greek politicians were running for election, and many publicly denounced Lagarde for the comments, accusing her of stereotyping and humiliating the Greek people. “Greek workers pay their taxes, which are unbearable,” Alexis Tsipras said in response, before going on to criticize the government for its failure to go after “big capital.”

The widespread perception that the government was exempting the wealthy and the powerful from its tax-collection campaign was confirmed a few months after the Hydra uprising, when a Greek investigative journalist named Kostas Vaxevanis published the names of some two thousand Greeks said to have accounts in a Geneva branch of HSBC. The names—which included a lot of prominent people, such as relatives of former and acting government ministers—constituted the so-called Lagarde List, after Christine Lagarde. A few years earlier, Lagarde had been French finance minister when her government obtained information on thousands of Europeans with undeclared Swiss bank accounts. French authorities used the information to investigate domestic tax evasion and passed on pertinent information to other European nations so they could do the same. In 2010, the French government passed along a CD of information concerning Greeks to Lagarde’s colleague Giorgos Papaconstantinou, a boyish-looking PASOK politician who was serving as Greek finance minister at the time. Papaconstantinou, who later said the sum of the account deposits in question amounted to some two billion dollars, was presumably the right person to see to it that an investigation be launched. By the time Vaxevanis published the names, however, two years had passed and no investigation had taken place. Papaconstantinou later said the original CD had been misplaced, though a copy of the data had been made. From that copy, it turned out, information concerning three people on the list was deleted—that of Papaconstantinou’s cousin and two other relatives. Papaconstantinou was later accused of tampering with the list, and the Greek parliament voted to revoke the immunity he received as an ex-minister. A special court eventually found Papaconstantinou guilty of a misdemeanor for document tampering and sentenced him to a one-year suspended prison term, while acquitting him on a felony charge of attempted breach of faith. All along, Papaconstantinou maintained his innocence, denied deleting the names,
and said he had been framed. In a speech in parliament, he said he was being scapegoated for the country’s misfortunes because, as the finance minister in the early days of the debt crisis, he had performed the unpopular duty of signing on to the first bailout.

A swift investigation may not have come for the people actually on the list; however, it did for Vaxevanis, the journalist who published it in his magazine. Right after it hit the stands, Vaxevanis, a persistent thorn in the side of the Greek government, was arrested, charged with violating a personal data protections law, and had his trial fast-tracked so that it would take place just a few days later. Vaxevanis was acquitted, but a prosecutor found the ruling to be mistaken and ordered a retrial. A year later, Vaxevanis was again found innocent. At the same time, investigations of people on the Lagarde List remained extremely spare and slow. “In Ancient Greek mythology, justice is presented as blind,” Vaxevanis wrote in
The Guardian
after his arrest. “In modern Greece, it is merely winking and nodding.” The Lagarde List, he added, showed how “the entire system of power” transferred money abroad, and this much had been uncovered only by examining accounts at a single Swiss bank branch. “Meanwhile in Greece, people are going through dumpsters for food.”

Vaxevanis was right, and while many affluent Greeks were evading both taxes and justice, other people were suffering. A lot of the Greeks I saw picking through dumpsters in Athens were old and decently dressed people who had given their pension money away to their struggling children or grandchildren. After witnessing scenes like this, I struggled to try to understand the central narrative of the Greek crisis. Were Greeks wealthy and hiding their money from the government—in other words, actors in the so-called poverty lie? Or were they suffering the effects of austerity policies and economic ruin?

After a while, I realized I should stop trying to choose between the two narratives, because both were true. Economic collapses have
the unfortunate tendency to disproportionately impact the most vulnerable people in any society, and this was certainly the case in Greece, where income inequality had already long been high by European standards, and the welfare system, which often served special-interest groups rather than the most needy, was piecemeal and fractured. Greece was one of only two EU countries—Italy being the other one—with no nationwide minimum income benefit. While family bonds in Greece provided an informal safety net, this too increasingly frayed as the economic downturn endured. By the end of 2013, 36 percent of the Greek population was “at risk of poverty or social exclusion,” according to the EU statistics office. Only Bulgaria and Romania fared worse. One out of every five Greeks suffered severe material deprivation—being unable to afford basic household necessities, pay their mortgages, or adequately heat their homes. What had begun as a public debt crisis in Greece was increasingly becoming a private debt crisis as a rising number of Greeks—faced with lower incomes, an increased tax burden, and mass unemployment—were going broke like their government. Most worrying, families with young children constituted a growing proportion of the Greeks falling into poverty. These were the people who didn’t have money to hide in offshore accounts, yet they were paying the highest price for the country’s problems.

Many of the most desperate people in Greece gave up hope that things would ever change, that economic opportunity would return, that Greek politicians would create a more just system. One encounter in particular drove this point home for me. It took place not in Greece but in Swabia, a hilly, prosperous region of southwest Germany, a place I visited in the spring of 2013. Swabia, known in Germany for its inhabitants’ orderliness and parsimony, is home to a thriving auto industry that has long lured laborers from southern Europe, including many Greeks. Most of them initially came in the sixties and seventies. By the time of my
visit, however, a new generation of Greeks was arriving as the economic situation back home was creating an annual exodus of tens of thousands of people. In a small Swabian town dotted with half-timbered houses, I took a tour of a fulfillment warehouse. Business was great, the owner, the son of Greek immigrants, told me, a circumstance that was allowing him to hire some of the Greek newcomers. As we walked around, I met one of them, a slender thirty-eight-year-old woman named Maria Saoulidou. She was hanging packages of children’s party supplies—red balloons and yellow streamers—onto a rack that was to be shipped, store-ready, to a discount retailer. Saoulidou had recently arrived from a small city in northern Greece. She told me the supermarket she used to work at there had stopped paying her and the other employees. For a while, she kept on working at the supermarket anyway in the hope that a paycheck would be forthcoming, but it wasn’t. Things were not going much better for her husband, a truck driver. When they ran out of money, the couple decided to try to start a new life in Germany, where an already established immigrant uncle could help with the transition. The couple left their two young sons behind in Greece with the childrens’ grandparents and left for Swabia. They lived in a basement apartment near the warehouse, a gloomy, dank rental that was sparsely furnished with a mattress and a couple of chairs. They would send for the kids once they were able to establish a suitable home, Saoulidou told me. She missed her boys dearly, of course. “It’s very hard,” she said, nearly in tears with a package of balloons in her gloved hand. I looked down at the floor and noticed that one of her sneakers was badly torn open near the toe. Once the boys arrived in Germany, she said, the family would never return to Greece for more than a visit. “We’re not looking after our future,” she said. “We’re looking after the future of our children, and unfortunately, there is none for them in Greece.”