Thursday, July 19, 2012

The Greek Debt Crisis Explained in 30 seconds

Bribery is one of the major sources of economic activity in Greece. Bribery, not necessarily by definition but close to it, is under the table income. The Greeks did not report this income to their government and therefore did not pay taxes on it. The government acted like they received it anyways and based their budgets and borrowing levels off of this projected tax revenue base. Banks lent them money assuming the books were accurate without investigating the issue further (they did/do this a lot). A new government took power and realized the money was, in fact, not received. In response, the new Greek government attempts to pass new laws targeting tax evasion and bribery, but lawmakers were bribed not to. Bill fails. European Debt crisis ensues.

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