finding simple observations in a complex world
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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