Greek government has a long history of problems with its public debt—it has spent more than half the years since 1832, when it gained independence from the Ottoman Empire, in default. Deep analysis on Greek history point to several deeply entrenched features of the Greek economy and Greek society in general that have prevented sustained economic growth and created the conditions underlying the current crisis. Chief among these are :
- State ownership of majority of resources – As recently as 1990, the Greek state controlled about 75% of all business assets in the country and tightly regulated other sectors of the economy. The state reduced its stake to about 50% by 2008; however, according to the report of OECD , much of the private sector continues to “suffer from weighty and complex regulations and from the lack of a coherent and systematic approach to rule-making.”
- Hefty public expenditure – In the decade before the crisis, a significant portion of rising government expenditures was allocated to rising public sector wages and benefits. As recently as 2009, Greek government expenditures accounted for 50% of GDP, with 75% of (non-interest) public spending going to public sector wages and social benefits. However, there was no critical evidence for ‘improvemnet in quality of services’.
- Political stereotyping – Greek politicians have traditionally viewed the provision of public sector jobs and benefits as an important way to grant favors and thereby secure electoral support.
- Tax evasion & Political clientelism- Clientelism may also be an important factor behind pervasive tax evasion and a complex tax code that grants exemptions to numerous professions and income brackets. According to Greek government officials, until the debt crisis, the state taxed only one-third of officially declared income, at an average rate of about 30%. This excludes profits from an unrecorded economy that some value at upwards of 30% of the official GDP.
- Widespread corruption – According to 2010 Corruption Perceptions Index, Transparency International ranked Greece as the most corrupt country in the EU, just behind Bulgaria and Romania.