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Greece in the European Union

Nicolas Delalande. ¿Books and Ideas?. (La Vie des Idées)

Interviewed by Nicolas Delalande for Vie des idées, on 27 February 2012, the words of Anastassios Anastassiadis help explain where the Greek state's fiscal difficulties come from, and highlights the role of inequalities and sheds new light on what is currently happening in the country.

Books and Ideas: The Greek state currently seems to have a very difficult time collecting taxes. Does this phenomenon have historical roots?

Anastassios Anastassiadis: As I have said, the Greek state is in reality a former Ottoman province that became independent. Both its fiscal and land tenure systems obey an Ottoman logic. In the legal realm, Islamic law was implemented along with customary law but also Christian ecclesiastic law, and thus Byzantine law. When they arrived, the Bavarians undertook to modernize both the land tenure system (by the abolition of "mainmorte," land redistribution, and the creation of land registries) and the judicial and economic realm (i.e. by introducing Napoleon's commercial code). These efforts ended abruptly with the 1843 bankruptcy. This was notably true of the land registry (an effort that has recently been renewed within the framework of the European Union), the fund aimed at financing the training of clergy, primary education and even the civil code, which was not enacted until the twentieth century. In fact, efforts to modernize and fiscal centralization of the Bavarian met with the enormous resistance of local powers. Thus, a series of Ottoman practices persisted throughout the nineteenth century.

As for taxation itself, one should remember that, at that time, agriculture weighs heavily on the Greek economy. The other major activity is commerce. As the historian Georges Dertilis has shown, the Greek political-institutional compromise of the nineteenth century played to the fiscal advantage of these two constituencies. The creation of a parliamentary democracy benefited farmers, who benefited both from land redistribution and the lowering of their tax burden. In Greece, unlike in most cases of state-building, small agricultural landholders did well for themselves and were not absorbed into larger properties, as occurred in other European countries. Greece is thus one of the rare European countries in which there was neither a mass rural exodus creating an abundant and available workforce for nascent industrialization, nor major rebellions of dispossessed and impoverished peasants. At the same time, tax cuts for farmers were not paid for by raising taxes on the urban professions and bankers, the other influential groups, which were and still are politically overrepresented, even today (still) in political representation. Just look at how difficult it is for leaders to enact the liberalisation of the access to law, engineering or architecture, while at the same time making dramatic cuts in pensions.

Even after the introduction of income tax in 1910, the Greek State opted for indirect taxation when looking for new resources. This can be largely explained by the difficulty of achieving a truly effective tax, a fact which is derived from the Greek economic structure itself. An effective plethora of liberal professions (the number of lawyers, engineers, doctors, dentists and plumbers or taxi owners per capita is exceptional) in the domain of small farmers, small family businesses or small businesses (also with undeclared employees -usually immigrants- in tourism) have considerably weakened labour wages. The control of the proceeds of these professions is very random and complex, even today. In 2010, about 4.4 million Greek employees and retirees declared on average 17,000 Euros in annual revenues, while 379,000 independent professionals reported an average of 11,500 Euros (the tax limit is set at 12,000 Euros in annual revenue) but the winners are the million farmers, with 1,500 Euros average income declared. In this regard, it is not surprising that the Greek state, pressured by the crisis, recover the old recipe of "patent rights" to increase their receipts on the revenues of professionals. The weight of the informal economy (especially in services) lowers tax revenues, which are based mainly on wage earners and pensioners; that is, those whose income ultimately depends the state and the mixed sector or sectors working for the state, such as banks or large private companies.

In the interwar period, it was the consumer who endured the bulk of the tax burden. The urban classes were the first to be affected because they could not count on sufficient income or consumption. Every time there was a need for money to finance State measures, the Greek State therefore established a new indirect tax (a tax stamp on some transactions to build courts, a tax on the wax to pay salaries and pensions of priests, a tax on boat tickets for sailors' pensions, and so on.) Rather than face the problems of collecting tax on income and social issues, they simply piled on taxes that fell on consumers. The introduction of VAT in 1987, which was not accompanied by any noticeable lowering of other taxes, was in this sense an anthological moment in time.

The lowering of indirect taxes is one of the major challenges for current reforms, especially when the income of wage earners and pensioners (on which are the foremost tax payers) have suffered dramatic cuts for years. One might think that with the lowering of wages and the expected decline in consumption, prices would be recalculated despite the hike in taxes (this has in any case been the commitment of the troika). None of this has happened, demonstrating the power of the consolidated professions, acting together to prevent any fall in prices, as well as the strongly oligopolistic nature of the Greek market. State revenues have not increased, households have reacted to lower incomes and the support for prices by a decline in purchases, while industrial and commercial professions have reacted to lower sales with a "resistance" to increasing taxes. Revenues from direct and indirect taxes have fallen, dragging the country into a spiral of depression that it has been suffering since a long time ago.

Clearly, the current situation questions a fiscal pact, which dates back to the late nineteenth century, which favours industrial, commercial and professional occupations, on one hand, and farmers on the other, protecting the incomes of the former (no control) and promoting land taxation of the latter. We should shift the tax burden from wage earners to the various professions, improving tax collection, reducing taxes on consumption, increasing taxes on land ownership and self-employed income, and eliminating the tax loopholes that have been created along with the socio-economic transformation of Greece.

Books and Ideas: nevertheless, how has redistribution of wealth in Greece operated?

Anastassios Anastassiadis: During the twentieth century, the development of philanthropy allowed a certain redistribution of wealth. It is true that it was charitable practices of pre-modern type, which formed part of a new socio-economic context: the integration of the local economy into the world economy as a result of the opportunities offered by trade liberalisation in the eastern Mediterranean. Opportunities that allowed the mixture of fear and envy of trader enrichment and expansion of this new social inequality could result in communities to be exorcised. The Orthodox Church provided this mutation, redefining their concept of the relationship between sin and eternal life in the context of wills and inheritance procedures. Specifically, it introduced the principle of donation to the community, which was established not only in the form of donations to monasteries, as currency for forgiveness of sins, but also for the family, in perpetuity. Thus, the entire community would remember the name of the philanthropist until the judgment day.

From the second half of the nineteenth century onwards, this mechanism of power was transformed to fit a "national" discourse, encompassing the various charitable practices, grouped under the name of philanthropy, which became additional proof of historical continuity of the Greek nation from antiquity (philanthropy was indeed a regular feature of Greek cities from classical and Hellenistic times, much studied since the late nineteenth century to the famous book by Paul Veyne, "Bread and Circus", which appeared in 1976). This also became a mechanism of domination -influenced by the practices and new social realities from the West that was incorporating concepts and issues such as charity, social issues, endangered classes... As has been boldly repeated by many politicians, journalists and intellectuals, trying to conjure the spectre approaching at full speed, the social question did not exist in Greece; the presence of national philanthropists rendered all class struggle useless.

In this situation, the very distant possibility that the State might adopt other solutions appeared. The welfare state and development of public employment during the twentieth century helped ensure both redistribution and ensure the legitimacy of the state. From 1930 to 2000, the Greek state became a true welfare state adopting a full range of distributive and redistributive policies that correspond to a modern state (health, education, pensions, social security). Some of these policies reflected the paternalistic aspect of a typical state of rural societies, which ignored the principle of mutualised security. In any case, the Greek system suffered serious deficits: funding mainly from indirect taxes on consumption; a parcelled practice that allowed certain professional groups to obtain preferential treatment based on their bargaining power and, finally, a use of public employment and benefits substantiated "social criteria" to undertake a low-cost social policy (for example, facilitating access to public jobs for "social reasons" or allowing students who could not access a college in Athens to do so for reasons of "family reconciliation"). This state of affairs made things difficult for public service and it was obvious that the model could not last. It had to be replaced. However, if the only logical proposal given by the European Union is to dismantle the state, we must be ready to pay the tragic consequences (unemployment of those under 25 years is above 50%, suicides have increased by 40% in two years, Crime is rampant and, in parallel, a social response grows unpredictably).

Books and Ideas: With regards to the role of the Orthodox Church in Greek society, with the current difficulties, is it as important as it is sometimes said?

Anastassios Anastassiadis: Having devoted much attention to the Church, I think the issue has become a favourite topic of journalists, both Greeks and foreigners, and also politicians lacking ideas, because this has permitted a progressive discourse to be made effortlessly. The Orthodox Church is important, it is a fact. Politicians know that it is an institution that can serve to win voters, the same as the media or associations of lawyers or doctors.

Does the Orthodox Church a considerable fortune? Probably yes. Can it be calculated? No, certainly not, because we do not have a registry of land ownership or access to their real estate assets. This is a very decentralised institution (we would have to traverse every diocese to get a better idea). A certain number of important properties, in the hands of the ecclesiastical institutions, benefit from an almost foreign status. For example, this is the case of Mount Athos, under the Patriarchate of Constantinople, or properties that depend on the Patriarch of Jerusalem. We are dealing with institutions often linked to scandals, and not those of the Greek Church itself. From this standpoint, the Greek state has little room for manoeuvre. Foreign Orthodox church institutions are matters of international relations, so that the Greek state they cannot take them lightly, on behalf of a progressive secularization. Remember that when the public prosecutor investigated a superior member of a large monastery on Mount Athos involved in a financial scandal, it was Vladimir Putin himself who intervened on his behalf.

The Church of Greece's ownership of land after the nationalization waves of 1830 and the years 1914 to 1929 is now much lower than you might think. It is often the subject of legal disputes with municipalities over their commercialisation. However, I am quite suspicious in this respect because most of the time this discourse, especially when it comes from local powers, conceals a dispute over land, or a willingness to appropriate them for themselves. Many municipalities would like to seize church property, as happened throughout the nineteenth century, when they were responsible for the churches. Given what we know about that epoch and the current situation of municipalities, this must be avoided.

The laws of 1929-1932 concerning the Church should have regulated a series of issues about ownership and financing of ecclesiastical institutions and their staff. The Church should manage their properties and their staff with complete independence, an eventuality that has terrorized politicians since independence, who feared that their influence at a time when state legitimacy was not completely assured. In any case, the Second World War put the Church in a difficult financial situation. From the outset, the State agreed to pay the salaries of Orthodox clergy in exchange for some extra nationalization and a contribution of 25% of annual ecclesiastical revenues, which was raised to 35% in 1968 by the dictatorship, and from 2004 progressively reduced. Actually, these ecclesiastical revenues were systematically undervalued, like any other non-wage income in Greece. However, profitability is quite restricted and is far from the exaggerated sums that sometimes bandied about. In 2003, the best year on record, this contribution gave only ten million Euros to the Greek State. A sum, even considering that the sample calculation was considerably undervalued, is not particularly significant.

This means that the Greek Church suffers from the same ills as the Greek state in terms of insufficient institutionalization, the absence of truly "productive" personal and ineffective management of resources. The crisis is also being an ordeal for it. It has been called to review its mode of operation because, in view of the situation of social disaster prevailing in Greece, the expectations and needs of everyone are enormous. In the first place, raising taxation on real estate would automatically have an impact on its fortune. However, we have to try to prevent a playback of a discourse that tries to hide the face of the real problems of the Greek economy. That is, the structure of the economy and the weak (or artificial) production revenues, and its paradoxical integration into the European economic sphere of these last thirty years.

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