Last November, when the Greek Supreme Court charged revered Vatopedi Monastery’s Abbot Ephraim and 14 others, including the shipping minister’s wife for forgery, Greece set off en route to become the first developed country to default on International Monetary Fund (IMF) loan repayment. It was evident that Greece would have to endure a compromise with its "sovereignty" to escape a full blown sovereign bankruptcy. And finally, Greece agreed to abide by a series of squeezing and crushing restructuring in governance to get a fresh bailout.
One might ask what this 10th century’s Christian monastery has got to do with the Greek crisis. In fact, Vatopedi is the ground zero of Greek debt tragedy. Abbot Ephraim had done a bizarre deal with the government in 2005. He sold the monastery-controlled Lake Vistonida to the Greek government in lieu of 73 government properties, including the 2004 Athens Olympic gymnastic stadium, and started commercial construction on them. Following the exposure of the scam in 2008, the government fell and corruption of mythical proportions, crony capitalism and official fraud in Greece surfaced.
Technically, Greece looks like a victim of loan defaults arising out of economic slowdown, akin to other beleaguered and bailed out "PIGS" (Portugal, Ireland, Greece, Spain) of the eurozone. But the truth is, while Portugal, Ireland, Spain and Cyprus could manage to come out of stress, gaining back financial credibility, Greece succumbed to debt default. Even India could successfully manage to repay IMF bailout received in 1991 but as the saying goes, "In Greece wise men speak and fools decide". Greece has suffered more owing to invasive governance and political default than a lack of funds.
The decline of Greece began in 2008. After 2010, the European Union (EU) and IMF gave it two packages of $240 billion, out of which a repayment of $1.6 billion was due last fortnight. Greece defaulted on it. With the fresh default, this country of 1.1 million people has descended into a long tunnel of financial difficulties. On Monday, Greece pledged to adhere to harsh austerity in exchange for a third bailout in five years from the EU. Not only this, valuable Greek assets and public utilities and even plots of land on its famed islands are now on a sale to generate proceeds for its debt repayments.
In spite of a dissimilar financial system, the Greek crisis has a lot to edify India. Take the Vatopedi Monastery, which has committed the land scam that pushed Greece’s credibility to the brink. The Holy and Great Monastery of Vatopedi on Mount Athos in northern Greece is the oldest centre of orthodox Christianity since the Byzantine times. Michael Lewis writes in his famous book Boomerang that Abbot Ephraim was so influential that he was trying to establish a real estate fund in collaboration with a banker. He changed the land use of the properties received in lieu of the lake deal with the government. The land use was made commercial so that modern complexes could be built on them. Doesn't the Greek tale of monastery-government nexus look like an umbilical twin of India’s Vadra-Adarsh scam and land scams of various religious trusts?
Greece shows that disaster strikes when governments conceal the truth. To adopt the euro currency, Greece had to accept the tough conditions of controlling deficit and borrowings under the Euro Zone Growth and Stability Pact. The Greek government had done massive data-fudging to conceal expenditure on interest payments, pension, loan waivers and health subsidy. It declared deficit to be under control and raised huge loans from the market. An investigation by the European Commission’s statistics organisation (Eurostat) revealed that in 2009 Greece’s deficit was 12.5 per cent of the GDP, while the government had claimed it was merely 3.7 per cent of the GDP. This was a major blow to the country’s credibility and caused its slide towards a deeper crisis. In India’s data too there are enough statistical manipulations that would make for not one or two Greeces, but tens of them.
In Boomerang, Lewis talks about a construction company which sold several large buildings in Athens and did not pay a single euro in tax while a sum of nearly 15 million-euro was due on it. This firm built dozens of small companies, showed false accounts and expenses, and ultimately got away by paying a paltry 2,000-euro as tax. Although the novel ways of tax evasion in Greece are heard like myths in Europe and America, in India an ordinary tax inspector can narrate several stories like this.
Sovereign defaults are not new to the world. Between 1824 and 2006, the world has witnessed almost 257 such events. It is quite obvious that most of the defaults emanated from the exigencies of war or sudden fluctuations in economic fortunes. But Greece is one of those few cases where bad governance, corruption and lack of transparency pushed a nation to the brink of bankruptcy.
As the Greeks often quip; Greece always makes a history beyond its capacity. It did not disappoint this time too. The Greek default offers complex lessons. Would we like to take down notes?