By Dev Kar, May 11, 2010
Global Financial Integrity Lead Economist Dev Kar Examines the Role of Illicit Financial Flows in the Greek Debt Crisis. IFFs Cost Greece an Estimated US$160 Billion over the Last Decade
Greece has been in the news a lot lately and as we all know, it has not been good news. By all accounts, the austerity measures being imposed on the population as a condition for bailing Greece out of the financial crisis, is severe. As Walter Mead points out in a recent blog, investors are worried that the Greeks may not stand for them. He rightly notes that ordinary Greeks feel that the rich should pay the costs of the economic crisis and not them. They are right. According to an article in the Washington Post (Is austerity a Greek myth? By David Ignatius, May 3, 2010), Prime Minister Papandreou admits that corruption now robs the Greek economy by US$20-30 billion and “graft” (probably meaning bribery and kickbacks) accounts for some 8-12 percent of GDP. If, as I suspect, the Prime Minister is talking of graft and corruption as separate components, the size of Greece’s underground works out to some 18-21 percent of GDP. The result still falls short of the 25-30 percent of GDP estimated by most economists.