1) Greek debt was much worse than hitherto reported
1000 drachma noteThis was so for a number of reasons. The Greek National Statistical Service, which compiled statistics on the performance of the Greek economy, was under direct government control and for years habitually under-reported Greek debt. Furthermore, the Greek government colluded with a number of investment banks, such as Goldman Sachs and JP Morgan Chase, to "hide" Greek debt via a number of complicated cross currency swaps where Greek debts and loans were converted into yen and dollars at fictitious rates of exchange to disguise the true level of government debt. Goldman Sachs alone made on the order of $300 million in these transactions.
Rather than having a budget deficit of circa six per cent (as had been thought) the government's actual deficit was reported to be 13.6 per cent in 2010 and was later adjusted to 15.7 per cent through more detailed analysis by Eurostat. This meant that the actual costs to service Greece's debt were over 2.6 times what had previously been assumed.
2) Tax Evasion
There was tax evasion on massive scales. Data from 2013 show that the government was able to collect less than half the tax revenues owed to it in 2012. This cost the Greek government on the order of $20 billion. Large amounts of untaxed money were squirreled away in Swiss bank accounts by wealthy Greeks and Greek corporations. In 2012 it is estimated that something on the order of 24.3 per cent of the Greek economy took place in the untaxed "black" sector, the highest proportion in the Eurozone. The former Greek finance minister Evangelos Venizelos estimated that there were 15,000 Greek individuals and companies that owed the government on the order of $41 billion in taxes. The Tax Justice Network estimated that there are 10,000 Greek-businesses that keep money offshore to avoid paying taxes.
This was a triple-whammy punch: the level of Greek debt was much (2.6 times) greater than supposed; Greece was collecting far less (approximately 50 per cent) taxes than it was owed, and it was unable to borrow money (or only borrow at extortionate rates) to cover the shortfall.
The Greek social safety net
There is sometimes a misapprehension that the Greek government has squandered its money (and more recently, that of its creditors) creating cushy lives for its citizens who work short hours and benefit from overly generous pensions. In fact, social expenditures in Greece amount to 24.0 per cent of GDP, twelfth amongst OECD countries (see Figure 3; OECD data, 2014). France, Finland, Belgium, Denmark, Italy, Austria, Sweden, Spain, Germany, Portugal, and the Netherlands all spend more [N.B. As an interesting comparison, supposedly generous Canada is 27th amongst OECD countries in terms of social expenditures, investing only 17.0 per cent of GDP.)
Social Expenditures
Furthermore, the Greek labour force is extremely hard working, putting in an average of 2,042 hours annually, the fourth highest amongst OECD countries. Only Mexicans (2,228 hours/year), Costa Ricans (2,216 hours/week), and South Koreans (2,163) work longer hours. [By way of comparison, Canadians work an average of 1,704 hours/year, and Germans work 1,371 hours/year, only 67 per cent that of what Greeks do (OECD data, 2014).]

The Greek pension system that the Syriza government inherited was a jumbled mess with some 130 separate pensions funds making up the national retirement system. People working in certain hazardous professions could retire early and there were various injudicious loopholes and exceptions. Nonetheless, the average age of retirement in Greece (2012 data) was 57.8 years of age compared to the Eurozone average of 59.6 years, only a three per cent difference (see Figure 4). [By way of comparison, the average age of retirement in Germany is 61.1 years and in the U.K. it is 58.3 (Eurostat data, 2015]. Pensions are much more generous (as a percentage of wages earned) in Greece than they are in (say) Germany, however, workers' wages are less and (as per above) Greek workers work on the order of a third more hours over their lifetimes than their German colleagues do. Pensions should reflect how much people have actually laboured during their working lives.
Age of Retirement
Furthermore, in exchange for the bailout packages that Greece received in 2010 and 2012, many pension benefits have been cut back sharply. Retirement age has now been increased from 60 to 67. Greek pensions, which averaged $1,484/month in 2009, have now been cut to $915/month, a 38 per cent reduction. Many of the early-retirement exemptions have been axed and holiday season bonuses have disappeared. As Owen Davis pointed out in Greek Debt Crisis: Greece’s Pension System Was Once A Bloated Mess, Now It’s A Crucial Lifeline For Struggling Families, with unemployment currently at 25.6 per cent, the remnants of these pensions:
"Have become the last social safety net preventing Greek society from completely falling apart. The elderly population is literally feeding the rest of the family." -- Greek Deputy Prime Minister Yannis Dragasakis
Military spending
Crucially, past governments also made enormous financial investments in military hardware, perhaps in part due to Greece's long-standing tense relations with its neighbour, Turkey. Nonetheless, this military profligacy contributed sizably to Greece's problems. Greek military spending accounted for 2.3 per cent of its GDP, the third highest on the world after the U.S. (4.4 per cent) and the U.K. (2.4 per cent) (NATO data, 2013). Since 1974, Greece has spent some $240 billion (USD) on armaments.
Greek military spendingThe main beneficiaries of this spending have been the United States (42.0 per cent), Germany (25.3 per cent), and France (12.8 per cent) (see Figure 5). For Germany, in particular, this market has been vital, Greece being its biggest customer in Europe. Almost 15 per cent of Germany's total arms exports are made to Greece. Since the late 1990's Germany has sold on the order of $60.7 billion in arms to Greece. Greece also accounts for 10 per cent of all French arms sales. Over the years Greece has bought a fleet of four state-of the art submarines (for $7.75 billion; they are still unfinished and have never sailed), hundreds of Leopard tanks, Mirage and F-16 fighter jets, and many other weapons.
Furthermore, as Greek MP Dimitris Papadimoulis has pointed out, "Well after the economic crisis had begun, Germany and France were trying to seal lucrative weapons deals even as they were pushing us to make deep cuts in areas like health."
Such deals have been rife with bribery and corruption. Former defense minister Akis Tsochatzopoulos was convicted of taking an $8.85 million bribe from Ferrostaal, the German company that supplied the scandal-plagued submarines to Greece. The German company Siemens was convicted of bribing Greek cabinet ministers in relation to securing contracts for the 2004 Olympic Games in Athens (see Helena Smith's article German 'hypocrisy' over Greek military spending has critics up in arms in The Guardian for further information).
While successive Greek governments certainly bear responsibility for having engaged in this profligate military spending, much of the money they squandered ended up supporting the arms industries of its Eurozone partners Germany and France, with not a little under-the-table bribery greasing the contractual wheels.

There is no doubt that successive Greek governments bear a substantial share of responsibility for squandering money on needless military purchases, for deliberately hiding the level of government debt, and for fostering and succumbing to various corrupt practices. For decades there has been a lackadaisical approach to tax collection and wealthy professionals, politicians, corporations, and businesses hid money in offshore tax shelters or banks, secure in the knowledge that Ministry of Finance officials would do little to try and collect the amounts owed.

This must change, and indeed has been changing. As part of the structural reforms demanded by the Troika, the personal income tax-free ceiling has dropped; certain tax exemptions have been done away with; the Value-Added Tax (VAT) has increased from 19 per cent to 23 per cent; and social contribution taxes have gone up. In 2012 tax revenues collected by the government increased by 5.8 per cent from the previous year. The Greek police have established a special unit to deal with tax offences and the Greek government is in discussions with the Swiss government with respect to revealing the hidden Greek assets in Swiss bank accounts. More certainly needs to be done.

A share of the responsibility also lies with those 15,000 Greek individuals and companies who have for decades engaged in tax evasion and tax fraud on grand scales.

A further share of the blame must also lie with the various foreign governments and corporations that have profited enormously at the expense of Greece, siphoning off immense profits, paying bribes, corrupting officials, and otherwise enriching themselves. Also in this category are banks that have taken part in what are little more than Ponzi schemes to drain financial and natural resources from Greece. In a really penetrating analysis, Mark Blyth writing in Foreign Affairs (see A Pain in the Athens: Why Greece Isn't to Blame for the Crisis) makes clear that the Greek debt crisis has been largely manufactured to protect, "German banks, but especially the French banks, from debt write-offs." Of the 230 billion that was 'loaned' to Greece in the first two Economic Adjustment Programs, only some $27 billion actually went keep the Greek state running. The remaining 90 per cent effectiveluy bypassed Greece, going instead to bailout wildly over-leaveraged French and German banks hit hard by the 2008-2009 economic crisis. It's a sobering account.

A further share of the blame must also lie with the various foreign governments and corporations that have profited enormously at the expense of Greece, siphoning off immense profits, paying bribes, corrupting officials, and otherwise enriching themselves. Also in this category are banks that have taken part in what are little more than Ponzi schemes to drain financial and natural resources from Greece. In a really penetrating analysis, Mark Blyth writing in Foreign Affairs (see A Pain in the Athens: Why Greece Isn't to Blame for the Crisis) makes clear that the Greek debt crisis has been largely manufactured to protect, "German banks, but especially the French banks, from debt write-offs." Of the 230 billion that was 'loaned' to Greece in the first two Economic Adjustment Programs, only some $27 billion actually went keep the Greek state running. The remaining 90 per cent effectiveluy bypassed Greece, going instead to bailout wildly over-leaveraged French and German banks hit hard by the 2008-2009 economic crisis. It's a sobering account.

It is clear, however, who is not responsible -- the vast majority of the people of Greece. They have not lived profligately. Their social safety net is not excessively generous, and they are not the ones with numbered Swiss bank accounts. Yet, the sins of past governments and of the wealthy and corporations are being squeezed from their ever diminishing -- virtually vanishing -- salaries, pensions, social security, and savings. Millions of ordinary Greek citizens have had their lives turned inside out for the past five years, many reduced to poverty and penury and there is no end in sight. Each bailout promises only more pain and uncertainty.
The current government of Greece led by Syriza (the Coalition of the Radical Left) and Prime Minister Alexis Tsipras, which was elected on January 25, 2015, has only been in power for five months. As a left-wing, social-democratic, anti-capitalist, anti-globalization, eco-socialist coalition (composed of thirteen groups) it is starkly at odds with previous Greek governments and played no role in the policies that brought Greece to this financial brink. Whether one supports Syriza's hardline approach in dealing with the Troika on the sovereign debt crisis, or not; and their occasional brinksmanship with regard to exiting the Euro, or not they have clearly inherited this situation.
To err is human, to forgive, divine
So wrote Alexander Pope. There is a long litany of error that has brought Greece to the state it is in 2015. But the current unending austerity agenda of the Troika acting on behalf of the Eurozone is compounding error into tragedy.

In an open letter to German chancellor Angela Merkel and the Troika, economists Thomas Piketty, Jeffrey Sachs, Heiner Flasbeck, Dani Rodrik, and Simon Wren-Lewis write:
"Together we urge Chancellor Merkel and the Troika to consider a course correction, to avoid further disaster and enable Greece to remain in the Eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.
"In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece."
Further details on Piketty's position and proposals are contained in an interview published in Die Zeit.
In 1953 in London representatives from twenty-two countries -- including Greece -- signed a debt accord cancelling 50 per cent of Germany's debt [DM 13.5 billion of pre-war debt was restructured to DM 7.5 billion; DM 16.2 of post-war debt was restructured to DM 7.0 billion]. It was widely recognized that the German economy had been shattered by the events of World War II and it was incapable of sustaining its debt load. This debt forgiveness played an instrumental role in contributing to the German economic Wirtschaftswunder (or "Miracle on the Rhine&quot of the 1950s and 1960s, allowing the devastated country to rebuild and recover.

I can't get no relief
So sang Bob Dylan. The economic and other circumstances of Germany in 1953 and those of Greece in 2015 are far from identical. However, Piketty et al. are driving at a common point, namely that carte blanche debt forgiveness and stark neoliberal austerity are not the only options. The London Debt Accord was tailored to Germany's situation and debt relief was outcome-contingent, that is to say German debt repayment was linked to future trade surpluses. If trade surpluses failed to materialize then no repayment was required. In other words, creditors had a stake in ensuring that the German economy recovered.

In Thoughts on the Greek referendum and the democracy mismatch in public debt crises, economist and lawyer Anna Gelprin makes a similar point in regard to a way out of the unfolding Greek economic tragedy:

"One way to mitigate the democracy mismatch would be to link debt repayment at the outset to the achievement of agreed policy objectives, so that creditors designing the policies would share some of the risk with the debtor. The debtor would get a modicum of financial relief if its economy fails to recover, though any such relief would be too small to justify sabotaging its own recovery. The amount of outcome-contingent debt can be small because the principal goal of risk-sharing is political accountability for the creditors.
"If a small fraction of their investment were tied to policy success, creditor officials would have to defend their policy advice more vigorously up front to their own stake-holders, and might be less inclined to take policy risks. Requiring creditors to share in the risk of their prescriptions might mean less crisis lending, or less ambitious policy conditions. Either would be welcome. A government that cannot agree on credible policy reform with its creditors should not borrow more; it should restructure sooner. At the other extreme, lighter conditions would reflect creditors’ appreciation for the debtor’s domestic political challenge, so that there is no need for an eleventh-hour referendum."