Trying to Understand Greece

It's hard to understand why someone would try to pull a foot off the brakes of a car careening towards a cliff.  That's the puzzle facing investors as they get the latest news out of the European Union on Greece's call for a referendum on last week's agreement.  Some people and nations make agreements and then live up to the agreements.  Some don't.  A useful source for understanding Greece, as well as the overall European crisis better, is Michael Lewis' readable and entertaining book Boomerang.   I quote from page 47:

"...in October 2009, the Greek government had estimated its 2009 budget deficit at 3.7 percent.  Two weeks later that number was revised upward, to 12.5 percent, and actually turned out to be nearly 14 percent.  He (talking about Papaconstaninou - the new finance minister) was the man whose job it had been to figure out and explain to the world why, "The second day on the job I had to call a meeting to look at the budget," he says. "I gathered everyone from the general accounting office, and we started, like, this discovery process."  Each day they discovered some incredible omission. A pension debit of a billion dollars every year somehow remained off the government's books, where everyone pretended it did not exist, even though the government paid it; the hole in the pension plan for the self employed was not the 300 million euros they had assumed but 1.1 billion euros, and so on, "At the end of each day I would say, "Okay guys, is this all?"  And they would say, "Yeah". The next morning there would be this little hand rising in the back of the room: "Actually, Minister, there's this other one-hundred-to-two hundred-million-euro gap."

That's the cost side.  Then there's revenue.  Tax collection in Greece would probably make even Grover Norquist take pause.  Lewis talks to a tax collector "...an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year - which meant, because incomes below that amount weren't taxable, that even plastic surgeons making millions a year paid no tax at all."
"If the law was enforced ," the tax collector said, "every doctor in Greece would be in jail."