How Debt-Ravaged Greece Aced a Financial-Literacy Survey

In a poll, Greeks tested highest in all of Europe for mastery of personal financial issues. Here's what this impossible finding means

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Greece is in such financial turmoil that its people are rioting in the streets, and the country risks being tossed from Europe’s Economic and Monetary Union. Yet in a recent personal-finance-literacy assessment, the Greek people were found to be the most savvy in all of Europe.

This seemingly impossible finding comes from ING Investment Management, which polled 5,500 adults in 11 nations and found that Greek retail investors scored the highest marks. The poll asked 13 questions about retirement savings, mortgages, credit cards, savings accounts and the stock market.

The Greeks, a people long dependent on state entitlements but now experiencing massive pension-and-salary cuts, have had virtually no grounding in personal finance. In interviews with Athens bankers this fall, the only shred of financial education I could uncover was the recent opening of the National Museum of Economic History. I wrote at the time:

Amid this upheaval, there’s been little effort to join the global financial-literacy movement. The private-banking industry sponsors a Junior Achievement program geared toward high school students. But there’s been little penetration. In many schools, the teachers are so disgusted with bankers that they won’t let volunteers visit their classrooms. Meanwhile, the government is preoccupied with recapitalizing its banks and saving the economy. It’s done almost nothing on the financial-education front.

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How can the Greeks ace a financial-literacy test? The answer is they can’t; they just did better than everyone else. On average, Europeans answered correctly on 6.2 of the 13 questions, down from 6.8 in the same survey two years earlier. These results are in line with dismal financial-literacy scores in the U.S.

In the ING survey, 24% of Greeks were found to have good or excellent command of personal financial issues, followed by:

  • U.K., 22%
  • Netherlands, 22%
  • Hungary, 15%
  • Czech Republic, 14%
  • Romania, 12%
  • Bulgaria, 12%
  • Poland, 11%
  • Slovakia, 9%
  • Spain, 9%
  • Turkey, 7%

While in Europe, I also interviewed Spanish bankers about their nation’s financial-education efforts, which are considerable. Yet Spain polled second to last. As I wrote in the fall:

Spain is one of 36 countries with a formal strategy for raising the financial IQ of its citizens, having adopted its first plan in 2008. The program has roots in the aftermath of the Internet bubble in 2002, when educating investors about things like risk and diversification was the mission. The housing collapse, which was every bit as devastating as the one in the U.S., broadened the focus to mortgages and all sorts of ‘family debt.’ Now, with austerity measures tied to the euro crisis, Spain has a well-rounded personal-finance-education program that includes budgeting, saving, retirement-planning and general consumer banking.

What does all this tell us? Financial literacy is a global concern, and we have not yet figured out how to get ordinary people the financial know-how they need to manage their lives. Spain has a vibrant program but tests at the bottom while Greece has no program and tests at the top. Meanwhile, all scores are low.

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In the wake of the financial crisis, academics and policymakers around the world are researching ways to make regular folks smarter about late fees, interest expense, compound growth and the like. Some have thrown up their arms and declared it’s impossible — that regular folks will never get it. They prefer to push for more government safeguards instead. But that’s not a long-term solution. We need to figure out how to make math and money interesting to kids, so they grow up knowing how to make smart money decisions.

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AdamSmith1
AdamSmith1

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DanAllen
DanAllen

"The Greeks, a people long dependent on state entitlements but nowexperiencing massive pension-and-salary cuts, have had virtually nogrounding in personal finance"

According to the OECD, the number of Greek public employees in 2008 (750k per 11 million of population or 5 million workers) was lower than the rest of Europe and in line with the USA. Greek tax revenues were 40% of GDP for over a decade, again in line with Europe and higher than the USA's (despite tax evasion). Greek public worker salaries (in the teens) were still at the lower end in Europe and lower than the USA's.

Greek public workers may be totally inept, yet to say that the country largely survived off that money is nonsense. The debt was built through vendor-financing schemes with huge bribes going to politicians. 150 billion of it over a decade can be traced to military weapons procurement alone.

EdRector
EdRector

What does personal financial literacy have to do with the macroeconomics of a single-currency economic union??

bojimbo26
bojimbo26

If the Greek government was to put the money from their Swiss bank accounts back into circulation ........... .