Maybe1day

Greece should definitely do what Merkel is asking, ie. reduce their pensions to be exactly like Germany, ie the mínimum Greek pension should be exactly the same as the minimum German pension. After all we are all the same in Europe, there are no 1st class or 2nd class EU citizens. I only mention the mínimum, after all there are some EU countries paying state pensions in excess of 90,000 Euros per month.

Red Eric

Tax legislation changes are to be voted on in parliament on Monday to address some of the injustices in the current system.


I came across this recently - it illustrates some of the sort of absurdities that exist in the current system, introduced since the bailout and under the watchful and approving eye of the Troika. It may help to explain why there are deemed to be so many people owing money to the tax authorities. I understand that Syriza have promised a full rewrite of the entire tax code (but for obvious reasons, can't do that part-way through a tax year nor can they introduce it without the permission of the Troika).


http://www.keeptalkinggreece.com/201...ithout-income/

Garbatellamike

Interesting Eric, thanks for sharing that. One thing is for sure, the tax code needs rewriting from scratch - deemed income what utter bollox!

I am sure a tax code rewrite that seeks to increase tax collection to the point it will fund the Government spending programme will have no problem gaining Troika support in no time at all.

Red Eric

That, I think, will depend on whether the Troika will accept that they can make a better job of collection than their predecessors - and I'm not sure they will. They tend to be keener on hiking existing taxes on those who are already pating them and I think Syriza's argument that taxes are high enough already is falling on deaf ears. But we'll see.


One interesting comment I read from Varoufakis recently - which relates also to the frequent accusations of Greece having a bloated civil service - is that when they took over there were only 100 tax inspectors remaining for all of Greece.

InVinoVeritas

Like a lot of the illustrations Varoufakis likes to use, this one is very selective. The major criticism from the Troika, for at least the last 6 years has been on the inefficiency of the Greek public sector - hence the 1 to 3 rule and then the 1 to 5 rule, only hiring one new 'person for every 5 who leaves. However the inefficiency and clientelism remains unchanged.

So if there are only 100 tax collectors left (which I find difficult to believe), this has to be down to sheer incompetency and lack of political determination on the part of the Greek administration and cannot possibly be blamed on the Troika who do not micro-manage the implementation of the programme (and nor would the Greek government allow them to).

Maybe1day

Deemed income is normal practice in Italy too, Called "Studi del settore". It has no bearing on what you might have earnt especially in times of crisis, It is the minimum that the state reckons you must have earnt, given certain parameters, type of business, Location, sq metres, power consumption and so on....

Red Eric

Well we're back again to what previous administrations have left behind, I'm afraid Vino and you and I probably have different opinions about how that should be dealt with or how much the current government can be held to account for it.


Here is a quote from a very recent interview with Varoufakis
I have no reason to disbelieve him - I presume there are different levels within the tax officer profession and that tax inspector is not the lowest, so he may well be saying that generally staffing levels are low but also that they're extremely low for tax inspectors specifically. Which obviously isn't good when you've got a tax evasion / tax collection problem.

Red Eric

I won't bother going in to lengthy details about how much damage has been done to Portugal's economy over the past few years but that article gives a very false impression.


There are 3 factors which are definitely very helpful to Portugal at the moment - lower oil prices, very low interest rates and a weaker euro - and they are all beyond Portugal's control.


The "early paying off" of the IMF is a misnomer. Far from being paid off, the debt is being transferred to elsewhere at a cheaper rate of interest because the market rate is now below the IMF rate.


It makes perfect sense to do that, of course but the debt remains at the same level, it's just the interest rate that's changing.

InVinoVeritas

Not forgetting, of course, the fact that Portugal can borrow at lower rates is because they now have access to the markets and are attractive to lenders because their finances are under control.

Lower oil prices, interest rates and Euro should also be working in Greece's favour except the whole country is "paused".

Red Eric

Greece's spending before debt repayments is under control. It is the front-loaded debt repayment schedule that is causing the problems right now and the fact that, without an agreement the money required to service that debt in the immediate future has been withheld for almost a year.

InVinoVeritas

It looks like we don't have to wait too long now to see how this resolves itself. I get the impression that Greece wants to default and be allowed to use its own currency, maybe in parallel with the Euro. I do wonder now if this was the Tsipras/Varoufakis intention all along and the theatrics were just make it look like it was an EZ decision and not Syriza's.

Maybe1day

The Euro saved a few countries from everlasting double figure inflation and many in those countries feel that a return to their own currencies would be beneficial for maybe a decade, (they would probably want to rejoin at a later date). In Italy in the 70s, 80s and 90s inflation permitted house ownership on an unprecedented scale resulting in 70% home ownership. Today it is difficult again for first time buyers to get on the ladder. Italy frigged the figures to join the Euro and the right is always pushing for a Euro exodus.

Garbatellamike

Yes agreed. It increasingly looks like, as you have said before, no one wants to be seen to be the one who shot Bambi. Tipsyrash is definitely playing to the hard left audience with his comments on criminal irresponsibility (maybe time for a hard look in the mirror Mr T!) at the expense of negotiations with the Not-Troika.

I tend to think the hypothesis that they want to leave the Euro but also want to blame the lenders for the exit so they are not perceived to have broken their election promise on the Euro looks the most likely one at this time.

Something clearly had to give, given the impossibility of delivering their contradictory election pledges, and this may be the smartest way out of the hole they dug for themselves.

I have to confess to being more than a little cynical that Greece's spending is under control if debt repayments are taken away. I think Varoufakeit is trying to create exactly that illusion but time will tell if this assertion is true (or not).

amideislas

Inflation and currency devaluation has always been a key part of any economy, and explains why every economist is so fearful of deflation.

In the 50's, an Italian carrying 1 million Lira cash in their purse would be highly unusual (except for maybe mafia bosses). I spent some time in Italy in the 90's, and I did have over 1 million Lira in my purse from time to time. And that wasn't all that unusual. Similar comparisons can be made for virtually every currency.

The upside to the Euro (as Maybe1day points out), is that it saved a few countries from "everlasting double figure inflation", but the downside is that it prevented the natural course of inflation and currency devaluation that virtually every economy depends on, resulting in increasing debt and inability to service them. The classic "Euro-imbalance" between divergent economies that the Eurozone has been struggling with since the start of the crisis.

In truth, Greece has comparable debt to all other Eurozone member states. The problem is its ability to service that debt through economic growth, which has been largely stifled by its inability to devalue its currency in line with its economic 'character' and overall GDP.

True, Greece has traditionally acted irresponsibly with respect to its economy, but that can also be said for other member states that spend as though there's no end to the money supply, and in Greece's case, they were completely lax about collecting funds to support their spending.

Then throw in a healthy dose of politics - in this case, far-leftism, which is currently quite attractive to a Greek population that's accustomed to easy-street and a sort of economic "magic" (smoke and mirrors) that has traditionally kept them more prosperous than they otherwise could support...

Still, if Greece could have naturally devalued its currency as it should have done long ago, making it much cheaper to operate and effectively, wiping billions off its debts, then it stood a chance.

But now, it has no choice but to cut all spending to the bare minimum, and that's not ever going to make the Greek population happy, nor prosperous. Besides, the Greeks have been getting a relative free ride for decades, and that's not an easy cultural expectation to change. Pandora is already out of the box.

No matter what, the outcome will never be palatable for Greek voters, and that will only fuel further disparity and distrust of any governmental authority, whatever their political persuasion, making it even more difficult to achieve public cooperation in re-booting themselves.

Me thinks until Greece leaves the Eurozone, this is a never-ending story. The Eurozone is Greece's problem, not the other way around.

bigglesworth

I agree Ami. But the EU will never permit Greece to exit the Euro.
The Commission plays an endless loop of Hotel California throughout their bunkers

"You can check out anytime you like but you can never leave".

"We are all just prisoners here, of our own device"

If Greece leave, that will crystallise the debts (debts used to a large part to repay reckless German and French banks). But the other side of the debts is that they are loans, which will be crystallised on the ECB's books. If they are crystalised at book value, that will raise a large question as to just what the ECBs capital actually is. If they are shown at market value, someone somewhere has to take a large loss.

IMO Greece will be kept hostage in the Euro - pour encourager les autres. They simply cannot be allowed to leave. Just think of the signal it would send to all EU members if Greece actually recovered! Now that really would be the waste of a good crisis, in Commission speak.

"We are all just prisoners here, of our own device"

By the way, nice article in the Guardian yesterday - and how often can one say that!
http://www.theguardian.com/commentis...s-nationalists