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Road to a Grecian turn?

Road to a Grecian turn?

Old Feb 9th 2015, 1:54 pm
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Default Re: Road to a Grecian turn?

Originally Posted by Garbatellamike View Post
In sum,the EU will have to give a little and Syrzia will have to give a lot (their election promises are, after all, barking mad from a wider EU perspective - beware of Greeks bearing gifts )
I'd be interested to know which of the following measures, announced yesterday in the new parliament, is barking mad from an EU perspective

Teneo Intelligence has helpfully rounded up the key commitments, which MPs will vote on tomorrow night:

  • Abolish the single property tax (ENFIA) and replace it with another tax targeting large real estate properties.
  • Re-increase the tax-free threshold to €12k (from its current €5K).
  • Restore the 13th pension for gross monthly pensions below €700 from end 2015.
  • Introduce subsidized meals for families living below the poverty line.
  • Rehire 3,500 civil servants who lost their jobs as a result of the mobility scheme introduced by the previous government in the public sector. However, this number would be subtracted from the 15,000 recruitments scheduled for this year.
  • Raise the monthly minimum wage in the private sector from €586 (or €510 for under-25s) to its 2011 level of €751 by 2016.
  • Restore collective wages bargaining with the advice of the International Labor Organization (ILO).
  • Extend the existing ban on foreclosures of primary residences.
  • Stop new privatizations, but extend concessions when in the national interest.
  • Introduce legislation enabling the Hellenic Financial Stability Fund (HFSF) to exercise its full voting rights with no restrictions in recapitalized banks.
  • Repel legislation providing immunity to the members of the boards of the HFSF, the Hellenic Republic Asset Development Fund (HRADF) and the Bank of Greece.
  • Introduce a new ‘stable, simple and fair’ tax system and fight corruption and tax evasion.
  • Introduce a comprehensive reform of Greece’s public sector.
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Old Feb 9th 2015, 2:12 pm
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Default Re: Road to a Grecian turn?

If history is any guide, any tactic that promises to immediately generate positive tax revenue is what the EU would applaud.

Much of this seems to be suggest more tax spending than tax generation. I don't see all that much that suggests job creation or stimulating economic growth.

Unless you actually have employed tax payers eligible for paying those taxes rather than consuming them, simply raising taxes & closing tax loopholes won't generate much increased tax revenue if there aren't enough eligible tax payers.

It seems to me the best way to sustainably achieve that would be to adopt an economic growth strategy including tax breaks, business incentives, and job creation. More taxpayers = more tax revenue. But that of course, would be considered barking mad by EU standards.
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Old Feb 9th 2015, 2:22 pm
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Default Re: Road to a Grecian turn?

Originally Posted by Red Eric View Post
I'd be interested to know which of the following measures, announced yesterday in the new parliament, is barking mad from an EU perspective
Ok, a good question Eric, let me have a stab! Here are my starters for 10:

These are barking.

Re-increase the tax-free threshold to €12k (from its current €5K).
Restore the 13th pension for gross monthly pensions below €700 from end 2015.
Introduce subsidized meals for families living below the poverty line.
Rehire 3,500 civil servants who lost their jobs as a result of the mobility scheme introduced by the previous government in the public sector. However, this number would be subtracted from the 15,000 recruitments scheduled for this year.
Restore collective wages bargaining with the advice of the International Labor Organization (ILO).
Stop new privatizations, but extend concessions when in the national interest.
Introduce legislation enabling the Hellenic Financial Stability Fund (HFSF) to exercise its full voting rights with no restrictions in recapitalized banks.


And not these, which are entirely sensible:

Extend the existing ban on foreclosures of primary residences.
Repel legislation providing immunity to the members of the boards of the HFSF, the Hellenic Republic Asset Development Fund (HRADF) and the Bank of Greece.
Raise the monthly minimum wage in the private sector from €586 (or €510 for under-25s) to its 2011 level of €751 by 2016.

Then there are these - which are exactly what they need to do before they can start splashing out wads of cash they don't have.

Introduce a new ‘stable, simple and fair’ tax system and fight corruption and tax evasion. (as long as it raises more money to fund the debt)
Introduce a comprehensive reform of Greece’s public sector (i.e. make it affordable).

Imho this one is TBC as it could result in less money being collected:

Abolish the single property tax (ENFIA) and replace it with another tax targeting large real estate properties.



From which I deduce that the Syrzia master plan seems to be we are going back to Pre-bailout levels of spending, we are not going to pay back most of what we already owe you and you have to lend (give) us more money which you will not get back without any conditions being imposed on us.

Therefore, taken on face value the Syriza policies are Dagenham (i.e. 3 stages beyond Barking) and they must be posturing and preparing to compromise - I really hope so.

After the policies you highlight were announced the results were 10 year Greek bonds are now costing them 12% (10 year German bonds by comparison are at 0.34 of 1%). Greek banks stocks are down 20% and the Greek stock exchange is down more than 10%. Greek 3 year bonds are now at 22% and rising i.e. no one will touch them.

Therefore, either there is an outbreak of collective insanity across the World in the bond markets or the announced return to irresponsible borrow and spend policies are scaring the horses. I for one suspect the latter.

Neither the PM or the Fin Min are completely hat stand so I assess they are posturing to try and improve their extremely weak negotiating position. The liklihood of a GREXIT has increased, which will be bad, gusting disasterous, news for the global economy but it may just be a better option than keeping Greece in the Eurozone if these guys aren't posturing and are actually serious.

I sense that Syrzia has one message for the electorate at home, which is being splashed across the media and another hidden (the real) message, which is more sensible and intelligent one to take to the negiotating tables. I am hoping to be right on this as the alternative is too bad to contemplate.
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Old Feb 9th 2015, 2:33 pm
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Default Re: Road to a Grecian turn?

I have only just recieved the alert, but see sufficiently astute reples that there is no need for me to say anything but hear hear to them.
I am not as sanguine as Mike. I fear that the immovable object- Merkel -has met the unstoppable force -Syriza- here, and that Greece is to be sacrificed for greater European objectives - whether that is just the nasty little deal she and Hollande are trying to cobble up with Putin, the breakup of NATO or simply pour encourager les autres.
I believe and have believed for some time that Greece's exit from the Euro is a matter of when and not if. And that tough as the first year or so will be that is in fact Greece's only hope of returning to prosperity.

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Old Feb 9th 2015, 2:35 pm
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Default Re: Road to a Grecian turn?

Originally Posted by amideislas View Post
If history is any guide, any tactic that promises to immediately generate positive tax revenue is what the EU would applaud.

Much of this seems to be suggest more tax spending than tax generation. I don't see all that much that suggests job creation or stimulating economic growth.

Unless you actually have employed tax payers eligible for paying those taxes rather than consuming them, simply raising taxes & closing tax loopholes won't generate much increased tax revenue if there aren't enough eligible tax payers.

It seems to me the best way to sustainably achieve that would be to adopt an economic growth strategy including tax breaks, business incentives, and job creation. More taxpayers = more tax revenue. But that of course, would be considered barking mad by EU standards.

This: +1
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Old Feb 9th 2015, 2:49 pm
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Default Re: Road to a Grecian turn?

Originally Posted by bigglesworth View Post
I fear that the immovable object- Merkel -has met the unstoppable force -Syriza- here, and that Greece is to be sacrificed for greater European objectives - whether that is just the nasty little deal she and Hollande are trying to cobble up with Putin, the breakup of NATO or simply pour encourager les autres.
I believe and have believed for some time that Greece's exit from the Euro is a matter of when and not if. And that tough as the first year or so will be that is in fact Greece's only hope of returning to prosperity.
I fear you are right on this Biggles but I really really really hope we are wrong and that Erik is right...............
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Old Feb 9th 2015, 3:24 pm
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Default Re: Road to a Grecian turn?

So do I Mike, but the law of unintended consequences...
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Old Feb 9th 2015, 3:34 pm
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Default Re: Road to a Grecian turn?

I for one am delighted that the apathy has finally been breached. That alone should be pretty troubling for a status-quo Eurocracy that has historically depended on apathy to sustain its paternalism.

But voter risk aside, there is no substitute for economic growth. Period. If it ain't growin', it's dyin'.

You can argue that Europe is just suffering from a little "flu", but 7 years is a long time to have the flu. And who knows how many years before it was actually diagnosed - in denial (as a matter of record).

I suppose it's only coincidental that both structurally and economically, Europe is unique in all the world. Highest taxes, highest regulatory burdens, most subsidised economy, lowest rated competitiveness, most divergent political and economic structure, along with the world's highest unemployment and the 1st world's longest-endured economic crisis.

Yeah, surely just a cold. A little tax hike here, and a few incremental tax-evasion penalties in hopes of sucking a few more billion out of the economy, and all will be just ducky.

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Old Feb 9th 2015, 3:45 pm
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Default Re: Road to a Grecian turn?

I could not agree more Ami.
I have never understood the insularity of the project. It is not a great step from the rest of the world playing catchup, to them leaving us behind. Which increasingly they are doing.
They are already eating our lunch. Soon it will be our dinner too.
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Old Feb 9th 2015, 4:41 pm
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Default Re: Road to a Grecian turn?

Biggles - you mention "eating our lunch". Well, that's not too far from the truth.

I am particularly amused with the current sensationalism surrounding tax evasion as the source of our problems - as if the oppressive taxation that encourages it is completely irrelevant.

In fact, the very loopholes deliberately created by Europe's ruling elite to facilitate a means of protecting the wealth that pays for our "social democracy" - (including the wealth of the ruling class) from our oppressive tax policies, are precisely that which facilitates all those foreign companies to pay little or no tax (other than the massive amount of VAT collected from the general public on the sale of those products). Effectively, legally eating our lunch.

And especially for some of Europe's finest leadership, the solution of course, is to tax the "wealthy" even further. But naturally, that only applies to those who randomly qualify for whatever they define "wealth" to be - and that would not include the ruling elite, as in the case of the honourable and eminent Mr. Hollande, who apparently also needs those loopholes, along with his other ruling elite cronies:

Wealth tax

And of particular amusement is the latest appointment of a fox to guard the chickens:

Jean-Claude Juncker: I will lead EU campaign against tax avoidance

By the way, I'm not at all rallying in favour of tax evasion. I'm simply rallying in favour of restructuring Europe in a way that it creates an economic growth that serves the population, rather than the current system of systematically burdening the population for the benefit of the ruling elite.

It might be worth a little look across the pond to see how they manage it.

Last edited by amideislas; Feb 9th 2015 at 5:13 pm.
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Old Feb 10th 2015, 8:35 am
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Default Re: Road to a Grecian turn?

Thanks for all the responses - interesting reading. I don't agree with most of it but I'll refrain from letting you know in detail where you're all wrong

Suffice to say that I don't agree that tax systems are there to protect wealth or that, properly designed, they are overburdensome on any one sector of society. The wealthy are plenty good enough at protecting their privilege in many ways, including rallying the less well off to their aid with scaremongering and specious arguments about how they'll all end up paying more for wealth they didn't even know they had or that the reason the rich evade paying tax is that the tax system is too complicated.

I'm slightly puzzled as to the over-spending comments. Apart from a minimal amount of welfare and a few more public servants I didn't see anything on the list that would actually cost the state money.

Mike - a quick review of the items that remain in your doghouse
Re-increase the tax-free threshold to €12k (from its current €5K).
Restore the 13th pension for gross monthly pensions below €700 from end 2015.
Introduce subsidized meals for families living below the poverty line.
Rehire 3,500 civil servants who lost their jobs as a result of the mobility scheme introduced by the previous government in the public sector. However, this number would be subtracted from the 15,000 recruitments scheduled for this year.
Restore collective wages bargaining with the advice of the International Labor Organization (ILO).
Stop new privatizations, but extend concessions when in the national interest.
Introduce legislation enabling the Hellenic Financial Stability Fund (HFSF) to exercise its full voting rights with no restrictions in recapitalized banks.

It does seem sensible to me to try to get more money in the pockets of those who actually need to spend it - that way, even if it's not liable for income tax, the government still gets the sales tax and, equally vital, consumption rises and money circulates rather than everything collapsing because theres no spending, leading to more of the austerity "medicine".

One of the biggest injustices in the bailout countries has been the increase of the burden on the less well-off, who have suffered disproportionately. These are the people who most need protection. Subsidising food for families living below the poverty line seems a very necessary measure to me - people who haven't enough money to support the most basic of human needs should be the very first to qualify for welfare.

It has shocked me over the past few years to realise that in fact there are no limits to how far the bailout crews will push without ever saying "enough". Raising taxation at the same time as cutting low incomes and pensions and shredding welfare provision has had an entirely predictable result. It's appalling but what is worse is that neither the austerity-mongers nor the wider community (and let's not forget, we are supposed to be one, not just a chummy trading bloc) has raised its voice against this.

One last thing - there are a couple of items that stand out on the list for putting a stop to measures that have been totally irrelevant to getting anywhere with clearing the debt. The privatisations and the collective wage bargaining, which were imposed for reasons of pure ideology - quite right to change those, in my opinion. As the Austrian PM said yesterday when he publicly supported Tsipras, fighting corruption and fiscal fraud makes far more sense than cuts and privatisations in the middle of a crisis.


Last edited by Red Eric; Feb 10th 2015 at 8:36 am. Reason: Add clarification.
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Old Feb 10th 2015, 8:50 am
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Default Re: Road to a Grecian turn?

Originally Posted by Garbatellamike View Post
After the policies you highlight were announced the results were 10 year Greek bonds are now costing them 12% (10 year German bonds by comparison are at 0.34 of 1%). Greek banks stocks are down 20% and the Greek stock exchange is down more than 10%. Greek 3 year bonds are now at 22% and rising i.e. no one will touch them.

Therefore, either there is an outbreak of collective insanity across the World in the bond markets or the announced return to irresponsible borrow and spend policies are scaring the horses. I for one suspect the latter.
I know very little about the markets, Mike. All I need to know is summed up in the following quote

Christopher Vecchio,
currency analyst at DailyFX, says it’s "pointless to peg a specific likelihood of a Grexit", but concedes that this "tail-risk scenario is probably "shifting closer to the centre of the bell curve".
Do we really put all our faith in the future of capitalism in the hands of someone who can give that reply to a simple question? Now that's what I call insanity
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Old Feb 10th 2015, 9:31 am
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Default Re: Road to a Grecian turn?

Originally Posted by Red Eric View Post
I know very little about the markets, Mike.
That I regret to tell you is patently obvious Eric my friend.

Of course it is sensible to put money into the pockets of those who need it most but the key question is actually how to do it not whether it is sensible. Go back and read ami's posts on how it might be possible to do this in an intelligent and sustainable way.

Recklessly driving up the costs of your borrowing will reduce the amount of money you can put in the pockets of those who need it most - it is counter-productive in the extreme to what we all see as the compelling need, how difficult is that to understand?

If I may offer a suggestion to help you better understand the concept of insanity?

Insanity is to keep doing the same thing over and over and expecting a different result. Borrowing significantly more than you can afford to repay has always proved to be a disaster as has the imposition of simplistic austerity (i.e. austerity without associated stimuli for real growth).

You, therefore, need to change the paradigm completely and mix finacial responibility with stimuli (again I refer you to ami's earlier post for the things that need to be done) to create real sustainable growth. I am talking about genuine transformation here and not the political posturing currently in progress (btw I define transformation as change at the molecular level not just creating the perception of change, which is what modern politicians default to).

Is borrowing a lot more money to create the short term illusion of growth whilst mortgaging the future of your country to the hilt insane? I tend to think so but you may disagree.

Last edited by Garbatellamike; Feb 10th 2015 at 9:35 am.
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Old Feb 10th 2015, 9:34 am
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Default Re: Road to a Grecian turn?

Originally Posted by Red Eric View Post
Do we really put all our faith in the future of capitalism in the hands of someone who can give that reply to a simple question? Now that's what I call insanity
No for sure we don't. He is a pompous bufoon like most narrative economists regardless of their political leaning.
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Old Feb 10th 2015, 1:26 pm
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Default Re: Road to a Grecian turn?

I'll say this, Eric,

If you believe for one minute, that the numerous tax havens and tax-favouritism Europe provides to it's elite wealth-generators, long supported by European governments (and demonstrably well-patronised by European leadership and bureaucrats as well), are somehow just an innocent oversight, then I have a miracle potion to sell you.

Our tax policies are heavily targeted at the general population, not the elite. Tax havens and elitist tax policies have traditionally supported the wealth that drives our economy, because if we penalised wealth to the degree we'd collectively rally in favor of, it would simply vanish like a fart in the wind. And just look around you to see testament that wealth is slowly, but surely leaving our little utopia, a paltry few million at a time.

Do you really believe that we'd even need to impose the world's highest VAT - a burden primarily suffered by the average population, not the wealthy - if we could actually get away with taxing all Europe's wealth to the 50%-70% levels our tax policies call for? I suspect that may explain much about how so much of Europe's wealth is "stealth". We do have some of the world's largest stealth economies, after all.

Again, look around - if anyone suffers, it's inevitably the average punter. In it's paternalism, our social democracy quite obviously views the population as its subservient, not as subservient to the population, as it's democratically obliged to be.

If it were truly acting in the best interests of the population, the European economic crisis would have been addressed through a policy of growth, rather than austerity. The elite have suffered little in all of this. The population, on the other hand, has been saddled with almost the entire burden. And that includes any moderate wealth that doesn't qualify as Europe's "elite".

But they've pushed that a bit too far now, and the political consequences are starting to come to pass.

As it so happens, a number of key outsiders as well as a few others not belonging to Europe's elite, have also discovered, and cleverly taken advantage of those legal loopholes. I seriously doubt "tax havens" would now be the 24 hour top news story if they hadn't.

Oops. What now, boss?
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