Monday 29 April 2013

Greece austerity

As It Gets Its Latest European Lifeline, Life In Greece Is About To Get Even Harder

28 April, 2013

A few hours ago, Greek lawmakers approved a reform law to unlock about €8.8 billion of rescue loans from the European Union and the International Monetary Fund. The law, which was a condition for further aid installments, passed easily with the solid backing of the three parties comprising Greece's ruling coalition, by 168 to 123 votes. Next, euro zone officials will meet on Monday to approve overdue payment of 2.8 billion euros ($3.65 billion) in rescue loans, finance minister Yannis Stournaras said. Euro zone finmins will then meet on May 13 to release a further 6 billion euro installment, he added. The use of proceeds? To have enough cash to pay salaries and pensions, and of course to pay Mario Draghi for a bond that matures on May 20. The fact that Europe has gotten the green sign to hand over some pocket change to Greece, so Greece can pay for the maturity on Greek bonds by the ECB was the good news (for someone, unclear exactly who). The bad news, for Greece, starts now.

As BBC reports, some 15,000 state workers will lose their jobs by the end of next year. Naturally, in light of the recent epic backlash against austerity (or fauxterity as penned previously) whose corpse has already promptly been trampled in Spain, and now in Italy, Greece would like to get back on the gravy train as well. Yet they are being denied, and the result is indignation at what the people rightfully see as B-class European citizen treatment.

As MPs debated the measures inside parliament, several hundred demonstrators outside took part in a protest called by Adedy, the civil service trade confederation, and the private sector GSEE union.
They were demonstrating against what the unions called "those politicians who are dismantling the public service and destroying the welfare state".
Critics say the law, which is part of a larger package of measures, will only add to Greece's record unemployment rate of 27%.
They say many of those who will lose their jobs are older workers already struggling to support their families and make ends meet.

It's only downhill from there too. As Kathimerini adds the tax burden for all Greeks is about to go through the roof. Literally:

Besides regular income taxes and numerous other obligations being faced by Greek taxpayers, the taxation of real estate property has become the focus of attention after the ministry’s decision to demand the payment of the 2011 and 2012 property tax (FAP) in seven monthly installments this year.
Taxing property is seen as the only safe and efficient way to boost revenues, given that indirect taxation is bringing ever-smaller amounts of money into state coffers due to the drop in consumption. In this context, the fiscal adjustment as far as revenues are concerned this year will rely on taxing property.
The measures of the multi-bill are projected to generate an additional 5.9 billion euros in state revenues for the period from 2013 to 2017. The state stands to gain in excess of 6 billion euros from the measures with the addition of a planned increase in teachers’ working hours that is expected to save 103 million euros from the budget spending of 2013 and 2014.
The settlement of debts to tax authorities is expected to fetch 2.73 billion euros in these five years; the application of the extraordinary special property levy, to be paid again this year through electricity bills, will bring in an estimated 1.9 billion euros; the settlement of debts to the social security funds will result in the collection of 795 million euros in the period from 2013 to 2016 according to labor industry estimates; and the extraordinary levy on photovoltaic systems will add 490 million euros this and next year to state revenues.
The property tax to be paid again via power bills will be broken down in five installments, with the last due in February 2014. Its rate will be 15 percent lower than in the two previous years, as the number of properties to be taxed has grown considerably with the inclusion of properties rented to the state, 17 percent of the surface of camping enterprises and even unfinished buildings that are connected to the power grid.

What this means, logically, is that tax revenues in Greece are about to go inversely parabolic as even more resentment builds against austerity, as increasingly less people pay any taxes, and as more workers migrate to the shadow "cash-based" economy, where no taxes are paid at all.

In fact, that is already starting. As the Greek Finance Ministry reported earlier today, after reporting better than expected tax revenues in January and February (+1.8% and +7.8% above target, respectively), March tax revenues plunged, missing the Troika target by a massive 9.3%. Prepare the negative misses to get worse and worse.

Of course, where things get really funny is that as the Finance Minister (not the one with the Swiss bank account, the current one) reported, should the Greek recession prove to be worse than forecast, no new austerity measures would be imposed.

And just like that, Greek GDP craters by 100% in 5....4...3....

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