Category Archives: Economy

Talking with the taxi driver about economics

taxi_harry“Good evening and thank you in advance for the generous tip you’re going to leave me.” As welcomes from Athenian taxi drivers go, it was a fairly original and disarming one. I’m not a regular cab customer but have used them enough over the last couple of years to see a change in their attitude. Where they were surly, they now seem resigned. Passengers were once taken for granted; now they’re a rarity.

Take a look at any taxi rank and you will see the yellow-colored cars lining up around the block. At Athens International Airport, where I caught my ride, things are even more dramatic. “I waited seven hours in the queue,” the driver tells me.

Greek taxi drivers say their takings have dropped by more than 50 percent since the crisis began. In the meantime, their costs have skyrocketed: The cost of gasoline has risen, as has the consumption tax on fuel, while social security contributions also shot up. A cabbie needs to make about 15 euros a day profit just to pay for his healthcare and pension cover. This is far from a given in Athens and other cities.
Continue reading

Margaret Thatcher: Her Master’s Voice

Illustration by Manos Symeonakis for Cartoon Movement http://www.cartoonmovement.com/p/6035

Illustration by Manos Symeonakis for Cartoon Movement http://www.cartoonmovement.com/p/6035

More than the bouffant hair, the handbags, the power suits and pussybow blouses, it was the voice that lingered.

For anyone growing up in the UK in the Eighties, Margaret Thatcher’s voice was unforgettable. Proceedings in the House of Commons were not televised until 1989 and, until then, TV news had to make to with displaying pictures of Parliament and playing audio of the debates, which often consisted of Thatcher swatting away her opponents with her polished vowels.

That memorable voice, though, was the product of elocution lessons, which were part of a wider effort to make Thatcher more appealing. This was not the only illusion of the Conservative leader’s time in power.

One cannot question that when she became prime minister in 1979, Thatcher took over a country in a steep decline. The economy was tanking, inflation was rising, industrial relations were mired and a general post-colonial malaise had descended over the UK. Getting out of this mess was an immense challenge.

Continue reading

An April Fools economy

clown_390_0204The leaders of Greece’s coalition parties are due to meet on Wednesday, a day before the troika returns to Athens to resume its latest inspection of Greek public finances and check on the progress of structural reforms. Reports indicate that among the subjects which will dominate both Wednesday’s talks and subsequent meetings with officials from the European Commission, European Central Bank and International Monetary Fund are the collection of an emergency property tax and installments for unpaid debts to the state.

The talks will take place in the wake of Eurostat figures showing that Greece, for the first time since the crisis began, has the highest unemployment rate (26.4 percent) in the euro area. At the same time, Greece’s leading economic think-tank, IOBE, warned that the current rate of unemployment in this country is unsustainable and that 60 percent of jobless people had been without work for at least 12 months. Also this week, Markit’s PMI showed that manufacturing in Greece, which accounts for almost 15 percent of the economy, continued to fall in March as it has done since September 2009. Meanwhile, the Finance Ministry has reportedly revised this year’s recession figure to 5 percent of GDP from 4.5 percent.

To say that the talks between Greece and the troika will have a touch of the surreal about them given the mauling that the real economy is suffering is probably an understatement.

Continue reading

Cyprus: The eurozone’s omnishambles moment

Petros Karadjias/AP

Petros Karadjias/AP

At the beginning of last week, Cypriot politicians insisted they would not choose a “suicidal” option for their country. By the end of the week, they picked one that would inflict mortal wounds instead.

Nicosia’s handling of its unprecedented predicament has been cataclysmic. But the approach adopted by the European Union and International Monetary Fund to Cyprus’s problems has also been disastrous. The eurozone has been building up to an omnishambles moment throughout the debt crisis and it finally struck in a small island state in the Eastern Mediterranean.

The agreement arrived at in Brussels early Monday, following hours of talks involving Cypriot officials, eurozone finance ministers and EU and IMF chiefs, is being billed as the least worst option after all sides took successive wrong turns on the way. That may be the case but it will be little consolation to thousands of Cypriots who have lost a big chunk of their deposits and face uncertain times ahead.

Continue reading

Cyprus: It’s not about the numbers

Cyprus Financial CrisisThe Eurogroup agreed on Monday night to allow Cyprus to change the make up of its controversial deposit tax. Instead of imposing a levy of 6.75 percent on savings under 100,000 and 9.9 percent on those above 100,000 – as agreed in Brussels in the early hours of Saturday – Nicosia can play around with the numbers, just as long as it raises the arranged amount of 5.8 billion euros.

Cyprus’s new but already beleaguered President Nicos Anastasiades is proposing that bank customers with deposits under 20,000 euros should not be taxed at all, while keeping the levy the same for the remaining depositors. Cypriot MPs have already shown a reluctance to approve the tax, mindful of the impact on depositors but also the long-term damage it could do to the island’s banking system and economy.

However, what’s happened over the past few days and what’s likely to happen in the days and weeks to come has little to do with numbers. It is much more about perceptions. Even if a financial meltdown is averted in Cyprus this week, the decision to tax depositors there in order to reduce the eurozone and International Monetary Fund contribution to the island’s bailout has sown the seeds for a future eruption.

Continue reading

After Cyprus, eurozone risks transmission failure and running out of road

?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????The Eurogroup’s decision on Friday to impose a one-off tax on depositors in Cyprus may mark a turning point in the euro crisis. Only, the single currency’s decision makers might soon realize that in taking this particular turn, they also ran out of road.

Under pressure from several members of the eurozone – Germany in particular, if reports are accurate – the new Nicosia government agreed that deposits above 100,000 euros would be taxed 9.9 percent and those under 100,000 at a rate of 6.75 percent.

This is an unprecedented decision for a eurozone country. It is also one whose potential consequences reach much further than an island in the eastern Mediterranean. It threatens to cause the transmission system between the economic and financial sectors on one side and the political and social on the other to seize up. Without this, the euro cannot be propelled forward. It cannot function.

Continue reading

Greece and the troika, dancing in the dark

IMFmics_350Finance Minister Yannis Stournaras felt compelled last week to call into a TV news show to deny rumors about imminent property tax hikes for Greeks. He argued there had been a lot of “scaremongering” by the media and politicians relating to the creation of a new property tax, which would unify several levies on real estate that currently exist.

Tax has become an increasingly sensitive issue in Greece. As wages shrink and jobs disappear, nobody is looking forward to the prospect of paying more into public coffers. But anxiety has been spurred by the voting of a new tax bill in January, which increased income and corporate tax and scrapped the tax-free threshold with the aim of raising 2.3 billion euros.

Furthermore, a recent international study by KPMG showed that Greeks pay the second-highest effective income tax and social security contributions at 46.5 percent of their income. Given this burden and the slow progress on ensuring that a sizable minority does not consistently get away without paying its share, it is no surprise that the issue of tax raises hackles in Greece each time it enters the public debate.

Continue reading