Finance 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.
Posted in Economy, Greece
Tagged cyclically adjusted deficit, ECB, European Central Bank, European Commission, fiscal multipliers, Greece, Greek bailout, Greek economy, IMF, International Monetary Fund, Olivier Blanchard, Recession, Troika
Despite receiving a bullet in the post and having an MP from the Independent Greeks suggesting it won’t be long before someone shoots him, Finance Minister Yannis Stournaras is more likely to be concerned by this week’s “friendly fire” rather than any other kind.
Unhinged Cretans and boorish opposition MPs are hardly the worst that Stournaras is going to face during his time in the scorching hotseat at the Greek Finance Ministry. Attacks from within are a different matter, though.
A number of New Democracy lawmakers lined up to take pot shots at him over the past few days for a number of reasons, top of which was his decision in recent interviews to discuss the fiscal derailment that took place between 2004 and 2009, when Greece was led by Costas Karamanlis and his conservative government. In doing so, Stournaras has broached a somewhat taboo subject.
“I will show you a chart with annual public spending as a percentage of GDP,” he told Sunday’s Kathimerini in an interview. “From the early 1990s until 2006, when it reached 45.2 percent, there were few fluctuations. Immediately afterwards, in 2007 it rose to 47.6 percent, in 2008 to 50.6 percent and in 2009, it skyrockets to 53.8 percent. The only way I can describe what happened after 2006 is an economic derailment.”
Posted in Economy, Greece, Greek politics
Tagged Costas Karamanlis, Costas Simitis, fiscal derailment, George Papandreou, Greece, Greek bailout, Greek debt, Greek deficit, Greek economy, New Democracy, PASOK
The head of Greece’s statistics agency, Andreas Georgiou, is to face a criminal inquiry. An ex-employee of the Hellenic Statistical Authority (ELSTAT), Zoe Georganta, has accused him of colluding with the European Union’s statistical arm, Eurostat, to inflate Greece’s deficit figure for 2009, thereby justifying Greece’s EU-IMF bailout, signed in May 2010, and its drastic austerity measures. Georgiou vehemently denies the charges.
Financial prosecutors have referred the matter to a special magistrate and the Greek justice system will have to decide on the validity of each side’s arguments.
Beyond the judicial process, some observations about the case are needed as it goes to the very heart of understanding how Greece’s public finances veered dramatically off course and the country turned to the eurozone and International Monetary Fund for emergency loans.
Posted in Economy, European Union, Greece
Tagged Andreas Georgiou, ELSTAT, Eurostat, Greece, Greek bailout, Greek crisis, Greek debt, Greek deficit, Greek economy, Greek GDP, Greek statistics, Ireland, New Democracy, PASOK, Zoe Georganta
For Greece, the underlying theme of this crisis has been swapping one set of uncertainties for another. In fact, sometimes the uncertainties have been exactly the same, simply repackaged and rebranded. From George Papaconstantinou’s “loaded gun on the table,” to the first bailout in May 2010, from the mid-term fiscal plan in the summer of 2011 to the October 27 haircut agreement last year, from the PSI and second bailout early this year to the European assurances ahead of this summer’s elections: each development has promised stability, continued membership of the euro and better days ahead; each has crumbled into an empire of dust.
Now, hopes are being pinned to the Brussels debt deal agreed in the early hours of Tuesday morning. The immense relief at an agreement being reached is both understandable and justified. The prospect of the eurozone and International Monetary Fund failing to find any common ground on how to make Greek debt sustainable would have led to potentially devastating economic and existential implications for the single currency area and Greece. However, as this relief subsides, it becomes more evident that this deal takes a stab at providing a definitive solution to Greece’s debt problem but falls short, leaving the sword of Damocles dangling over the country. Even if the debt reduction program goes according to plan – and there are doubts whether it will, especially due to questions over the bond buyback scheme – Greece will still have to contend with a debt of 124 percent of GDP in 2020. It is also doubtful whether enough has been done to remove the niggling doubts about Greece’s future in the minds of investors, who are so necessary to helping change the course of the Greek economy. JP Morgan referred to the Brussels pact as a moment of “creative ambiguity.”
Posted in Economy, European Union, Greece
Tagged Bond buyback, debt sustainability, euro, eurozone, Greece, Greek bonds, Greek crisis, Greek debt, Greek economy, Growth, IMF, primary deficit, Recession
On October 26, I had the privilege of addressing the Chicago Council on Global Affairs. My subject was the Greek crisis: what else? However, I decided it was an opportunity to go beyond the basic account of the woes in Athens and give an informed and attentive audience greater insight into what led Greece to this point.
Unsurprisingly, when talking about Greece we rarely look beyond the last three years but it is of vital importance that we start to appreciate what happened in the lead-up to the crisis. It is time to assess the economic, political and institutional mistakes that were at the heart of the country’s collapse.
This is a favourite topic of discussion between myself and Yiannis Mouzakis and we hope to soon announce a joint project on exactly this subject.
In the meantime, I hope you have the time to read the speech (it’s rather long) and post your comments. Keep in mind that it is an overview and cannot in any way be considered a comprehensive account – there’s only so much you can fit into 25 minutes. The text contains a few paragraphs, mainly on domestic political issues, that I had to cut out of the speech due to time restrictions.
If it suits you better, there is audio of the event available here, courtesy of the Chicago Council on Global Affairs, who I’d like to thank again.
If you prefer to read the speech yourself, then please do so while adopting the voice of an accomplished public speaker (unlike myself) and perhaps throw in a few humurous anecdotes of your own. I’m thinking Peter Ustinov might be good example to have in mind.
Much as it is an honour for me to be speaking at the Chicago Council on Global Affairs today, I’m fully aware that I’m here because of a word – a Greek word – that carries many negative connotations: crisis.
Over the last three years, you won’t have read a newspaper article, seen a TV report or listened to a radio program that referred to Greece and didn’t use the word “crisis.”
And for good reason too: the problems triggered by the Greek debt crisis have sent the country’s economy into freefall, destabilized its political system and thrown its society into turmoil. Beyond Greek borders, the crisis has threatened to destroy the euro, pull apart the European Union and cause global financial havoc.
Posted in Economy, European Union, Greece, Greek politics
Tagged Austerity, current account, euro, European Union, eurozone, Greece, Greek crisis, Greek economy, Greek politics, International Monetary Fund