EU calls for Greek population to tighten belts to support wealthy Greek tax dodgers
The economist Michael Burke has a post up on Socialist Economic Bulletin, which has been cross-posted on Progressive Economy about the current situation in Greece. The post is a follow on from his previous posts on the topic which I have already linked to. In this piece Michael shows that Greece’s debt crisis has been exacerbated by the ECB’s decision to remove Greek government bonds from the list of assets it would hold at the end of this year while at the same time providing the PASOK government with little room to rectify the years of high tax evasion amongst the wealthiest of Greece and high tax exemption. It is also forced to fully take the blame for the irregular reporting of its deficit level to the EU commission. To further entrench Greece’s problems the aid package that the EU is planning to put together will be based on strict conditions that demand further austerity measures, a move that will worsen their deficit levels. The question is, why does the EU consider that reflationary measures are necessary for France, German, Belgium… but not for Greece? The answer, Michael argues, may lie in Eastern Europe. Well worth a read. I’m adding the opener. You can read the whole thing on Progressive Economy.
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Tactical manoeuvring is continuing among European governments to decide exactly how much of the bill will be picked up by who for the financial debacle in Greece. The one thing they all agree is that Greek workers will not be enjoying a bailout of any kind.
Along with the lowest paid and those dependent on public services, Greek workers will bear the brunt of the ‘adjustment process’, through wage and welfare cuts, pension reductions, an increased retirement age and other austerity measures. The tactical squabbling is that Greece is being pressed by the European Central Bank and leading EU to go even further in the austerity measures it has already announced. At the same time the Greek PASOK government is facing mass demonstrations and strikes, which have encouraged resistance to further austerity measures.
It is noteworthy who will not be targeted. Greece has one of the lowest tax takes in the Euro Area. In the 15 years to 2006, Greek total general government revenues, as a percentage of GDP, were 37.9% compared to an average rate across the Euro Area of 45.3%. This low level of taxation was, in the Greek case, the source of long-standing budget deficits which were hidden from a gullible or complicit EU (or Eurostat) inspectorate over a number of years.
Greek absence of taxation is also a long-standing burden borne by the poor in the country. The Financial Times reports that, according to the official tax returns, there are literally only a handful of Greek citizens who earn more than €1mn per annum registered for tax purposes, and that the Greek shipping magnates and the other rich are registered as ‘non-domiciles’ in Britain, and consequently pay tax nowhere.
Greece is not in the financial firing line because of a particularly severe recession or an especially blighted banking sector. The latest estimates from Eurostat show that Greece’s GDP fell 2% in 2009, but this compares to -4% for the Euro Area and -4.1% for the EU as a whole. This is shown in Figure 1. At the same time, Greece has committed funds to its banking sector equivalent to 11.4% of GDP - far less than the 31.2% EU average (and 232% for Ireland).
Read the rest here.
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