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Euro Optimism Surges, A Greek Tax Revolt Flares Up: It’s Decision Time

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Wolf Richter www.testosteronepit.com

Euro optimism is once again gushing through the system on the hope that the debt crisis could be wished away with a nod by German Chancellor Angela Merkel or with a wink by the Bundesbank in direction of the European Central Bank, which is dying to print unlimited amounts of moolah to buy sovereign bonds—and old bicycles, if it has to—in order to force yields down for debt-sinner countries like the US Spain and Italy.

There is even hope that sudden German “flexibility” might solve the Greek debacle when Prime Minister Antonis Samaras heads to Berlin for his session with Merkel, based on indications in Germany that those with the power to say “no” are getting cold feet. But there was an incident in Greece that they should bear in mind.

It started Friday on the island of Hydra, a tourist spot of 2,700 souls. Officers of the financial police checked taverns, bars, and souvenir shops for tax violations. At a seafood tavern, an inspector discovered that patrons weren’t given Value Added Tax receipts, though required by law. An old trick: cash income remains undeclared and disappears; the VAT, though collected from customers, also disappears rather than being turned over to the state.

To investigate the case, the owner was taken to the police station, where she fainted. So she was taken to the hospital under guard. Her 25-year old son who worked at the tavern and copiously insulted the inspectors was also arrested—the straw that broke the camel’s back. Enraged, people threw rocks and firecrackers at the police station, shut off water and power, and demanded that the guy be released. Others blocked the port to prevent ferries from docking so that police couldn’t transfer him to Athens. Some forced their way onto a ferry and scuffled with the crew.

The next morning, riot police from the mainland made their way through the shouting people to the police station and freed the officers of the financial police holed up in there. The owner’s son was released because he wasn’t the owner; he claimed he’d planned on issuing receipts to his patrons, or whatever. On Sunday, his mother was taken off the island. The tax revolt in Hydra came at an inconvenient time: just before the all-important meeting in Berlin. So the Greek government was quick to condemn the revolt.

But tax fraud is pandemic in Greece. The financial crimes squad (SDOE) announced today that 4,067 taverns, bars, souvenir shops, and the like on 46 islands and in prominent tourist locations on the mainland had been checked between July 6 and August 19; of which 55.7% had committed violations. It’s been getting worse, in tandem with the economy. Last year, violations were found in 53% of the establishments. And there had been other incidents of revolts, writes Angelos Stangos:

On Lemnos in 2009, outraged business owners tried to push a group of tax inspectors into the sea, obviously in an effort to terrorize them into not running another inspection on the island. The practice has manifested itself in a variety of forms over the years, with a rich array of excuses presented as to why certain people should be allowed to get away with not paying taxes.

Tax fraud from the bottom to the top of society is one of the causes of Greece’s financial problems: the money just isn’t coming in. Now, costly promises politicians made to their voters have to be broken. For years, Greeks benefitted from the artificial manna of cheap euro debt and European Union funding, but the system has run into a wall—and Merkel has an opportunity to decide if taxpayers in Germany and other countries (including the US through participation in the IMF) should fork over endless billions to fund benefits, services, and boondoggles that Greeks themselves refuse to pay for.

The other option is default. “A weapon of the weak when they reach the point of not being able to pay their debts,” said Panayiotis Lafazanis, a Greek politician. Closer to the truth than anything else emanating from his wily colleagues in parliament. The government is already selectively defaulting on its obligations, paying only salaries and pensions of civil servants. Other disbursements have been stopped. And nothing works anymore. Read.... The Greek Bailout Sham Is Getting Gummed Up.

So should Greece, as it has been suggested, follow in the footsteps of Argentina, which rose from the ashes after its default? Not so fast. To stave off another collapse, the government in Argentina is imposing ever more trade barriers and capital restrictions. Read.... Argentina’s Creeping State Control, by stilettos-on-the-ground economist Bianca Fernet.

 

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Tue, 08/21/2012 - 22:29 | 2726126 markar
markar's picture

The Greeks are not stupid.. They know the bailout funds they are prostituting themselves for are being given to the banks. They should go beyond tax revolt and overthrow their govt. if the much more oppressive E. bloc countries of Poland and E. Germany could do it, I don't know why the Greeks cant.

Wed, 08/22/2012 - 17:34 | 2728790 Chuck Walla
Chuck Walla's picture

The Greeks are not stupid.. They know the bailout funds they are prostituting themselves for are being given to the banks. They should go beyond tax revolt and overthrow their govt. 

 

But the only government they want is a "Sugar Daddy" government much like any Liberal big city or state.

FORWARD SOVIET!

Tue, 08/21/2012 - 22:36 | 2726140 john39
john39's picture

paying taxes is quite possibly immoral these days.  u.s. taxes support drone murders and other war crimes.  how many countries has the u.s. military been used to destroy for the bankers? a real quandry.  pay for evil or go to jail? isnt freedom great?

Tue, 08/21/2012 - 22:52 | 2726175 worbsid
worbsid's picture

Yes, men and materials used for war are simply gone from the economy.  If those men and monies stayed in the economy, even with the poor VOM, it would still help recovery. 

AF One was here today. I wonder how much the DNC pays to run that horse around the country or is it on the .gov tab?  What an ego trip ... to give encouragement to students to vote for the DEMs.   

Tue, 08/21/2012 - 23:00 | 2726198 john39
john39's picture

that's .gov money.... a lot of it.  all to give the illusion that the office of the president actually has any power...   pure theater.  shadow government in full control here now.

Tue, 08/21/2012 - 22:06 | 2726074 pashley1411
pashley1411's picture

"Tax fraud from the bottom to the top of society is one of the causes of Greece’s financial problems: the money just isn’t coming in."   

No, tax fraud is merely a natural response to government corruption, and is a rational and necessary survival mechanism in response.    When tax money is merely a conduit to paying for new terrace on a political's porch, tax evasion is a imperative.   Who are you defrauding if government spenditures are merely an opaque cash transfer mechanism from the poor sucker taxpayer, to the connected and favored?

Coming to an economy near you.

 

Wed, 08/22/2012 - 08:48 | 2726778 masterinchancery
masterinchancery's picture

Taxes are so high in Greece that if everyone paid them, most would go out of business; Greece is run by a gang of criminals and extortionists.

Wed, 08/22/2012 - 18:26 | 2728897 Freddie
Freddie's picture

Greece is run by a gang of criminals and extortionists.

Sounds like Illinois and Callie-forni-ia.

Wed, 08/22/2012 - 15:42 | 2728493 Zero Govt
Zero Govt's picture

Exactly Gentlemen

i fail to fathom the term tax "cheat" when it's your money the thieves, sorry taxmen, are after and if you're hiding it, you clearly do not believe the Govt has any democratic right to it

Tue, 08/21/2012 - 22:06 | 2726073 pashley1411
pashley1411's picture

"Tax fraud from the bottom to the top of society is one of the causes of Greece’s financial problems: the money just isn’t coming in."   

No, tax fraud is merely a natural response to government corruption, and is a rational and necessary survival mechanism in response.    When tax money is merely a conduit to paying for new terrace on a political's porch, tax evasion is a imperative.   Who are you defrauding if government spenditures are merely an opaque cash transfer mechanism from the poor sucker taxpayer, to the connected and favored?

Coming to an economy near you.

 

Tue, 08/21/2012 - 22:39 | 2726146 worbsid
worbsid's picture

Please delete one of the duplicate posts.  You point is quite true about Greece.  I lived there a number of years ago and it was so true then.  If you wanted to get anything done you had to have some cash under the table or your request just never made it out of the 'IN' basket.  Even simple things like getting a license for your car.  What a lovely country going into the toilet for the banksters.

Wed, 08/22/2012 - 15:37 | 2728469 dogbreath
dogbreath's picture

it sounds like the problem of corruption doesn't mysteriously manifest itself when one gets a government job or is elected.    I bet greek jails are half empty and or have many inmates claiming " I was framed"

Tue, 08/21/2012 - 21:59 | 2726046 philipat
philipat's picture

German taxpayers are now saying "Get a job". That could be directed either to the Greeks or Merkel, depending on how she acts.

Tue, 08/21/2012 - 21:31 | 2725973 Neethgie
Neethgie's picture

the greeks want all the nicities the state provides, but dont want to have to pay for it. Cut the funding then they will have to pay for it, or just have to give it up instead, either way its better than waiting for godot.

Wed, 08/22/2012 - 17:31 | 2728776 Chuck Walla
Chuck Walla's picture

the greeks want all the nicities the state provides, but dont want to have to pay for it. Cut the funding then they will have to pay for it

 

Just like the Liberal Progressives here!

 

FORWARD SOVIET!

Tue, 08/21/2012 - 22:02 | 2726060 Father Lucifer
Father Lucifer's picture

but Godot is coming. isn't He?

Tue, 08/21/2012 - 22:39 | 2726143 philipat
philipat's picture

but Godot is coming. isn't He?

It's about time.

Wed, 08/22/2012 - 00:37 | 2726326 i-dog
i-dog's picture

 

"Argentina, which rose from the ashes after its default? ..... the government in Argentina is imposing ever more"

ANY country that simply reinstates statism and central planning after a default/reset is clinically insane!

Try free enterprise and voluntary association for a change.

Wed, 08/22/2012 - 09:24 | 2726885 g speed
g speed's picture

paying taxes to support a taxing authority is akin to buying a car to go to work to buy a car-- soon it will be apparent to all "gov't is obsolete"

Wed, 08/22/2012 - 19:02 | 2728950 donsluck
donsluck's picture

Obsolete, as are men, but we keep makin' 'em. Government is part of our evolution. Run for office!

Wed, 08/22/2012 - 19:20 | 2728980 nmewn
nmewn's picture

"Obsolete, as are men..."

You do realize women won't have anyone to blame but themselves for leaving the toilet seat up...right?

I'd pay good money to see those catfights but of course I wouldn't be there ;-)

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