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Greece Is Giving The European Union ‘The Finger’ – And Europe Can’t React
Greece surprised the international community earlier this week after Prime Minister Samaras has announced he is considering to lower the income tax and corporate tax in Greece, and that he’s looking to get the European troika to sign off on his plans. According to press agency Reuters, Samaras said in his annual speech in the parliament that it’s ‘time for Greece to stand on its own feet again’.
So what is Samaras actually proposing to do? The Prime Minister has announced a plan whereby the corporate tax rate would be gradually reduced from the current 26% to just 16%, and that the top tax bracket would see a substantial reduction in personal income tax. Samaras clearly said the wants to reduce the highest personal income tax rate from 42% to 32%. Additionally, a certain property tax would also be reduced.
It’s remarkable that the Prime Minister is already publicly stating he wants to reduce the income taxes, even though the current quarter will be just the first quarter of economic growth in not less than six years time. This might be hubris (which is a Greek word after all), as it’s extremely risky to immediately think that all the problems are behind his back. After all, one quarter of economic growth doesn’t mean that Greece has found the path to a sustainable recovery. We would dare to say this economic improvement is still very fragile, and even though the economy must indeed be stimulated, the Greek politicians need to be careful they don’t act too fast on preliminary indications.
What would the impact be of a lower tax rate? Most importantly, the households and companies would get additional breathing room, as a lower tax rate should increase the disposable income which will be used to increase the consumption numbers. However, the main problem in Greece is its underground economy, and a lower overall tax rate might not be sufficient to legalize this informal economy. Samaras didn’t talk about additional plans to tackle undeclared gainful employment. In our view, a reduced personal income tax rate could only work if the government steps up its efforts to decrease the informal employment contracts. If Athens would neglect to do this, its tax revenues would decline, and none of the informal economy would be formalized. So the reduction in tax revenues should be compensated by an increased supervision and frontal attack on the informal economy.
Another reason why we think this easement is coming too early is because the country hasn’t met the ‘primary surplus’ target of 4.5% which was required by the European governing bodies. Rating bureau S&P estimates the average primary surplus over the next three years to be just 2%, which is less than half of what the Troika demanded. By daring to propose a substantial tax cut after just one quarter of economic growth (after 25 quarters of a contracting economy) and by meeting less than half of the Troika’s requirements regarding the primary surplus, Greece is essentially giving Europe ‘the finger’ after the community bailed the country out for a total amount far in excess of 200 billion euro’s. Additionally, by lowering the corporate tax rate to just 15%, Greece might seduce companies to relocate to Greece, thereby reducing the tax revenues from other member states which helped to bail Greece out.
The Greek 10 year government bond yield; Source:Bloomberg
One would expect the Troika to react aggressively to this Greek idea and to outright reject any plans to reduce the taxes, but the truth is that the hands of the Troika are tied and it has no other possibility than to accept these measures. Prime Minister Samaras just HAD to propose these very populist measures as it is feeling the breath of the left-wing anti-austerity Syriza party in Greece (hence the one liner ‘the over-taxation has to end’. The only reaction to muzzle an anti-austerity party is to soften the impact of the rules and nothing works better than lowering (or at least pretend you’ll lower) the tax rates. And that’s also the reason why the Troika is with its back against the wall. Theoretically, it should refuse Samaras’ request because the requirements of a very decent primary surplus have not been met at all and that a sustainable recovery hasn’t been achieved yet.
But the Troika is smarter than that and has found a very cooperative partner in Antonis Samaras. If the government would stand its ground and not reduce the tax rates it would be very likely that Samaras would be voted out of office and the anti-Europe and leftist party Syriza would take the reins. As this euro-sceptic party would most definitely not want to cooperate with the troika, it has no other option than to agree with a lower tax pressure, even though the situation is very fragile.
This reads like the average telenovela, and instead of the Troika commanding the Greeks, it’s now the other way around. And the worst thing is, Prime Minister Samaras isn’t even proposing the tax cuts because it’s in the best interest of the nation and the common Greek citizen. No, the planned cuts are nothing else but basic self-preservation to keep him and his party in the saddle. One has to wonder if the Troika is indeed immune for political games.
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Who wrote this tripe. Sprott Money? I expect better from those people.
"even though the current quarter will be just the first quarter of economic growth in not less than six years time."
There's no growth! It's phoney accounting. All smoke and mirrors.
This is just political rhetorics. Samaras' party is behind in the polls and Syriza came up with a plan that would appeal to people so he had to react.
''So the reduction in tax revenues should be compensated by an increased supervision and frontal attack on the informal economy.''
Said like a true centralist meddling parasite
the 'informal economy' (black market) being the free (from Govt laws and money skimming) market and the only market that works
it's only been minutes from everything Govt regulated going down the sewer... this journalist wants Govt back in to try to wreck the last bastion of freedom and only thing that works in Greece.. what a tool
Surely the lesson super loud and crystal clear is tell the State to F' OFF
Greece is not giving the finger to the Troika. The present government is simply begging for some sympathy & understanding from them cause otherwise they are done.
What does Mr. Panos think ????.......I miss that guy ...lol
I think Victoria Nuland said it best.
The truth is also that overdue payments from citizens and businesses to the government (from various forms of taxes) are increasing by 1-2 Billion EUR per MONTH!!! Essentially we are increasingly NOT PAYING taxes as most simply can't. Those who can pay BTW have found their ways to legally avoid taxes altogether, as happens all over the world. Reducing the tax burden would not do much good, since we already owe too much to our beloved state.
The Troika has even admitted on multiple occasions that the policies followed to restructure Greece have failed miserably. This has led to a bidding war between the political leaders about who can provide the best central economic planning ever imagined.
After getting personally disillusioned back in 2011 (in which ZeroHedge played a big part) I still have a hope that people will realize that the problems caused by letting the government have so much control over our lives cannot be solved by more governement control and regulations. But I feel that we will have to go through a lot more of central planning mistakes and failures before this is "more obvious than the sun" as an ancient Greek saying goes.
Yup. These criminal facists come up with all these cute names like czars and troikas. Police state buzz words to mock the citizens. F these criminals. Almost every country is all the same. The people are generally good and decent but are controlled by these criminal "leaders."
many can't, and many... won't, if not forced to, in my experience in your beautiful country
if the Greek parliament would pick you to lead a government, how would you tackle the situation? not that I would have an easy answer, and my "natural" inkling would be to tax only undeniable assets, like land, and build from there
but I'm optimistic, the 2014 sommer season was exceptionally good for tourism in Greece, I read
Thanks for the prompt Ghordius. I have struggled to find an answer that does not include a complete tear down of the state (and the subsequent life losses that would ensue) and the closest I've come to is this:
Local governments (municipalities) and communities are much more able to handle many of the services that the state today provides centrally, such as education, healthcare, law enforcement, and several other things. We're talking about small communities (averaging 35.000 people each across the country) which could have more willing taxpayers, that is if the funds were directed locally instead of paying some unseen, distant Greek governemnt.
People know each other much better in our local communities, and it's not that easy to hide wealth (assets or cash) and thus the social "enforcement" could be much more effective than the central state in collecting fair taxation.
Further, any corruption would naturally be downsized to fit the budget. Lobbying and bribes at the top is much less expensive than having to do the same thing for 350 authorities.
And something else which you won't see mentioned in any economic discussion: What about the pride of the people about their homeland? It used to be a major social factor until we gave it up to join the big cities (where the money circulated from) and now the majoriy feels lost in the sense that we do not feel the country or our place of residence as our own. Getting back to those old feelings and sentiments (I admit it might never happen) could boost people's morale to the point where they could be more enterpreneurial, efficient, innovative and productive with their life so that we can actually crawl out of this whole mess.
I know it's orders of magnitude more complicated than this, but that's my take.
whats with the swaz sticka? Tired of anti-Semitic bullshit
fuck off you hasbara troll, we're stick of you lot stealing from us through your banks and destroying our countries, ie aipac in the us and the likes of barbara spectar in europe.
in addition you lying kike scum most of you are not semetic, you are ashkansi orginally from Ukraine a country which you lot are destroying and killing thousands of 'goyim' in, also the real semetics are the arabs such as the Palestinians which you lot are slaughtering, there was no 'holocaust' in ww2 but there is in Gaza, so its you ashkansis you are the anti semities.
"there was no 'holocaust' in ww2"
Too stOOpid for words !
The swastika is actually an ancient symbol, but its origin is hard to define.
In "The Swastika," Folklore, Vol. 55, No. 4 (Dec., 1944), pp. 167-168, W. G. V. Balchin says the word swastika is of Sanskrit origin and the symbol is one of good luck or a charm or a religious symbol (the last, among the Jains and Buddhists) that goes back to at least the Bronze Age. It appears in various parts of the ancient and modern world. This article mentions Christians did, indeed, consider the swastika for their symbol.
Also native American Indians
In Buddhist usage the swastika is both clockwise and anti-clockwise.
The sheeple are slowly comming out of their slumber and seeing the truth.
"Samaras didn’t talk about additional plans to tackle undeclared gainful employment. In our view, a reduced personal income tax rate could only work if the government steps up its efforts to decrease the informal employment contracts."
People who are of the opinion that taxation is theft only pay taxes when the tax is low enough to justify not expending the effort needed to avoid them. Many people who pay lip service to the "fairness" of taxation evade it if the risk of doing so is in line with their personal tolerance for risk. If the risk of evasion is too high they shrink their lifestyle, do with less, work less, and inadvertently play a role in crippling economic activity.The Greeks have a high tolerance for tax evading risk cause they know governments are chronically full of shit. Which rational person wants to work harder to feed an insatiable parasite when they can find a way to live a better life without hurting anyone (except the free shit army) while doing fewer hours of work to do so?
In my view sprout money can keep his views on this issue.
"...instead of the Troika commanding the Greeks, it’s now the other way around"
of course. who is the Troika? This Russian word means a three-horse carriage: the IMF, the EU and the ECB
what is Greece? a sovereign country. member of the IMF, member of the EU and member of the ECB, three clubs of sovereigns
so who is the boss and who is the servant? of course Greece has to be the boss in this relationship. one hopes it's a responsible boss, and takes advantage of the three-horse carriage to get Greece out of this mess, yet nevertheless the whole concept of the Troika "commanding the Greeks" was always just a piece of propaganda. sometimes I have the impression that the very word sovereign is often used by financial journalists without being really understood
Greece has an elected Parliament, and makes it's own laws, including it's own taxes. all the representatives from the Troika can do is advice, help or go home
Ghordius, that is bullshit. We had the Troika here in Ireland and they dictacted uncompromisingly to our Occupation Government, who fell on their knees to their Troika masters. Whatever the Troika demanded, they got. They paraded from the Shelbourne Hotel to Govt Buildings every day, flanked by the media, who hung on their every word.
As for sovereignty? Are you really that innocent? The reality is, at least for the smaller countries in the EUSSR, is that our sovereignty was ceded long since to Brussels. National Governments are more like local councils now.
The tax rate doesn't matter. It's the regulations and bullshit that impair business. Even if the tax rate were 0, Greece would still be a disaster. Italy too. And France. Imagine France had no corporate tax. Would you want to build a factory in France? I wouldn't. The workers would strike, kidnap my managers, and try to extort money every way possible. I would rather build a factory in a place that has no bullshit even if it means paying 20%-30% tax on net income.
EUSSR regulations. Probably hundredds of thousands of pages at this point. Greece, Italy, france Portugal et al need to leave the EU and Euro.
If you were a corporation, would you relocate to Greece?
Sure there are plenty of people that are out of work that would be willing to take job hammering out 15-20 hours a week.