It's been a while since the Syntagma square riotcam was broadcasting live from Athens. After all, despite the ongoing collapse in its economy, where only 3.7 million people have jobs [8]compared to 4.7 million who are unemployed or inactive, the general sentiment was that "austerity" measures have been put on hiatus, and no more tax, pension, or benefits cuts are on the table. That changed last night when Greece was the latest country to become the US, following a tax hike on its highest earners. However, unlike the US, this increase in "rich" taxes is being offset by at least some spending cuts such as tighter control of the budgets of ministries and state utilities, and the reduction of parliamentary employees’ wages in line with cuts to the wages of other civil servants. In other words, it is almost time for the Syntagma square daily pay-per-view daily webcast. The good news, at least for Greece, is that it does not have a debt ceiling to worry about. Then again, when all your debt is zero coupon perpetuals in the hands of the ECB and other "official" institutions, the balance sheet is the last thing you have to worry about. It's the income statement, one where not even all the one-time charges or loan loss reserve releases in the world will do any difference, that suddenly matters far more.
From the NYT [9]:
Greek lawmakers voted late Friday to increase taxes on middle- to high-income earners, self-employed professionals and businesses despite vehement objections by the political opposition and several ruling coalition deputies who said austerity-weary citizens should not be subjected to further pain.
The change to the tax code, one of a long line of pledges Greece has made to international creditors in exchange for continued bailout money, passed comfortably with at least 162 of the ruling coalition’s 163 members backing the articles in a roll call that came after two days of heated debate in the 300-seat Parliament.
Defending the bill in Parliament, Finance Minister Yannis Stournaras called it “a vital fiscal reform” that would avert additional across-the-board cuts to workers and pensioners.
“Every euro collected in tax revenue is one euro saved from salaries, pensions and social benefits,” he said. He rejected a flurry of amendments from members of two junior parties in the coalition and the opposition, noting that such costly changes would throw Greece off the path to economic health and put further bailout money in jeopardy.
Calling Mr. Stournaras a “political terrorist,” Panagiotis Lafazanis, a lawmaker of the leftist party Syriza, which opposes the terms of Greece’s bailouts, said the tax bill was “the nail in the coffin of social justice,” adding that “Greek society is more important” than its creditors.
Of course, Greece does have one teeny, tiny problem:
Greece’s failure to crack down on widespread tax evasion came into sharp focus over the holidays after prosecutors revealed that the names of three relatives of the former finance minister George Papaconstantinou had been removed from a list of some 2,000 wealthy Greeks with Swiss bank accounts. Parliament is to vote next Thursday on whether Mr. Papaconstantinou, and his successor as finance minister, Evangelos Venizelos, who leads the coalition’s Socialist party, will face a parliamentary inquiry on whether they should be indicted on charges of criminal tampering and breach of duty.
So yes, voting through tax hikes is one thing. Actually collecting the new taxes, when not even the old tax code was being observed by anyone and certainly not the rich, is a different problem. Which means even more tax evasion, even more offshore accounts (only not in Zurich this time, but in Singapore), even more tarps of swimming pools to cover them from satellite photos of "villas of the rich and infamous", even greater deficits, even greater deficits, until the ongoing surge in bad loans [10]once again topples the local banking sector which like a habituated drug addict demands for yet another round of bailouts.
The best news, however, is for Vladimir Putin who is about to see yet another surge in applicants for Russian passports, which as we observed previously [11]have become the new Swiss bank account.