While European banks may or may not succeed in delaying the inevitable unwind of the Eurozone by a month or two, the European credit catastrophe is taking on a grotesque form, first in Greece, where following news that the budget deficit will soar past an unprecedented 10% of GDP, the Greek government has halted virtually all cash outflows. Ekathimerini reports that "The government has decided to stop tax returns and other obligation payments to enterprises, salary workers and pensioners." In other words, the entire government has now virtually halted one half of its operations - the outlays - as the country reverts even more to its status as European bank debt slave, in perpetuity, or until the country breaks away from the Eurozone and reinstitutes the Drachma (which as Zero Hedge pointed out first in August, continues to trade When Issued at various desks) whichever comes first.
The Finance Ministry is desperately seeking ways to contain the fiscal deficit that has swollen due to additional grants to social security funds totaling 0.5-0.9 percent of GDP and due to the lagging of public revenues in the year’s first 11 months.
Finance Minister Evangelos Venizelos and his alternate, Filippos Sachinidis, met on Monday with the other high-level ministry officials and agreed to issue an order to the country’s tax authorities to immediately stop paying tax returns to taxpayers, companies and state suppliers.
They also decided to promote a new regulation at the start of 2012 allowing for old debts to be paid in 60 installments, at a minimum sum of 300 euros each, in an effort to bring more revenues into the state coffers.
Provisional figures for the first 10 days of December showed that public revenues remained at low levels, although a pleasant surprise came in the form of the special property tax paid through electricity bills. This revenue has exceeded expectations, although a share of that will have to be returned owing to errors made in calculating the tax for certain property owners.
As a result we are about to get, you guessed it, another downward growth revision. We have lost count how many there have been in the past year alone.
Under these circumstances, state revenues are expected to lag the revised target for 2011 by a considerable 1.5 billion euros at least, while the excess on the expenditure side will be calculated after the amount granted to the social security funds is established.
In conclusion, even Greece now admits terminal failure:
The only way to reduce the damage done to the 2011 budget by insufficient revenues is through further cuts to the Public Investment Program, but even then the deficit will be impossible to bring below 10 percent of GDP.
Sachinidis admitted in Parliament yesterday that both the government and its creditors have failed in their estimates for Greece’s macroeconomics this year, saying that this was also down to the financial program followed.
And while the next depoit update from the Bank of Greece will confirm the domestic bank run is soaring, and the country's financial system is a hollow shell, none of this matters any more: Greece is now officially bankrupt in all but name. At this point the best the banking cartel is to hope to bleed the country dry for a few more months before the people finally revolt at which point all bets are off.
Now, before we forget, there is this one other country that runs 10% deficits of GDP... Oh no, we just forgot who it was... Whoever could it be?