Γράφει ο Άγης Βερούτης
(Για τους αναγνώστες από το εξωτερικό που δεν γνωρίζουν καλά την Ελληνική γλώσσα )
Main issues for Greece to remain within the Euro until year’s end
Greece
has implemented the agreed Austerity program to a certain extent, and
the Greek people voted its continuation, despite the fact that it has
almost no growth prospects, and through the economic experiment of
“internal devaluation” (with horizontal “cuts” and overtaxation), it is
killing the economy, which already is at 20% of GDP below 2009 levels.
It is imperative that Greece receives “breathing space” so as to implement the required reforms within an environment of economic growth, rather than in an shrinking economy. If that is not understood, there will certainly be a humanitarian crisis before year-end, and public unrest which will ensue will potentially destabilize the whole Southeastern Europe, and Eastern Mediterranean areas.
1. Liquidity crunch -
Problem statement: There is no time for delays. The economy is left w/o oxygen. In the past 100 days Greek economy has been living with pre-existing cash. The 30% drop in Tax Revenue reflects the fact that businesses and individuals are fast running out of cash.
It is imperative that Greece receives “breathing space” so as to implement the required reforms within an environment of economic growth, rather than in an shrinking economy. If that is not understood, there will certainly be a humanitarian crisis before year-end, and public unrest which will ensue will potentially destabilize the whole Southeastern Europe, and Eastern Mediterranean areas.
1. Liquidity crunch -
Problem statement: There is no time for delays. The economy is left w/o oxygen. In the past 100 days Greek economy has been living with pre-existing cash. The 30% drop in Tax Revenue reflects the fact that businesses and individuals are fast running out of cash.
Current
business loans credit-approval rates for Greek businesses are below
25% w/ real estate collateral of at least 120% coverage. Additionally
interest rates are >10% p.a. in Euro currency. Amidst the internal
devaluation taking place in the Greek economy, it is likely, for
example, that a business will borrow today €1MM to buy assets that will
be devalued to €700K within 3 years, while paying back >€1.3MM in
three years. The proposition is unworkable.
Basically,
it is impossible to finance today a legitimate new business in Greece,
and have a return on capital employed sufficient to pay back the
business loan. At the same time, consumer credit is all but stopped,
with credit-approval rates below 15% of credit applications, which have
gone down significantly due to low approval rates. It’s another vicious
cycle fueled by the “internal devaluation experiment” being attempted
in Greece. The same numbers in the German economy are 90% credit
approval, at 2.8% interest rate p.a.
To
add insult to injury, tax rates of both direct and indirect taxation
have increased exponentially, with VAT increased from 18% to 23% (28%
increase) in the course of the depression, and fuel taxes now amounting
up to 56% of fuel prices, while direct taxation of 45% of profits make
any and all business investments unattractive.
One
plan being discussed by Troika is putting €6 Bio in the economy, by
paying down debt of Greek state to private companies. This will
certainly not be enough.
Withholding
VAT by the Greek tax authorities is bringing down otherwise healthy
businesses, and multiple overtaxation exceeds economic entities’
capacity to pay tax. At the same time, overspending, overstaffing,
bureaucratic obstacles, and corruption stifle any attempt of private
enterprises to generate wealth.
2. Unemployment -
Problem statement: Currently there are 1,3MM unemployed registered, plus in excess of 200K self-employed without income, or negligible income. Total of 1,3MM people cannot earn a living due to the shrinking of the economy, that follows internal devaluation policies and heavy taxation for wealth generation, real estate property and consumption.
Problem statement: Currently there are 1,3MM unemployed registered, plus in excess of 200K self-employed without income, or negligible income. Total of 1,3MM people cannot earn a living due to the shrinking of the economy, that follows internal devaluation policies and heavy taxation for wealth generation, real estate property and consumption.
Out
of total 4,5MM people able to work in the Greek economy, 1MM is
working for the government or government owned businesses, 1,3MM are
unemployed, and the remaining 2,2MM working people are called upon to
generate the wealth to support the total economy, and the tax revenue.
It
is imperative to increase the number of working people as soon as
possible, as the taxation level of income generated currently is
increasing job loss at a rate of more than 50K jobs per month.
Bureaucracy and corruption of public servants is preventing job
creation. Currently a 55% public overhead to gross salaries, makes
unworkable the creation of legal jobs.
3. Corruption -
Problem statement: Up to 6% higher GDP could be achievable if corruption was curbed. Laws that protect corruption have been passed over the last few years, culminating in 2005 law of Pavlopoulos, disallowing the submission of video and audio recordings of public servants and politicians performing unlawful acts of corruption in a court of Law. Moreover, politicians have implemented laws that prevent proper Courts of Law to place them in trial, and instead perform the task amongst themselves. This is causing the Greek people a sense of injustice and support of corruption by the state itself.
Problem statement: Up to 6% higher GDP could be achievable if corruption was curbed. Laws that protect corruption have been passed over the last few years, culminating in 2005 law of Pavlopoulos, disallowing the submission of video and audio recordings of public servants and politicians performing unlawful acts of corruption in a court of Law. Moreover, politicians have implemented laws that prevent proper Courts of Law to place them in trial, and instead perform the task amongst themselves. This is causing the Greek people a sense of injustice and support of corruption by the state itself.
All such laws should be abolished, and everyone should become equal under the Law.
4. Bureaucracy -
Problem Statement: As much as 6.7% higher GDP could be achievable if bureaucracy was curbed. Culminating in the 18,000 pages of the Tax Code, getting a licence to produce anything in Greece is an exercise in futility. The economic growth is stifled by it, and it is the method of choice for corrupt public servants and politicians to extract ransom by potential investors.
Problem Statement: As much as 6.7% higher GDP could be achievable if bureaucracy was curbed. Culminating in the 18,000 pages of the Tax Code, getting a licence to produce anything in Greece is an exercise in futility. The economic growth is stifled by it, and it is the method of choice for corrupt public servants and politicians to extract ransom by potential investors.
The
whole system of laws has to be abolished, and a workable system from
another country that has been effective in curbing bureaucracy should be
“copy-pasted”.