Summer Dreams

By Global Tax Weekly

In Russia, they dream in winter; but in Greece they dream in summer. Because it’s too cold in the first case, and I suppose because it’s too hot in the second. At all events, Prime Minister Antonis Samaras is promising to reduce all types of tax over the next few years, and predicts EUR55bn of incoming investment over the same period. There are a few inconvenient factlets standing in his way, however, and we won’t even consider the fractured state of Greek politics. First, GDP has shrunk by more than 25 percent since recession hit in 2008, and continued to fall in the first quarter of 2014; second, the unemployment rate increased in the first quarter of 2014 to about 27 percent, and in the 15 – 24 year age group is running at 57 percent; third, Greece has been provided EUR240bn of assistance from the Troika, and now has national debt equal to 175 percent of GDP and rising, with debt service even at today’s artificially low rates running at 5 percent of GDP annually. Net FDI in 2013 was under EUR2bn.

Now I hate to be a Cassandra, truly I do, but it is an existential impossibility for Greece to escape from this trap, this year, next year, or ever, unless it is bailed out once again by the Troika. The expectation of such a bail-out on the part of investors is what permitted Greece to raise EUR5bn on the international debt markets at “only” 5 percent interest late last year, a figure which is still double the average 2.5 percent rate Greece is paying on its debt. The EU cannot afford to rescue Greece again, even if there was willingness to do so; but they’re mad enough in Brussels to try it, nonetheless, unless they’re stopped by the recently elected eurosceptic body of MEPs. So the EU is between a rock and a hard place: either the Troika takes further steps down the primrose path towards bankruptcy for the euro-zone, or the eurosceptics force a halt to the endless creation of money to bail out already-bankrupt individal member states such as Greece. Either way, it looks as if the euro has had it! The government of any sane member of the eurozone should recognize this, and jump now; but they won’t, because they are politicians, and they don’t want to the ones who “lost” the euro. So they’ll continue dreaming until their rude awakening. It may be this year, or it may be next year, but it will come, and by now there is nothing that can stop it. Why then am I giving a bouquet to Mr Samaras? So that he can throw it on his country’s coffin, that’s why!

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