The people of Greece end the year under foreign guardianship and with tax reforms imminent. It has been their fifth consecutive year of recession.
Only stores with cheaper merchandise are seeing many Christmas shoppers. Sales are down on last year.
The conditions imposed on Greeks are in exchange for EU and IMF loans aimed at averting national bankruptcy.
There was a glimmer of optimism at this week’s summit in Brussels. Prime Minister Antonis Samaras said it ended talk of a Greek exit from the euro single currency.
He said: “Things look good for Greece. A success story for Greece would be a success story for Europe also.”
Samaras was smiling after the new loans were approved for Athens.
They come to 52.5 billion euros, most of this available immediately. But to be eligible, Greece had to agree to raise 2.5 billion euros in tax revenues in 2013-2014.
To put this into practice, reforms included reducing from eight to three tax brackets.
Wage earners and pensioners earning up to 25,000 euros will be taxed at 22 percent. Incomes above 25,000 and up to 42,000 will be taxed at 32 percent. Above this, 42 percent will apply. Farmers and other self-employed will be asked to pay at least 26 percent of their incomes in tax.
Greece will raise the tax rate on corporate profits to 26 percent from 20 percent but lower the tax on distributed dividends to 10 percent from 25 percent.
The effects on a family with three children, for example, declaring 25,000 euros for the year, will be to add 830 euros to their tax bill, which will come to 3,800 euros. So, not a lot of ordinary people are cheering about the latest bailout deal.
Economist Anastasia said: “I believe that it will help, but only in the short-term, not for long. Our country needs to make very big changes to have a real recovery.”
Greece’s central bank estimates that total economic contraction counting from 2008 will come to 24 percent in the coming year. Since 2010, unemployment has more than doubled, to 25 percent. More than 100,000 small businesses have closed.
In spite of its efforts, Greece is seen as the most corrupt country in the European Union, according to NGO Transparency International. In last year’s index, Greece placed 80th. Out of 176 countries now it is ranked 94th.
We asked Athens University Professor of Economics George Pagoulatos for his view.
Stamatis Giannisis, euronews: “Does the new tax system apply to all Greek taxpayers fairly, or, once again, do wage-earners in the public and private sectors bear most of the burden?”
George Pagoulatos: “Law-abiding citizens are those being asked to make the greatest effort to increase state revenues – that is a problem. This is both counter-productive and socially unjust. It is important that the Greek state focus a lot more on those groups of the population who systematically avoid paying their taxes, not only those in higher income levels, but also in small and medium-sized businesses, and those who are self-employed.”
euronews: “In spite of the efforts that have been made, no Greek government has so far managed to fight tax- evasion effectively. Why is that?”
Pagoulatos: “To be fair, in the last couple of years the efforts to combat tax-evasion have been the most meticulous and systematic in decades. These efforts take time because they are not only about tax reform, but also require the reorganisation of the internal revenue service and bringing about a change in the attitude of a large portion of Greek society, which is simply not used to paying taxes. Another problem is how long it takes to get a legal ruling in tax-evasion trials. But I am optimistic the reforms that are taking place will bare fruit soon, even if the results haven’t been felt yet.”
euronews: “The Eurogroup decision to give Greece a long-awaited loan tranche – does this make an economic and political crisis less likely in the foreseeable future?”
Pagoulatos: “We do have some new factors; one of these is the actual cash and capitalisation in the banking system, thus allowing the banks to lend money more easily. Another reassuring thing is the commitment the Euro zone members have made to lessen the chance of a Greek exit from the euro. This danger, I will underline, has had a paralysing effect on the whole economic process in Greece, with regard to the influx of capital, savings and investment. It was a disproportionate fear, however, since three quarters of Greek society is committed to the euro. As this danger fades, the country will have a chance to enter a phase of economic stability, and once again attract foreign investment.”
euronews: “The year 2013 is going to be the sixth consecutive year of recession for Greece. Are there any signs that by the end of next year Greece could get on the road to economic recovery, through, for example, some serious economic investment?”
Pagoulatos: “As I have said, one thing is that there is this sense of stability that is back in the Greek economy. Secondly, as the danger of Greece exiting the Euro diminishes – a parameter that some people had been taking into account – the country is now attractive to potential investors, as it has gained back a great deal of its lost competitiveness. It is, therefore, a country that has a lot of economic prospects to offer which are related to an extensive programme of selling stock in state-owned companies.”