Thread: Greece Outlaws Cash Transactions Above 1500 Euros, New Taxes

Saturday, February 13, 2010

Greece Outlaws Cash Transactions Above 1500 Euros, Unveils New Taxes

In an attempt to rein in the shadow economy and collect more tax revenue, Greece outlaws cash transactions greater than 1500 Euros. Please consider Greek Finance Minister unveils tax reform, wage policy. http://www.reuters.com/article/idUSLDE61824V20100209

"From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards"

"There's tax relief for incomes up to 40,000 (euros)"

"Taxable income based on the new scales will include capital gains from the short-term trading of stocks"

"Deposits in banks outside Greece are exempted from audits of their origin if they are repatriated within six months of the passing of the tax bill and are taxed with a 5 percent rate"

"Wages of board members in unlisted state companies will fall by 50 percent"

"The budget bill for allowances and compensations will be cut by 10 percent"

Buy It Now

Everyone in Greece will quickly figure out that that the time to make major purchases is now. So expect to see sales plunge starting January 1, 2011 as demand for everything priced above 1500 euros shifts forward.

New 40% Tax Rate

In addition, attempts to collect more sales taxes (VAT), Greece to levy 40% tax rate on more earners. http://www.reuters.com/article/idUSLDE6170CY20100208

Greece will lower the current 75,000 euro income threshold that is subject to a 40 percent tax rate as part of reforms to urgently boost government revenues, the country's finance minister said on Monday.

"The 40 percent tax rate will be applied on income levels that are lower than what is the case today, but there will also be intermediate rates that will provide relief for low and middle incomes," Finance Minister George Papaconstantinou told Ta Nea newspaper in an interview.

He said that as a result of the tax changes, the biggest burden would be felt by a small percentage of tax payers as 95 percent of earners report incomes below 30,000 euros a year.

Retirement Age, Fuel Taxes Rise

Please consider Greece raises retirement age and fuel taxes a day ahead of nationwide civil service strike. http://blog.taragana.com/business/2010/ ... ike-29494/

Prime Minister George Papandreou told a cabinet meeting that the reforms “must go ahead now … with greater speed.â€

Saturday, February 13, 2010

Eurogroup Chairman Jean-Claude Juncker's Grecian Bluff

Eurozone's Grecian charade continues this weekend with still more "moral support". One has to start wondering when the market is going to go "all in" in response to what is clearly nothing more than an obvious bluff by various European officials.

Please consider EU's Juncker warns against eurozone drift apart. http://www.reuters.com/article/idUSTRE61C1B120100213

Eurogroup Chairman Jean-Claude Juncker warned on Saturday against a further drifting apart of euro zone economies in an interview with a German newspaper.

"We must take care that the divergences do not get wider still. A currency zone cannot exist in the long run if the differences in the current accounts of the economies get too big," he told the Sueddeutsche Zeitung, adding he did not believe the euro zone would fall apart.

The Greek government had to understand it was its job to bring its budget into order but if Athens did everything it could, Europeans would stand by in an act of solidarity. He declined to say, however, exactly how the EU could help Greece.

"I cannot today name an exact instrument... We have many instruments ready and will use them if necessary," he said.

Juncker also said he did not believe the EU's Stability and Growth Pact needed to be reformed to respond to a possible state bankruptcy.

"The basis of the Maastricht Treaty is that a state bankruptcy does not come into question. If we had thought a euro zone member could go bankrupt, we would have devised instruments to deal with that. This is not envisaged," Juncker said.

He did not think a clause allowing the euro zone to throw out a member would be a good idea.

"Because throwing (a state out) would have momentous, uncontrollable consequences. We must prevent a state from getting close to bankruptcy."

A Bluff With No Chips

Junker's statements are like making a bet with no chips on the table. It can't be done except in Political Fantasy-land. By now, everyone knows Bazooka Theory Is A Proven Failure. http://globaleconomicanalysis.blogspot. ... zooka.html

It's even more preposterous in this case given that Junker would not even say what was in his pocket. Is it a bazooka or a pea-shooter and a squirt-gun?

Someone who claims to have "many instruments" ought to be willing to name a couple of them. Given that he will not lay his weapons on the table, some of us are skeptical whether he has any weapons at all.

Lack Of Vision

I can't help but laugh at Juncker's statements "If we had thought a euro zone member could go bankrupt, we would have devised instruments to deal with that. This is not envisaged."

Junker says he has "many instruments" and in the next breath admits he devised no instruments.

Junker also says "The basis of the Maastricht Treaty is that a state bankruptcy does not come into question." Really!?

Junker is effectively saying "This can't happen because we did not think of it."

What hubris! Did central bankers envision a worldwide recession? Did the Fed in 1929 envision a great depression? Who envisioned a massive earthquake in Haiti?

Because the EU failed to account for the problems of member countries when it devised the Maastricht Treaty, dealing with the issues of bankruptcy became more likely, not less likely.

Strikers Will Force Greece and EU's Hand

The market and strikers in Greece may quickly force many of those EU chips on the table and some of them in the pot.

Please consider Civil servant strike in Greece shuts schools, grounds flights. http://www.washingtontimes.com/news/201 ... s-flights/

A strike by civil servants shut schools and grounded flights across Greece on Wednesday, as unions challenged cutbacks aimed at ending a government debt crisis that has shaken the entire European Union.

Air traffic controllers, customs and tax officials, hospital doctors and schoolteachers walked off the job for 24 hours to protest sweeping government spending cuts that will freeze salaries and new hiring, cut bonuses and stipends and increase the average retirement age by two years to 63.

"It's a war against workers and we will answer with war, with constant struggles until this policy is overturned," said Christos Katsiotis, a representative of a Communist Party-affiliated labor union.

The realistic response of the EU would be to kick Greece out of the union if Greece does not comply with the treaty. Yet that is an option Junker and EU officials refuse to admit even exists.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot. ... ckers.html

Feb 12 2010 9:50AM

Greece Broke the Rules

“There are rules, and these rules need to be adhered to." This quote could easily have been made by Sir Isaac Newton 300 hundred years ago explaining how financial discipline would be imposed by his then new invention, the classical Gold Standard. But no, these are the words of German Chancellor Angela Merkel uttered just yesterday. In effect, they precisely state how the Greek crisis should be solved.

Greece broke the rules. The Greek government borrowed too much. It spent too much. Because it broke the rules, it is not worthy to be included in the eurozone. So Greece should be expelled. Doing so would re-affirm the reliability of the euro and indeed, make credible the promise of every European government before joining the eurozone that it would follow the rules.

The rules are there for a reason. They impose discipline by preventing too much euro currency from being created, which was the same crisis Newton had to address. The Bank of England was launched in 1694, but its over-issuance of pound banknotes created a crisis only two years later. The pound was losing value, and the solvency of the Bank of England was being questioned.

King William called on the brightest mind of the day to deal with this challenge, and the brilliant Newton delivered a solution that worked until 1914 – when Britain broke the rules – and would still be working to this day if the classical Gold Standard had not been jettisoned by governments. Without rules there is chaos, as evidenced by the mess Greece confronts today.

Expelling Greece from the eurozone in practice would be straightforward. Any euros in Greece should be re-named as drachmas. Henceforth, people would have drachmas in their bank accounts. All Greek debts would be owed in drachmas. This new drachma would immediately fall to a discount to the euro, with the consequent loss in relative purchasing power. Thus, the cost of solving the Greek problem would fall where it rightly belongs – on the Greek people who allowed their government to put the country into hock and the lenders to the Greek government who foolishly underestimated the risks. Fairness and justice require that the cost of Greece’s mistakes should not be put on the shoulders of the other EU members.

The non-decision yesterday by the EU leaders leaves open the question of what they intend to do about Greece. They were probably just waiting for this weekend to announce their decision as governments like to operate when the markets are closed. I hope it is the right one – that Greece has been expelled from the eurozone, and the euros in Greece today become drachmas on Monday.

http://www.kitco.com/ind/Turk/turk_feb122010.html

'Timid' EU must not make us fight this battle alone, says Greek prime minister

• Lack of united support blamed for creating a pyschology of imminent collapse
• Tentative response fails to impress markets as data shows eurozone stagnating


Ian Traynor in Brussels, Julia Kollewe, and Helena Smith in Athens
guardian.co.uk, Friday 12 February 2010 22.26 GMT


Greek Prime Minister George Papandreou at the World Economic Forum in Davos. Photograph: Pierre Verdy/AFP/Getty Images

George Papandreou, the Greek prime minister, today slammed the EU for displaying "timidity" in its dealings with the country as it grappled with its worst financial crisis in a decade.

In a live address to his cabinet following his return from yesterday's emergency summit in Brussels, the normally mild-mannered leader hit out at the lack of united support from the EU, saying the foot-dragging had exacerbated the load for debt-ridden Greece which has been hammered by markets in recent weeks.

"Greece is not a political or an economic superpower to fight this alone. The EU gave political support in the last few months of this crisis, but in the battle against impressions and the psychology of the market it was at the very least timid."

The union had, he said, been fragmented by multiple voices, differences and diverging statements. "There was speculation about our country which created a psychology of imminent collapse, prophesies which risked becoming self-fulfilling," he said. "There was a lack of co-ordination between various bodies of the union, the commission, the member states, the European Central Bank, even different opinions within those bodies."

EU leaders also failed to impress the financial markets with their tentative response to the Greek debt crisis and suffered another blow from fresh data today showing the eurozone economy stagnated in the last quarter.

With governments declining to put flesh on the bones of plans to rescue Greece from sovereign default, if need be, the markets again rounded on the euro, taking it to a nine-month low against the dollar at $1.3606 this morning.

Despite the market fever, however, leaders across the EU are quietly relaxed about the fall as they view the single currency as too strong. They are privately hoping for an adjustment against the dollar to boost European exports, not least in Germany, the world's champion exporter until recently overtaken by China.

Germany, the eurozone's key economy, defied expectations by posting no growth at all in the final three months of last year, meaning that the 16-country eurozone registered growth of only 0.1%, raising fears of a double dip recession.

Risking accusations of complacency, several of the eurozone's key leaders also see little threat to the currency's stability in the Greek drama, pointing out that Greece constitutes less than 3% of EU GDP. While Spain and Portugal, seen as other euro weak links, have severe problems, they are not confronting the kind of debt financing issues that the Greeks are struggling with. Spain and Portugual were not mentioned at Thursday's EU summit.

This analysis is feeding eurozone leaders' hopes that the Greek crisis can be contained, provided Papandreou seriously implements the outlined austerity package that is supposed to slash Greece's budget deficit by 4% alone this year.

For Greeks "the battle" had only just begun, Papandreou warned. "This battle isn't over," said the leader, hinting that austerity measures announced last week may be supplemented by further belt-tightening policies.

While the European Central Bank, the European Commission, and eurozone government leaders insist that Greece must meet the 4% target, privately they will settle for less provided the harsh therapy brings substantive returns.

Although the EU summit of 27 government chiefs on Thursday pledged "determined and coordinated action" to guarantee euro stability if need be, the compromise formula was hammered out at two smaller meetings of European leaders in advance of the summit which then rubber-stamped the deal.

The crisis management by small groups of key leaders, orchestrated by the new European council president, Herman van Rompuy, illustrated how such emergencies might be handled in the future in Europe, as there is a sense that summits of 27 leaders can be too unwieldy and indecisive.

Olli Rehn of Finland, the new European commissioner for economic and monetary affairs, said the EU needed to be bolder in monitoring member states' economic policies to avert a repeat of the crisis. "We urgently need deeper and bolder surveillance of economic policies," Rehn said.

But while European leaders wait, in the knowledge that Athens does not need to raise any funds on the markets until April at the earliest, the jury appeared still to be out on the European response.

"The EU's intentions are good, but the market would like details," said Kasper Kirkegaard at Danske bank.

http://www.guardian.co.uk/world/2010/fe ... e-minister

FT.com

Greece turns on EU critics

By Kerin Hope in Athens, Quentin Peel in Berlin and Tony Barber in Brussels

Published: February 12 2010 20:32 | Last updated: February 12 2010 20:50

Greece on Friday unleashed a fierce attack on its European Union partners, accusing them of creating a “psychology of looming collapseâ€