"The fundamental problem for Greece is that there is no sign of economic recovery, with GDP at -4.5% in 2010 and still likely to be -3.0% in 2011 (IMF). If your economy slows down by 10%, then your debt-to-GDP ratio rises by 11% without any new debt. And Greece is being asked to further reduce its deficit by what is in effect 15% of GDP, while taking on no more debt. Within two years Greece will have a debt-to-GDP ratio of 160% that can only come down under very optimistic growth scenarios. And that assumes that Greece can right its own house. I have mentioned the wonderful article by Michael Lewis in Vanity Fair last October (http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010). He refers to the massive corruption in Greece:
"The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year--which meant, because incomes below that amount weren't taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn't the law--there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros--but its enforcement. 'If the law was enforced,' the tax collector said, 'every doctor in Greece would be in jail.' I laughed, and he gave me a stare. 'I am completely serious.' One reason no one is ever prosecuted--apart from the fact that prosecution would seem arbitrary, as everyone is doing it--is that the Greek courts take up to 15 years to resolve tax cases. 'The one who does not want to pay, and who gets caught, just goes to court,' he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe"...............LINK
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