As Greece burns....

sankara

So i've been folllowing the bailout of Ireland and most recently Greece and I can honestly see Greece sliding into oblivion. The austerity measures will hand over many critical state-owned facilities to foreign private investors. I mean what's a country if it doesn't own its train stations and ports. Greece Ltd?

Added onto that is that there's the double blow of increased unemployment and lower salaries (as proposed in the austerity package). Which means lower income tax revenues for the government.

Tax increases

A solidarity levy: At 1% for those earning between €12,000 (£10,800) and €20,000 a year, 2% for incomes between €20,000 and €50,000, 3% for those on €50,000 to €100,000, and 4% for those earning €100,000 or more. Lawmakers and public office holders will pay a 5% rate.

A lower tax-free threshold: People will now pay tax on income over €8,000 a year, down from €12,000. This basic rate of tax will be set at 10%, with exemptions for those under 30, over 65, and the disabled.

Sales tax: The VAT rate for restaurants and bars is being hiked from 13% to the new top rate of 23%. This rate already covers many products in the shops, including clothing, alcohol, electronics goods and some professional services.

Wealth taxes: Tougher luxury levies will be introduced on yachts, cars and swimming pools, along with higher property taxes.

The changes should bring in an extra €2.32bn this year, rising to €3.38bn in 2012, €152m in 2013 and €699m in 2014.

In addition, the Greek government has pledged to combat tax evasion, which it believes will bring in an extra €1.15bn by 2015. Some legal tax exemptions are also being closed.

Spending cuts

Public sector wages: Salaries will be reduced by 15%.

The public sector wage bill: The goal is to cut 150,000 public sector jobs, through a hiring freeze and abolition of all temporary contracts. This should cut the total bill by €2bn by 2015.

Social benefits and pensions: The retirement age is being raised to 65. Increased means testing, and cuts to some benefits, will reduce the total amount spend on benefits by €1.09bn in 2011, then €1.28bn in 2012, €1.03bn in 2013, €1.01bn in 2014 and €700m in 2015.

Spending cuts: Many government department budgets are being reduced. This includes a €200m reduction in Greek defence spending next year, increased to €333m a year from 2013. Pharmaceutical prices are also being reduced, to cut health spending by €310m this year.

Social contributions: The rate on Greece's equivalent of national insurance will be increased, and there will also be a new crackdown on contribution evasion and undeclared workers.

Public investment: Spending on new infrastructure projects will be reduced by €850m.

Privatisations

Stakes in various state assets will be placed on the auction block, in an effort to raise €50bn over the next four years.

2011: The process has already begun, with the sale of a 10% stake in Hellenic Telecom to Deutsche Bank for €400m. Two port operators, Piraeus Port and Thessaloniki Port, will also be partially privatised. Stakes in betting monopoly OPAP, the lender Hellenic Postbank and Thessaloniki Water are also scheduled for sale.

2012: The pace picks up, with €10bn of assets earmarked. This includes stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATEbank. A wide range of other state assets will also be sold – assuming buyers can be found – from mining rights to airports.

The austerity programme also states that €7bn will be raised in 2013, €13bn in 2014 and €15bn in 2015.

http://www.guardian.co.uk/business/2011/jun/29/greece-austerity-plan-what-voted-on


Its gotten so bad they're selling off their islands

http://www.guardian.co.uk/world/2010/jun/24/greece-islands-sale-save-economy

So what does the SL think:
Is this the possible decimation of the EU as a monetary federation (but remain as a political federation)?
Was the UK right in NOT joining the Euro?
Is this a domino effect that will affect all EU members?
Are all political-monetary federations doomed as the more fiscally responsible nations are exposed to the consequences of less fiscally irresponsible nations.

Holla

Jonas.dini

Awesome thread dogg.

There's a very real likelihood that default is inevitable anyway, and even if they do cobble together a reprofiling of debt the market may still look at it as a default. In the meantime the IMF and ECB driving Greece into deeper debt, cutting social services that regular people depend on, and undermining any recovery effort. I don't want to be so cynical as to say that the IMF is making all the same mistakes they made before in Latin America and elsewhere, but hard to be optimistic going forward, especially as Portugal and perhaps Spain or Italy go down this same road.

As for greece joining the Euro-zone, I've been reading articles in the economist and elsewhere about how maybe greece shouldn't have joined because in a jam they can't use monetary policy and they're subject to the interest rates that the Northern Euro-zone countries apply. And of course there is the case to be made that greece would be better off doing import substitution and capital controls... but let's be real, greece isn't singapore or taiwan, and overall I'm inclined to say that the good of being deeply embedded in the EU should outweigh the bad in the long run.

I think UK is in a totally different predicament with some similarities to greece but overall not especially comparable. If UK had joined the eurozone they'd obviously be among the rich countries that hold all the leverage, by not joining they've hitched their wagon to the US and now has a lot of the same problems as the US but none of the monetary cushion, but I don't want to extrapolate that they should have adopted the Euro, I don't have a developed opinion on that.

sankara

Jonas.dini wrote: »

Awesome thread dogg.

There's a very real likelihood that default is inevitable anyway, and even if they do cobble together a reprofiling of debt the market may still look at it as a default. In the meantime the IMF and ECB driving Greece into deeper debt, cutting social services that regular people depend on, and undermining any recovery effort. I don't want to be so cynical as to say that the IMF is making all the same mistakes they made before in Latin America and elsewhere, but hard to be optimistic going forward, especially as Portugal and perhaps Spain or Italy go down this same road.

As for greece joining the Euro-zone, I've been reading articles in the economist and elsewhere about how maybe greece shouldn't have joined because in a jam they can't use monetary policy and they're subject to the interest rates that the Northern Euro-zone countries apply. And of course there is the case to be made that greece would be better off doing import substitution and capital controls... but let's be real, greece isn't singapore or taiwan, and overall I'm inclined to say that the good of being deeply embedded in the EU should outweigh the bad in the long run.

I think UK is in a totally different predicament with some similarities to greece but overall not especially comparable. If UK had joined the eurozone they'd obviously be among the rich countries that hold all the leverage, by not joining they've hitched their wagon to the US and now has a lot of the same problems as the US but none of the monetary cushion, but I don't want to extrapolate that they should have adopted the Euro, I don't have a developed opinion on that.

Props bruh,

U hit the nail on the head especially with the UK issue. I've always had a problem with a common monetary policy because a country shifts from total independence on setting its monetary policy to depending on others to implement a policy that is favourable to them. Right now every act of a EU member country dealing with monetary/fiscal issue has to be parallel with what is outlined in Brussels.

The PIGS (Portugal, Ireland, Greece and Spain) are gonna suck up so much money on bailouts yet the donor countries are also deeply indebted. No wonder the only people buying up the Greek utilities are the Russians and the Chinese.

Sometimes it seems to me the EU is simply an overloaded wagon pulled by France and Germany.