Greek Crisis 2014.2.3 – A Review Of The Ongoing Situation In Greece

Greek Crisis Review – 2014.2.3

The Greek government ran into problems servicing its debt in 2008

The Greek government received a series of loans (erroneously called bailouts) to fund the servicing costs

Greek government debt ballooned

The Greek government increased taxes massively to pay the increased debt servicing costs

The Greek government sacked no employees

The Greek government cut the wages of government employees

Greek government cuts pensions and benefits

Greek government imposed VAT on private property sales

Greek government imposed property taxes which are independent of income

Greek government imposed higher income taxes which are independent of actual income

Greek government social security revenue is independent of income and is at completely unpayable levels

Greek government doubled to price of petrol and quadrupled the price of heating oil

The Greek government has carried out no reforms which are visible to the population. It is just as difficult to start and run a business as it always was

Around 600 million Euro in taxes are going unpaid each month

This 600 million Euro in classed as income in government financials even though the chance of recouping this money is low

Government claims a 1 billion Euro “primary” surplus. It excludes their interest payment which is their biggest expense

Government is late refunding VAT for exporters

Government has stated it wants a cashless society in the medium term

Government wants people to put their money in Greek banks

Government wants to garnish bank accounts to claim unpaid taxes

State owned electricity provider experiencing problems as it has been tasked with collecting the property tax which most poeple are unable to pay

Greek government income and expenditures are around the same as they were when the government first ran into problems in 2008

In short the loans to the Greek government have achieved nothing except lower the standard of living of Greeks

Greek trade deficit has reduced, Greek government expenses excluding interest have reduced but this has been completely offset by Greek government interest payments increasing and amount of unpaid taxes increasing rapidly on a monthly basis

The loans to the Greek government have been used to extract more taxes as a percentage of income out of Greeks

Greeks get less back from their government even though they give it more money

The rate money is being extracted from the country has stepped up hugely due to the increase in the government’s interest payments (interest payments which were already unmanageable when they were smaller and when the economy was in much better shape)

Summary of Situation Until Now – Greek Crisis

The problems of the Greek government are worse now than they were in 2008

The Greek taxpayer is much poorer now than in 2008

The Greek economy is around 30% smaller than in 2008

A government default cannot damage the economy more than the current measures

The loans (bailouts) of the Greek government has worsened the situation by making the Greek government less dependent on the Greek taxpayer. The had led to the government abusing the people even more as they are no longer their only source of revenue

The Future – Greek Crisis

Further tax increases which will be independent of actual income.

Elimination of tax-free allowance

Further reductions in government spending inside the country

Further increases in government interest payments

Unpaid taxes to increase. Government transferring their debts onto the people through unpaid taxes.

Government finances completely unsustainable. The only reason figures look remotely sustainable at the moment is because tax increases have been independent of income. This has made government paper revenues look stable even if tax payer wages are cut or if people become unemployed.

Upcoming Problems – Greek Crisis

Social security funds will have to cut payouts even further.

Government cashflow situation will continue to worsen.

(You would have to imagine that the unpaid taxes are being worked in to financials to disguise cash injections from undisclosed sources. The wheels should have come off the government long ago even with the loans.)

Citizen tax debts will continue to increase

Banks bad loan rate is ballooning. It is claimed 1 in 3 mortgages are behind. Banks will go bankrupt or will be taken over for international banks from other countries

Government will start wholesale seizures of property to satisfy outstanding tax debt.  Their survival depends on it.

Expect measures to become more arbitrary as government become more and more desperate for income.

More troika bailouts on the way which the Greek political elite will use as the excuse for even harsher measures.

End Game – Greek Crisis

With taxes independent of income and a rapidly reducing monetary base and rapidly increasing tax debt and you follow that to its logical conclusion you have people with no land and no money and completely dependent on the state to provide their means of production.

You have to imagine the Greek people and economy reverting back to a Serf like existence where the people can not afford to own any property and work for the state for the subsistence.

From Wikipedia “Serfs who occupied a plot of land were required to work for the Lord of the Manor who owned that land, and in return were entitled to protection, justice and the right to exploit certain fields within the manor to maintain their own subsistence. “

The Greek government will have to offload these newly acquired assets which will be a boon to people looking for second homes and businesses in tourism development.

Solutions for Greek People

To limit their involvement with the government as much as humanly possible to avoid taxes and seizures.

To convert their assets held in Greece into easily tradeable commodities such as gold and silver

Manufacture and export. Any new businesses in Greece should be focusing on manufacturing in the country and exporting to others.

Relocate as much of business to neighbouring countries as possible to avoid seizures and taxes.

At some point the government is going to need sell the assets they have acquired, the citizens need to prepare themselves to take advantage of this situation.

They can do this by emigrating in the short term or saving in the short term or perhaps both. The economy will find a bottom at some point. Greeks need to insulate themselves and protect their assets from the deteriorating economy so they are in the best possible position to rebuild when it hits bottom.

Areas of Opportunity – Greek Crisis

It is hard to recommend buying land or property in Greece for any productive purpose when taxes on these assets are extortionate and increasing

It would be foolish for foreigners to invest in manufacturing in Greece. The employment laws put massive burdens on the business and burdens which increase the longer people are employed.

If you are a millionaire looking for a holiday home now is an excellent time to buy. Greece has probably the most desirable and varied real estate in the world in a location second to none.

Businesses catering to wealthy foreigners should be a growth industry. So this would include real estate lawyers, international accountants, high end services such as yatch servicing, mooring, hire. Luxury land management and luxury property development.


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