Make no mistake, the Greek government has been in a constant state of default since 2008. The only difference in this default is that the people who hold Greek government debt are still getting paid and only the citizens are getting stiffed.
This article in Kathimerini breaks it down, unfortunately the article is simply repeating what the government has said with no meaningful input from the “journalist”. Articles like this make me wonder why the government does not start its own newspaper and cut out the middleman.
Anyway, back to the article, I’ll highlight the main areas of the article to illustrate my point.
“Overrun by 1.75% or 652,8 million euro in relation to the objectives noted the budget revenue in 2013 due to better performance of all major categories of tax revenue.” – The government says tax revenues are better than expected, it raised just over half a billion Euros more than it expected. I’ll come back to this
“These will be reflected in a significantly higher primary surplus, compared with the forecasts made in 2013.” – Primary surplus excludes interest payments on the government debt which is probably their largest single expenditure at the moment.
“The total revenues of Tax for the year 2013 amounted to 38.14 billion euros” –
“The annual tax refunds amounted to 3.70 billion euros against 2.90 billion forecast” – 2% of the budget was unexpectedly absorbed by unforeseen tax refunds.
As far as new arrears (created from 1.1.2013 onwards) 2013 received 890 million from taxes on income, 460 million of VAT, only 10.2 million of the Code of Books and Elements (KVS) and 380 million euros of Other Requirements. – So the government is claiming that tax arrears increased by 1.7 billion Euros in 2013
and yet in this article in Macropolis the government claim in the first 10 months of 2013 “the current outstanding amount of arrears has dropped by a lower amount (2.40 billion) year to date” (or 240 million Euros a month)
The government’s own figures have changed by 700 million Euros in two months and in the opposite direction you would expect and yet not a peep of protest from the journalist who wrote the article.
Moving one, the claims of the government that it raised 652.8 million Euros more than it expected, this figure is misleading as it counts the 2.4 billion Euros in “due” taxes as being revenue when they are unable to collect.
Again, the Macropolis article sums up the Greek government finances very clearly
The state budget is the key element in the reported gg balance evolution. There is an important difference compared to the budget execution released for the same period, which relates to a cash correction of 5.36 billion stemming from settlement of arrears and tax refunds arrears. Therefore, the initially posted state budget figures are reported at a general government cash level as a primary deficit of 2.98 billion and state deficit at 8.32 billion, incorporating that cash correction.
When unpaid taxes are counted as unpaid and when the government’s unpaid obligations are taken into account the government is 8.32 billion/year in the red which works out at 690 million Euros a month.
Going back the Kathimerini article
The remarkable thing in this picture is that the recovery rates for fines KVS is only 0.44% in the new overdue and 0.1% for old arrears. – Of course people are simply unable to pay but I can not help thinking that the government is going to use this low recovery rate to justify extra judicial action.
The government figures in the Kathimerini article are very different from the government figures from 2 months ago.
The government is in a constant state of default as it is not fulfilling its obligations ie tax refunds, VAT refunds and pensions
The figures being quoted by the government are completely misleading as they are exclude the government’s interest payments, the figures are counting the government’s unpaid obligations as being paid and the figures are classing unpaid taxes as being collected.
In short the governments finances are a complete basket case and the worst part is the situation as it stands now is not sustainable. By this I mean if no other taxes were imposed or existing taxes increased and if no more benefit cuts were to be enacted the Greek economy will continue to shrink for the forseeable future.
The level of taxation vs current GDP levels is simply not sustainable. I predict that all things staying the same that the GDP of the country will drop another 15% from January 2014 at a minimum.
Unfortunately there are more tax increases on the way in 2014……