The paroxysm of sentimentality,
demagoguery and pseudo-nationalism which has been unleashed by the May 6th
elections in Greece is truly staggering.
At the risk of sounding
like a broken record, it is clear that neither PASOK or New Democracy (nor
any other party) have an integrated, means-tested policy proposal for solving
the deficit of justice, public sector efficiency, corruption and the real
economic crisis in Greece today.
PASOK comes nearest to a low-scale,
incremental plan which may lessen the shock of planned mid-2012 tax increases and budget cuts. However, PASOK's plan is based largely on a
re-negotiation of the fiscal adjustment schedule, increasing it from 2 years to
3 in the hopes of lessening the impact of further cuts to pensions and
salaries.
It promises government restructuring, but doesn’t indicate what would
be restructured. It promises to deal with the commitment to reduce the public
sector by 150,000 workers by transferring workers within the government to
“where they are needed”. It’s not clear, however, that this will solve anything,
since (a) total headcount must be reduced, and (b) the problem is efficiency
and productivity (and costs), not headcount.
The main problem with the PASOK plan is
that it does nothing to redress the very urgent economic crisis which is
evolving. There are no practical proposals (beyond the mythical absorption of
EU funds) to deal with business closures or unemployment. There is no real plan
for investment promotion. PASOK is silent on the main political weakness:
assuring privatisation targets are met, with all this means for pro-PASOK union
movements in the public sector.
My impression is that Evangelos Venizelos
is the most realistic politician today, at least in terms of what can be done based
on commitments to international partners. He has, after all, negotiated many of
them, and to his credit he is not running on a demagogic platform to withdraw
from the Memorandum, or to promise unrealistic pre-electoral benefits.
Unfortunately, the same cannot be said of
ND leader Antonis Samaras, the man most likely to be charged with forming a
government on May 7th. The “Zappeio IV” proposals include a range of
useful measures, including e-government, lower tax rates, a tax amnesty, a “New
Start” for taxes, etc. The problem is that tax reductions, while necessary in
some areas, are going to immediately impact the budget, and therefore Greece’s
progress in meeting its fiscal adjustment targets.
We are also asked to believe that by
reducing taxes, more Greeks (and foreigners in Greece) will be tempted to pay
their fair tax assessment. There is very little historical or actual evidence
for this.
The problem in Greece is not so much total
tax levels, but tax evasion and the burden of taxation. If we take corporate
taxes, for instance, Greece is actually quite competitive, with a 24% corporate
tax rate, and no dividend taxes (depending on the mix of wages, dividends paid
and total profits). This is very competitive—far more competitive than the
United States or Germany, for instance. Some areas, such as social insurance
taxes on labour, are far too high: ND has no proposals for them.
A far greater problem is the burden of
taxation. Tax evasion among companies and self-employed professionals is
rampant. The idea that by reducing taxes, there will be a higher tax compliance
(even with the electronic cross-checks proposed) is difficult to accept at face
value. The other problem is that taxes on individual salaries workers is
commensurately too high. Since these salaries are “immovable” (they are taxed
at source), they are easier to tax, and today most government revenue in Greece
(as in the United States) comes from individual income and indirect taxes, not
corporate taxes.
This certainly needs to change, and there
are some useful proposals in “Zappeio IV”. However, these are far outweighed by
the other public spending promises made, including a minimum monthly pension
which is far higher than the current minimum wage; additional benefits to
families with three children or more, and that perennial favourite, additional
benefits to farmers.
This is as classic a case of political
triangulation as we are likely to see, but because it sounds good doesn’t mean
it can be paid for, let alone accepted by Greece’s creditors.
It is also truly sad to note the rabid fear-mongering
over illegal refugees, which has reached fever pitch in the media these last
few weeks. A recent press
release by New Democracy is indicative of how
deliberately misleading the debate has become:
·
Τροφοδοτείται το παραεμπόριο, το οποίο έχει καταστρέψει χιλιάδες μικρομεσαίες επιχειρήσεις. Ο τζίρος του παραεμπορίου, σύμφωνα με τα στοιχεία του ΟΟΣΑ, υπολογίζεται ετησίως στα 25 δισ. ευρώ, στερώντας από τα δημόσια ταμεία έσοδα ύψους τουλάχιστον 9 δισ. ευρώ από ΦΠΑ, δασμούς και ασύλληπτη φορολογητέα ύλη.
·
[Illegal migration] supplies
illegal commerce, which has destroyed thousands of small and medium
enterprises. The turnover of illegal commerce, according to OECD statistics, is
estimated at EUR 25 billion, eliminating public income of at least EUR 9
billion from VAT, customs and unrecoverable taxed items.
The OECD
report on the informal economy and the sub-segment of counterfeit products refers
to items such as counterfeit products, including counterfeit CDs and DVDs, cigarettes,
liquors, fashion items, software and a range of other items which are brought
into Greece by well-organised networks of primarily Greek businessmen, or are
created within Greece itself. It also refers to other items, such as the illegal
fuel sales which are estimated by various sources to amount to approximately EUR 1
billion per year: this is an all-Greek enterprise which has nothing to do
with immigrants.
The trade
in counterfeit products in Greece is a serious one. However, it is dominated by
Greek retailers and intermediaries, not Nigerian street vendors. This is seen,
for instance, in the widespread availability of counterfeit Louis Vuitton bags
or brand-name items in high street retail shops in Monastiraki, Corfu, Chania,
Rhodes, and everywhere in Greece.
It is
seen in the bootleg DVDs and CVs for sale in the same places. On university
campuses, trade in hacked MS Office and other applications is everywhere. There
are even illegal products for sale at our neighbourhood “laiki” in Geraka.
Yes,
legal and illegal immigration definitely plays a role here. But the role played
by Greek retail networks is far greater. And no one mentions that the main
consumers of counterfeit products are, of course, Greek.
This
trade in illegal commerce has been going on for years, and has been covered by
a corrupt and dysfunctional justice and tax system which spans both ND and
PASOK governments. It is protected by corrupt customs officials, who know
exactly when and where counterfeit products are imported into the country, and
who they are delivered to. It would be relatively easy to stamp out illegal
retail by simply enforcing laws which are already on the books, and by implementing
retail audits and a real investigation of the customs authority.
It is truly sad to see a political party
stoop to such depths in an effort to win votes. Unfortunately, the issue of illegal
immigration has become a front-page item, as parties on both the left and right
strive to show their anti-crime and anti-immigration credentials.
I would
be much more wiling to believe this if I saw an equivalent crack-down on the
employers of these illegals, i.e. the farmers who employ hundreds of thousands
of immigrants; the households who employ cleaning ladies, etc. Any economic
transaction takes two parties: a supplier and a purchaser of services.
Focussing solely on the supply while ignoring the demand is a recipe for
failure.
Ultimately,
Greece will elect a new government on May 6th. Its ability to
implement new policies will be severely constrained by the lack of financial
resources and by the commitments already signed with international creditors. Yet
the expectations that have been raised by this campaign, and the deliberate
attempt to create divisiveness, fear and hatred which we see expressed in a
variety of media, both against illegal immigrants, but also against European creditors,
will remain with the national consciousness for years to come. None of this
bodes well for the future.
© Philip Ammerman, 2012
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