Greece en route to default

From Spiegel Online.

The rest of Europe is losing patience with Athens. And after 18 months of crisis in the country, there is still no improvement in sight … there are growing doubts over whether the Greek government truly understands how serious the situation is.

Greek government has been unable to meet its fiscal responsibilities and promises.  The failures have been on multiple counts.  Tax evasion remains widespread.  Worse, some tax departments have stopped working, protesting their 20% salary cuts.

Greek citizens and companies owe the state a total of almost €40 billion in taxes. The sum would more than cover the government’s budget deficit for 2011 … Some 17 tax offices did not perform a single audit in the first seven months of the year.

There have also been problems with proposed privatizations because of fears regarding labor union intransigence.

Union organizers at the electricity monopolist DEI are seen as especially radical. They have already threatened to cut off electricity if the company is privatized.

The German finance ministry has been working on a how to minimize the pain for the Eurozone.

The German plans focus on two instruments … preventive credit lines, which would involve the EFSF issuing bridge loans to financially weak countries … [and] financial injections for banks …

Care is being taken to build a fence around Greece.  The current message is that only the Greek situation is irredeemable.  The other vulnerable economies have been able to push through EU or IMF recommended measures, or at least seem more serious about implementing said measures.

The Irish … [are] regaining the confidence of financial markets, as evidenced by a significant decline in the risk premiums on Irish government bonds in recent weeks.

Portugal… is cutting back healthcare services and salaries for government employees. Hardly any government expenditure has remained untouched. At the same time, Coelho is raising taxes … There has been some grumbling so far, but they have largely tolerated the government’s decisions

But the Greeks also promised higher tax revenues and lower expenditures.  Will Portugal be able to deliver? Or will we hear the same words spoken to another country next year?

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