Greece, in an effort to get more bailout money from the European Union and International Monetary Fund, has instituted a property tax. The tax will be imposed over the next two years. And it will just be another levy Greek citizens can skirt or refuse to pay.
Greece has been unable to meet obligations tethered to its $130 billion bailout last year. GDP has dropped by unforeseen amounts, which created a larger deficit than expected. EU and IMF auditors will produce a report this month about the Greek government’s progress on austerity measures meant to close the budget gaps.
A second Greek bailout may not be forthcoming for reasons other than budget and austerity plans. Some members of the EU believe that any new tax the Greek government may legislate will matter little. Evidence abounds that the Greeks often do not pay their taxes. CNN recently reported that “there is wide speculation that many Greeks are not accurately reporting their income.”
The new Greek bailout is already in trouble. Suspicions that the nation cannot collect what its laws provide happen at a time when Germany has already begun to back away from what many people thought was a firm commitment to provide Greek aid. Bloomberg reports that “Chancellor Angela Merkel is laying the ground for what markets say is almost a sure thing: a Greek default.”
The German decision would be radical in some ways. A default could badly damage the balance sheets of banks in Germany and France. Many of them hold large amounts of Greek debt. Germany would have to rescue some of its financial firms in the event of a Greek default, and that could cost the government billions of dollars.
The largest EU nations and the IMF were supposed to put a system in place to lock in a new round of bailout money. The Greeks believe that an additional property tax will make that bailout more likely. That might be so if Greece did not have a multiyear record of its inability to get its citizens to pay what the nation’s treasury needs to collect to prove it can meet the obligations that go along with a rescue.
Douglas A. McIntyre
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