They must have been in a great hurry to close the deal with Greece. Who? The heads of the three Institutions, the country’s main creditors, the International Monetary Fund, the European Central Bank and the European Commission. Jean-Claude Juncker, Mario Draghi and Christine Lagarde called Prime Minister Alexis Tsipras on Tuesday and told him to fly to Brussels to meet them as soon as possible. That is before the Eurogroup meeting which is scheduled for 7 pm Wednesday.
According to Greek media, it is allegedly the IMF that is not satisfied with Greece’s latest proposals. The government offered austerity measures worth €7.89 billion from direct and indirect tax hikes plus social contribution increases, the IMF is said to demand cuts in spending and not tax hikes.
Speaking to Wall Street Journal, an IMF official said that the Greek economy has already suffered impressive over-taxation and imposing more taxes would further harm the growth while it will swell the public debt.
The IMF is said to express also some objection with regards to the Value Added Tax rates and singles that it is not satisfied with the Greek proposals with exception the measures regarding the budget.
According to the latest Greek proposals submitted on Sunday to the Institutions the tax hikes are:
Taxes
Special tax of 12% for corporate profit above €500 million
Increase tax rate from 26% to 29% for corporate profit
Increase of solidarity tax – no details –
After the Euro Summit on Monday, Tsipras said that these are all the measures the government can take for 2015-2016.
It seems that the IMF wants a kind of “redistribution” of the measures which could be something like “cut the f***ing pensions!” And that’s something the Greek PM can hardly do as cutting pensions and wages” is been considered the Government’s Red Lines.
But he could still cut high pensions of €2,000+ to The-Sky-Is-The-Limit, when people receive two, three or more pensions from different funds. And many of them are former politicians. This group* is a minority but it won’t hurt them. It hurts to cut €10 from a €460 pension but it doesn’t hurt much to cut a €1000 from €7000. (*I think I had a report 1-2 years ago about it)
If the 3 Institutions and Tsipras find common ground during the meeting, they will also pave the way for an agreement at the Eurogroup.
The Euro Leaders are expected to bless the Eurogroup agreement on Thursday.
Then Tsipras will have to run back home and try to persuade SYRIZA lawmakers and his junior coalition partner Independent Greeks that this was a good deal and that they have to vote in favor at the Parliament.
PS AHA! Interesting. The IMF realizes that the Greek economy (businesses and people) have been over-taxed! WOW! It must be a shock for the IMF after 5 years of blessing and pressing austerity together with the previous Greek governments.
29% is “over-taxation”, haha, before Karamanlis it was 42%, corporations blackmail
All this melodrama looks very bad to those watching – you know.
That Greec defaulting is such a big issue to the EU Group is amazing.
It certainly does not inspire any kind of confidence in the EU & its management.
I would imagine that any potential investors have left for brighter prospects in disgust of the amature performanace on the part of the EU & its claimed security of tenure.
They probably just want to give him and advance on those 35 billion Juncker is lying about, so that Tsipras can hand it straight back to them to pay this months payments and put the interest on the debt-tab, the restructuring or write down of which
(JC Juncker)
Tsipras should tell the IMF to go f**k itself – their time is finished. If Tspiras is thinking creatively and assuming he does not want to exit the EZ and all its problems, perhaps he should consider a special one-off ‘solidarity tax’ on the Super Profits made by the petrol companies and the supermarkets over the past 5 years or so. Barrels of oil are very cheap nowadays, yet the price of petrol at the pump does not reflect this. Supermarkets have not become more competitive between themselves pricewise over the past 5 years and their prices have risen not fallen. Therefore, it’s high time a monopoly commission was formed to look at why supermarkets are charging the same or similar high prices in times of absolute destitution for those on no or low incomes.
Maybe its time the Greek people were also asked what they would like to do with state spending related to Strato, national call-up, NATO membership and all the rest of the big ‘boys and toys’ projects that eat up many billions of euros wastefully each year.
when people receive two, three or more pensions from different funds – could you explain this?
did those people have real insusances with real money spending and investing (endowment insurance) or it is something else.
people change jobs in their working life and consequently they change social security funds + there are funds for rpofessional groups. and people pay money to all these funds when work.
Thank you,
but to make it clear – do they just change fund (no more payments to it) or continue to pay to 2 or more funds at the same time?
those funds are private?
their portfoilios are invested on market (stocks,bonds…)?
dear @tukan if I have to answer all your questions day-in, day-out I will have no time available to do anything else. “Google reach” is an excellent tool to give insight in many Greek issues.
The social insurance funds are para-state — neither public nor private, as in Germany.
thank you.
Your ignorance is remarkable. The Greek pension system is copied from the German one, where people are insured with different funds. Exactly the same. Just because you are from a communist state does not mean that Greece has the same history: it was always part of the European framework.
there are basically two models of pension systems
a) state independent (real life insurance with real individual investments/savings and no dependency of such pension funds on state budget)
b) state insurance (almost all European systems are +- based on this model where money are not invested but spent and thus it creates BIG hidden long term credit financing for budged – and this is of course problem not only for Greece)
From CNBC: “Pension expenditures account for over 16 percent of GDP, and transfers from the budget to the pension system are close to 10 percent of GDP” it seems that Greek system is mixture of those two (given that expenditures 16 are covered by budget only by 10).
I am interested to know to what extend the Greek system is dependend on budget and to what extent is covered by real portfolios. It has nothing to do with our or your history. It is technical question. Even if your system is based on German it has different parameters for sure.
b) not accurate info: Pension funds either invested in Bonds and/or stay in bank deposits. therefore, Germany angry at ECB’s low interest rates.
Thank you – sounds better, and yes in Germany they have the same (and it was fully covered but now it is pay-as-you-go as in Greece), thus I correrct myslef:
b) model where money are not ALWAYS invested but SOMETIMES spent:)
You are completely wrong. All state social insurance systems are Pay-as-you- go schemes, that depend on current contributions to finance current pensions and medical costs. They are rarely linked directly to the state budget (although they are in the UK).
The German and Greek para-state funds are invested when there is a surplus, as KTG notes. However, the German funds survive on high payments through a high employment rate plus high immigrant worker numbers, along with bad pension levels since 2000. The Greek funds were always in debit owing to high unpaid bills (mostly by those with political connections in ND and Pasok) and have been further damaged by depression (fewer people in work and paying into them) along with being hit by the haircut arranged by the Troika.
So, the Greek pension funds have been made considerably worse by the actions of the Troika. It is pure arrogance for the Troika then to complain about them, especially when pensions were cut by 40%.
You are wrong. Pay-as-you- go was not always the case even in Germany – it fully funded itself on the beginning despite it is state system.
Netherlands – Privately managed pension system is very well developed in the Netherlands, thanks to occupational pension plans that ensure a mandatory coverage of over 90% of all employees.
Chile has capitalisation system (and it helped Chile very much in crisis times), Argentina, Bolivia, Colombia, El Salvador, Mexico (not fully), Estonia, Hungary (was pretty close, but now I am not sure), Kazakhstan – After a transition period of approximately 40 years, the PAYG system will be phased out completely, Poland (I am not sure what is the current status). Hong Kong…
There are many other coutries trying to replace or partly eliminate unsustainable PAYGO sytems SWEDEN, CANADA, UK…
It is difficult process, because politicians want to use money now and they do not care about future unsustainable deficits. They are trying to grab money from existing funds and pension funds are nice big target:(((
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Just imagine. If there would be capital based pension system there would be not only less problems how to fund it and no need to make pension reform, but it could be a buffer for economy during crisis.
Very smart: When all banks get blown to Mars it’s all gone. Chile? Inhabited by Spanish squatters – Mapouche don’t get anything
Wrong.
Such system does not depend on banks. Money are invested to stocks, bonds (state, companes and only some % to bank bonds), rest to other assets (land, commodities, yes also bank deposits but this is not important).
You are one of the most confused people I have ever discussed anything with. I have already told you that the German system is para-state, not state, and now you continue to call the para-state insurance funds as state.
All of the world’s state insurance systems are pay as you go. Read the OECD and IMF reports on social insurance systems. The Bismarckian systems operate differently, at least in principle: the Greek ones ran out of money and tend to operate more like state systems.
The problem with all of you far right commenters here is that you know a little, and think you know a lot. Instead of grasping the obvious limits of your knowledge, you continue to spout right wing and anti-Greek comments all over the web. It makes serious people inclined to vomit.
If you want to play professor role next time, you should be more precise than your disciples, and not start with misleading bullshit:
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“You are completely wrong. All state social insurance systems are Pay-as-you- go schemes” (did I mentioned they are not, before?)
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Because based on your … I understood your point the way: all states have only PAYGO systems, and thus I was writing about something else 🙂 From some reports including the IMF I expained to you that it is simply not true and I did not care about state/parastate.
It seems some of the questions @Tukan is raising are very valid. For example, in their counter-proposal the creditors added: “ensure that, starting January 1, 2015, all supplementary pension funds are only financed by own contributions”. Does that imply that the state budget is helping finance supplementary pension funds?
I have explained above that the Troika destroyed the already weak Greek pension funds, in order to save German and French banks. There is nothing else to say.
If you think that Greek pensioners should die in order that European banks are saved from their own incompetence, then come out and say it. And i don’t know what you think “supplementary funds” means, but this is obviously Troika-speak trying to conceal the importance of the funds for pensions.
Give back to own contributions 27 billion cutten through haircut in psi and jobs
I see only one institution for pensions – IKA-ETAM
pls clear the message above (wrong place) :))
“PS AHA! Interesting. The IMF realizes that the Greek economy (businesses and people) have been over-taxed!”
What I remember, IMF hasn’t just now realised that, but long time ago… but Samaras was too stuborn to go that way (and it was much easier and politicaly safer to increase taxes then cut government spending).
Example of these perverted solutions is when Samaras imposed bigger taxes to all freelancers (and even to pay taxes before receiving the money!!!), just because they know that a lot of doctors and lawyers are hiding their earnings. Just crazy… and this was invention of Samaras government, not the IMF proposal. So instead chasing the violators, its easier just to impose more taxes over the board.
Here governments are much more afraid of rage of public sector, then private sector.
And in my opinion the reason is because here in Greece, we have totally inverted conception about what should be the relation between public and private sector. Here all the governments (but also most of the people) think that private sector is just here so it can be “milked” in order to feed public sector. And as during the years public sector grew to higher and higher levels, more and more “milk” was needed, the process accelerated until we would eventually kill the “cow”.
We have to realize that private sector is not here to support public sector but vice versa… public sector is here only to provide services to private sector and people, and (very important!!!) with minimum requered resources (workers, tools… etc).
Of course here in this totally disturbed environment private sector also has part of its guilt (like above mentioned some doctors or lawyers), but SOME of the private sector, not all… and if some of them created some illegal wealth, they should be prosecuted and thats it, and not just impose bigger taxes to all of private sector in order to be punished, because by this they maybe include some familly run taverna who is hardly surviving and has nothing to do with those big games of oligarchs (and also this “punishement” is just an excuse because governement just badly needs money to cover expences, because while there was money nobody cared… but ok).
Btw I know that the above story is kind of blasphemy here on the blog that cherishes communist ideas… so pls forgive me 🙂
I could not agree with you more. Unfortunately, favoring the public sector is an easy way for politicians to bribe strong constituencies (like public sector unions) using the other people’s (taxpayers’) money. It is not exclusive to Greece. Even in right-leaning U.S. many politicians (e.g., city mayors) are happy to bribe the public employees by promises of comfortable retirement to be paid by future taxpayers. In extreme cases the reality catches up in ugly ways (e.g., the city of Detroit had to declare bankruptcy).
Of course, in cultures accepting corruption as “normal” part of life, the appeal of “big government” is much greater. Many hope to get in and use the power of the government to enrich themselves (whether by benefiting from generous compensation or from bribes).
The idea that cutting taxes on the rich will help the economy, even in good times, is shown to be right wing propaganda. It gives more money to the rich and nothing else.
The idea of cutting state employment in a depression is so fucking stupid, that of course it would not happen in any country — except one that you do not have any accountability to. This is pure nastiness, and you should be ashamed of your economic ignorance. Of course, raising taxes in a depression is another stupid idea, which the Troika forced on Samaras and is now denying that it ever did.
Basically, the Troika are a bunch of bumbling crooks. It is really angering to see the arrogance of power that these uneducated pigs have. What a contrast to the Greek negotiating team — all with PhDs in economics from good UK unis.
Heh… first of all I haven’t said “rich people” but “private sector”, and those two terms are in very few cases the same. Huge amount of private jobs are hardly floating now, and very big number of private jobs are already lost, they say close to a million (much much bigger number then in public sector).
And regarding ignorance, I would say it is on the other side. Because even in Keynes theory… in order to increase spending during downturns (in order to give a push to a slowing economy), the country is expected to accumulate some wealth during economic boom and prosperity (e.g. China is doing exactly that now by building roads, bridges, millions of buildings etc and thus keeping people employed, and I totally agree with the idea). But was that the case with our Greece?! The same Greece that while its booming period, it was running at some moments 10% deficit (deliberately I don’t want to say 16%, in order not to create a flame about which number is correct, both are enormous). Sadly, we spent all our and the money we could borrow (and obviously, and even more sadly that even our children could borrow), to inflate that growth. So what that can tell us about all that growth (was it a bit phony?!). And of course at that time nobody bothered to care and to do some structural reforms in order to fix that at that time (it would be less painful for sure) but left the ticking bomb on hold. And it of course exploded. 🙁 So now we are in the situation that nobody has money, nobody wants to borrow us money, and you are still thinking about increasing salaries, pensions etc.
And regarding rich vs ordinary people… well of course rich people got richer during booming days, but also ordinary people (where I include myself) received big chunk of all this money that is now on our shoulders too (do you think that for example average house of 80-90 m2 in average Galatsi could reach the price of 200.000-250.000e during 2010, if only few tycoons had the money).
So again… this mantra about making your way out of crisis by increasing spending can be applicable to some economies (but certainly not all, and sadly but even more certainly not Greece at this point).
Such semi-informed comments are very tedious to reply to.
Briefly, Keynes did not write about the eurozone. Got that? Secondly, at the time of Keynes the UK economy was the most open in the world, and bore no comparison with the free movement of capital and goods that occur nowadays with the entire EU, including Greece.
Therefore, if you want to use Keynesian ideas you have to understand them in depth and principle, and not repeat things that you learned at school. Clearly you do not understand them, so everything you have written is incorrect.
I used him as an economist that is most mentioned since 2008, as his name (“Keynesian economics”) represents the basis of the approach that is proposed by a lot today’s economists (Krugman, Stiglitz etc). And I can say a few words more then I did previously about all differences between his original ideas, then Friedman, and nowadays tendencies of modern “Keynesian” economists.
And funny but he is the last one from them (Keynesian economists) that I wouldn’t accuse of total global destruction of (western) economy.
But ok, now I can see that there was no need to say more since you know much more than me, and you understand it deeply… and since I lack this depth, can you pls explain a bit more the things that I didn’t understand correctly.
But most of all just give me in couple of words (or point me to some of your previous comments maybe) your view about possible solutions for Greece, is it exiting the Euro and devaluation of Drachma?
(Since I can see a lot of your comments here, I would say that you have some spare time, so we can all learn something)
Thanks
i don’t have that much spare time, but I am very angry with the mess that Germany and others are making of Greece and the EU.
The only solution open for Greece to recover is restructuring of the debt. This should have been done in 2010, and was prevented by Germany in order to protect German and French banks. Now, the debt is owed to the Troika — who chose to do it that way.
Until they accept that the debt cannot be repaid, Greece is fucked. They know this, and play political games to draw out the agony — making the greeks and others suffer for the benefit of the Germans.
I have always been opposed to Grexit. It is not a good solution. I support the Varoufakis position, which is to default within the eurozone. Greece should look outside (Russia and others) for temporary financing, consider leaving the disaster of the euro in the medium term, and basically fuck up Europe in the same way as Europe has been damaging Greece. I think this is actually about to happen, if there is no final agreement this week. Germany has declared financial war on Greece, and appears to have support.
Greece needs to turn away from the fake “friends” of the EU and identify common interests in other nearby regions and beyond. Tsipras has already started the process. The EU is falling to pieces, thanks to Germany.
I totally agree that this level of debt is unsustainable, and it is inevitable to come to some restructuring (my guess would be in next two years timeframe)
But this “default within the eurozone” I think is obvious that it is impossible at this moment.
So either we default and go out of the eurozone, or we stay and do a deal.
If we default… first of all I am not sure that this means that all the debt is gone. Default means that we don’t have money to pay now (not ever), so in essence then there would be again negotiations about restructuring it (Argentinta has this still ongoing I think for part of it). And I am not sure that troika will be very generous again, since it would be a good oportunity to show to other countries (Spain, Portugal etc) that default is not the “way to go”. Regarding financing Greece from outside… well, Russia is not that strong politically far away of its borders, and economically also not in very good position at the moment. China havent showed any interest in Greek issue also. Open markets will be unaccessible for some time. And then new Drachma which will tank at least at the beginning.
Long story short, I am afraid that Greece will be in really dire situation then, and I am afraid that then we will see real humanitarian crisis.
I am for staying and signing a deal (as lesser evil), and really try to fix Greece from a lot of internal problems (which along with euro, got us to this situation… eg corruption, tax evasion etc). And when we fix those issues (its not process of weeks for sure), then we decide if we will leave euro and as “healthy” society go the path of drachma, or not.
Anyway… nor you or me can change what will happen in next days, so its nice to have a normal conversation instead of trashtalk although we have different opinions (this is the least Greece needs now) 🙂
Cheers
It was all about people with high incomes and not about people that are forced into being small businessmen
Detroit is broke cuz it’s build on Indian Land, Manitou told theses idiots a few times to swim back to Europe but they are deaf, dumb and blind.