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Greece is shock! Permanent & stricter “Capital controls” for public servants and pensioners

A shock-measure: civil servants and pensioners will be subject to stricter capital controls than the rest of the Greeks. They will be able to withdraw only €150 per week – with the cash withdrawal cap being €420 per week – that is a total of €600 per month. The rest of their wage or pension they will have to spend by using debit or credit card.

The news fell like a bombshell on Saturday evening and spoiled the weekend of millions of Greeks. It will probably spoil the rest of their lives too.

Greek media revealed, that the Finance Ministry plans to impose such a measure in order to combat tax evasion, but of course, not the tax evasion committed by the civil servants and pensioners as this is not possible as the state deducts their share on tax before they receive wages and pensions but the tax evasion committed by business owners.

According to the Finance Ministry plan, civil servants and pensioners will be able to withdraw in cash only part of their wages and pensions and the rest will have to remain in their bank deposit account. This remaining amount they will have to spend only through the compulsory use of debit or credit card.

“The measure will affect 2.65 million pensioners and 600,000 civil servants,” notes newspaper To Vima that revealed the shocking plan.

The newspaper adds that with this measure, the compulsory use of plastic money, the business owner , whether a shop or a professional like doctor, plumber etc will not be able to evade taxes since all transactions will be recorded in the banking system.

The Finance Ministry reasoning behind this plan is first of all the assumption that the money – or large party of the money – it pays in wages and pensions is been used in real economy without receipt thus without Value Added Tax and tax revenues for the state.

“Every month the State and the pension funds pay for salaries and pensions of approximately €2.6 billion, that is €30 billion per year.  The salary or the pension comes into the bank account of the beneficiary, who can withdraw 420 euro per week due to the capital controls.

This cash money is being used for the purchase of goods or services “and a large percentage of these transactions does not bring revenues to the state as the transactions are being done without the issue of receipt or receipt are issued by so-called fake cash registers which are manipulated to show less revenues.

In this way, the state suffers revenue losses of approximately 15-20 billion euro per year due to not collection of Value Added Tax and income tax,” from businesses and self-employed.

With this measure the state calculates that it will receive in no time revenues from V.A.T. and will not miss a cent from income tax. The state expects to rapidly increase its revenues and “proceeds to future reduction of the tax rates of 8.500,000 taxpayers.”

The Finance Ministry apparently considers to exempt pensioners of over 75 years old from the measure as well as those living in remote areas where the use of plastic money is limited.

If the measure successfully increases the state revenues and does not puts obstacles in the operation of households, “it can be extended also to salaries of the private sector.”

Measure officially not dismissed

The measure is supposed to be implemented next year. Alternate Finance Minister Tryfon Alexiadis, former tax official and now in charge of changes in taxation and taxes in general, did not dismiss the news. Speaking to private Mega TV on Sunday, he stressed that “the intention of the Finance Ministry to extend the use of plastic money, compulsory and voluntary, in order to combat tax evasion and the fact collection of V.A.T.”

In a Sybilla-style oracle, he said that “no capital controls will be imposed on wages” and that “whatever will be decided will not surprise anyone.” He advised Greeks to not fear. He added that “any changes will apply as of 1. January 2016.”

“Economics – the Basics” for 3. school grade

I could comment right away “the measure is a crap“, I am a polite lady and as a blogger I think that I am obliged to write down my arguments.

  1. the measure violates 2 articles of the Constitution.
  2. then it deprives people from accessing their full pension or salary.
  3. and it scraps equality among citizens and taxpayers then it creates two categories of citizens: civil servants & pensioners with incentives and credits, non-civil servants & non-pensioners with less privileges.
  4. it creates two categories of businesses: consumers should prefer super-markets & big companies, while avoid small businesses that will be in competition disadvantage.
  5. it can not secure – and of course not prohibit – that the cash withdraw will not be used to pay doctors, plumbers etc.
  6. it will drive households that pay utility bills (electricity, water, natural gas, telecommunications etc) per “bank monthly order”.
  7. Part of Greek citizens will be able to withdraw €1,680 per month, while part of citizens only €600.

And 8. and most important: it will make consumption compulsory in a country where low pensioners have to cover their basic needs by borrowing money from relatives and friends – to start with. Not to mention what will happen if this measure will apply also in the private sector, where many employees are paid with 2-5 months delay. I could expand my list of arguments with lots of examples form the real life of Greeks in times of recession, austerity and capital controls. But this is the subject of another post.

On the other hand, low pensioners of 300-600 euro per month will still be able to  withdraw the whole amount of their pension only in slower intervals.

A nice hole in the water? Probably. I have no idea who worked out this simplified and generalized plan but I have the suspicion that this ‘official’ has not graduated from high school yet.

Anyway, the plan revelation triggered an outcry and anger not only among the civil servants and pensioners but also among those not affected by it.

Plastic money compulsory for new companies

Another measure is apparently under way in the fight of tax evasion.

“Companies that are founded from next year onward plus a range of sectors of the Greek economy will only be able to accept payment via debit or credit card, according to a plan being drawn up by the government.

The plan, which has yet to receive the final approval from the country’s lenders, foresees all new companies having to be equipped with point of sale (POS) terminals that can accept credit and debit cards. The same will apply to numerous professions like will include doctors, lawyers, electricians and plumbers, which are all professions where tax evasion is thought to be rife.” (full article ekathimerini)

Also in this case, the ambitious legislator will create 2 businesses categories and exclude form competition the new companies as they will not be able to accept cash.

Who wins?

One has also to ask who wins from these measures except the state and the revenues it calculates to receive.

For sure the biggest winner are the banks: first of all, they will keep longer the amounts of pensions and civil servants salaries. It could be 1-1.5 billion euro per month. Secondly, because they charge 2 euro per transaction via debit or credit card.

Next to banks, a new business sector is skyrocketing in Greece: the companies that sell the POS-devices.

One has also to ask whether the state will use this option to deposit with delay salaries and pensions.

PS to make one thing clear: yes, the state should combat the tax evasion and yes, people should or could learn to use plastic money – even though this benefits only the banks. But the state cannot achieve its goals by punishing the consumers. In this troublesome country, they always strike the wrong target.

and furthermore, in order to use debit or credit card one has to have a bank account and money on this account.

So far, we have heard of not a single measure that would bring money to bank accounts.

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  1. costa sakellariou

    so! you are a polite woman blogger and not a male blogger!

    interesting clue…

    as far as the story : the only upside to the story is that there might not be so many pensioners crowding the buses early in the morning in order to wait in the banks and check their accounts…of course, this is a memory of how things were years back…the 103 from brahami was always packed with old people at 8 am…now they are going to have to figure out plastic and atms…nightmare!

  2. I agree with this measure. The money will always be in their account to send to friends or relatives etc. People simply do not need much cash. I spend no more than 100 euros of physical cash over a monthly spend (including bills, family shopping for 3 people etc.) of 2,000 Euros

    • keeptalkinggreece

      of course, you agree, dear. You are a SYRIZEE with 2,000 euro available income to spend per month.

    • Giaourti Giaourtaki

      Get old and have bad eyes and shaky hands and just try or just open your eyes and you will face old folks that already have problems to concentrate on anything in a supermarket because the cellphone-monkeys around them with their blabla drive them mad and normally they try to prevent to go there.

  3. No my argument is that cash is no longer necessary. The pensioners and salaried people still get the same salary, just that they have to pay things by card or bank transfer. Whats wrong with that? This will help eliminate the black economy.

  4. And stop lying. Banks do not charge 2 euro per transaction with credit or debit card, thats completely wrong. For the consumer the cost is 0. For the seller, the cost is 0% with a debit card and 2% of the cost of the transaction with credit card.

    Are you a cash black money player as well that hates using cards? It seems so

    • keeptalkinggreece

      you think the seller will not charge it on the customer?

    • Giaourti Giaourtaki

      For consumers zero? That thought also many tourists until they came back home and faced a fee of 7.50 for every time using their cards, so today it is much more expensive without money-exchange than it was before with traveller cheques and the reason for tourists preferring cash and that now everybody gets ripped off who has to pay more than 70 Euros cash; this is also nice for the staff: No more tip because the bank takes it all.
      And why do you think small shops which accept cards have a minimum?

  5. And as I am sure you know, by law every pensioner and salaried worker must have a bank account, otherwise they cannot receive their salary. Unless, of course, they are ‘off the books’. If you have a bank account, by default you have, or have access to a debit card.

    • Giaourti Giaourtaki

      The first weeks of the EU-sanctions via capital-control a million new cards were issued to people who don’t want this shit. Any idea how fast this plastic gets wasted by a small sand- or bread-corn?

    • costa sakellariou

      using plastic is NOT the answer…

      i think we see what effect is had had on the ‘developed’ economies of the world…

      hyper consumerism and no concept of debt!

      no good…

  6. So… what’s the problem? I earn 800 euros a month and I pay most of my bills with bank transfers or with a plastic card. My mother, with 75 years old, do the same. She learned quickly. When I need her help, she gives me her plastic card and I transfer her money to my bank account. Greeks still can withdraw €600 per month from the cash machine… and that’s a lot of bills in the wallet.

    • keeptalkinggreece

      you are not enforced to do so, aren’t you?

      • No, I am authorized to fill my wallet with more than € 600 in coins and bills, every month, thank god for that.

    • Giaourti Giaourtaki

      But normally poor people first take care of that they won’t starve the rest of the month, get their medicine and pay their bills later and now the authoritarians want it the other way round.
      Hopefully the reactions to this will be more black labour and tax-evasion as the government was only voted by 19.5%, very, very democratic this crime.

  7. “So… what’s the problem?”
    The problem is that this is my money that I earned (not stole) and I paid my taxes. By what right I should be limited to access MY money. Just because the government is not capable of doing its job and tackle tax evasion, and they will because of that do measures for everybody?!?!

    “Greeks still can withdraw €600 per month from the cash machine… and that’s a lot of bills in the wallet.”
    And again, who gives you the right to conclude how much money is enough in my wallet???

    I am really sick of government after government doing the same thing… instead of running tax evaders, they are punishing all of us (under story that this is fight against corruption and tax evaders)!!!

  8. “the state should combat the tax evasion”

    Ridiculous. The Greek state is now a front for oligarchs with only the form of a democracy. People vote for politicians who promise X, they deliver the opposite after being blackmailed by EU autocrats. Taking taxes from those whose voice is no longer represented is taxation without representation. The state has no moral authority to collect taxes now even under the standard statists beliefs, let alone combat tax evasion.

  9. Seems like a decent measure. It does miss the main point though. This crisis was mainly created by a deal between politicians and bankers such as Goldman Sachs. GS knew exactly what they were doing when they unfairly indebted the greek people and sunk the greek economy further. The only thing that can restore that is a class action lawsuit. The greek people needs to sue GS instead of taking it out on pensioners.

  10. …well, the most interesting part of this is the fact that by using plastic money/creditcards, you are saving the banks from fullfilling their promise to pay. Cash is the only true money, numbers on your account are only promises to pay. I guess the banks are in deep sh-t, not beeing able to fulfill their commitments…

    • Bravo.

      The story is much bigger than plastic in Greece. This is a Troika move, representing EU banks / ECB / BIS policy. Why the move to electronic currency? Because we are in stage 2 of a worldwide economic crash and this time what is going to go down are the banks, since the stock market is already an empty joke and punters have already started panic-selling “safe” bonds. And when the banks go, as signed at the November 2014 G20 in Brisbane, ALL systemic banks will automatically bail-in depositors money. Because…banks do not have the equity, despite the clown show of ECB stress-testing, and are in debt to the tune of trillions in the CDS shadow banking sector.

      Keep an eye on Deutsche Bank, the most dangerously exposed bank in the world, whose CDS exposure is many times larger than the entire German economy. It is already on massive life support.

      In other words, plastic money means banks can keep YOUR money – i.e. salaries, pensions and savings.

  11. Get real, everyone. Who seriously believes cash is the only real money? Heard of quantitive easing i.e. governments just print money? Whether it’s cash or plastic you still need it to be supported by a banking system and a currency the world of finance believes in. Nothing wrong with plastic. Easier to carry round. In most of the rest of the world everything can be paid for with plastic. It’s more international, reduces the whole problem of carrying different currencies. Even little businesses can get POS machines. Why should they be threatened by this? This is 2015, for heaven’s sake.

    • keeptalkinggreece

      apparently you didn’t read the post.

    • Apparently you live in USA or a “Five Eyes” country. The rest of the world uses cash.

      Or you work in banking and are pulling the wool…:)
      There was nothing wrong with cash before banks became gambling dens.
      Banks have become casinos that have run out of cash i.e. value money, not “play” money chips.

      When the dust clears I think you’ll find we’ll be using real money and that only some banks will survive as nationalised non-currency issuers, and the rest bankrupted and gone.