Weekend Economists Volvemos a Puerto Rico May 22-25, 2015

[MattSh]

33. Obama Has A Big Fat Greek Finger - The Automatic Earth

Will this Greek stuff ever stop? Probably, but don’t hold your breath. I was reading up on China, but that will have to wait till tomorrow. A friend just sent me a Sputnik story -they’re a Russian news channel, so they can’t be trusted, right?!- that adds more juice to the Syriza vs troika tale. And whaddaya know, the king of Greece leaks, Paul Mason at Channel 4, is involved once again.

Let’s do Mason first. He’s in Athens and, wait for it, he scored another leak. But not a direct leak to Mason; this one concerns a European Commission document leaked to Greek newspaper To Vima. There are some useful numbers here. Mason:

Greece: Europe’s Last-Ditch Effort To Keep It In Euro?

According to To Vima, the EU commission boss (Juncker, ed.) has offered Greece a deal that delays the harshest austerity for two years, and releases €5bn of bailout money to help fill the gaps in the Greek budget. To get the money Greece has to:

• Run a primary surplus of 0.75% of GDP – much lower than the previous demands from the ECB and IMF. And a surplus of 2% of GDP in 2016.

• This rises to 3.5% for both of the next years, but would have to be seen as notional – as committing to anything in 2018 barely matters when you are three weeks from default.

• Greece has to raise VAT to 18% – with 15% for card transactions. This cleverly forces tax evaders into the formal economy by setting a relatively low rate.

I was wondering why I saw two different numbers being reported, but this makes sense. As much as I am suspicious of the war on cash issue as well, we must be aware that using cash to avoid taxes is a huge issue in Greece, and Syriza has do to something about that. I’m guessing there’s a similar difference for the lower VAT rate, 6.5% vs 9.5%.

• Greece gets its way on labour market reform, which will be done using “ILO best practice”. But it has to keep an unpopular property tax called ENFIA and it has to reduce pension entitlements for public sector workers.

Complete story at - http://www.theautomaticearth.com/2015/05/obama-has-a-big-fat-greek-finger/