Disputed Reports that Troika Wants More Spending Cuts

ATHENS – Even two bailouts totaling $324 billion to save Greece haven’t been enough because of an old bugaboo – tax evasion – and international lenders reportedly have again insisted that tax cheats costing the country more than $72 billion be prosecuted or the government will have to make $14.6 billion. European Commission officials denied stories in Greek media that officials of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika were due here March 26 for more inspections of the country’s economic outlook. Greece has been reluctant to go after tax evaders for decades and even a recent roundup of more than 100 has not yielded any prosecutions as court delays mean it could be up to 10 years before cases are settled.
The newspaper Kathimerini said that unless tax evasion prosecutions yield some money fast that the government, which has already put Greeks under repeated pay cuts, tax hikes, slashed pensions and is set to fire 150,000 workers over the next three years, will have to make even more spending cuts, most likely on welfare and public administration. Austerity measures attached to the bailouts are taking their toll, with a new 22-32 percent cut in the minimum wage and a cut in unemployment benefits to $506 a month – before taxes –  imposed because tax revenues are less than expected due to tax evasion, forcing workers to pay for the monies lost to tax cheats.
Troika officials said they want Greece to bring in at least $4.66 billion from tax evaders or make the spending cuts. A report published by the IMF in December stated that nearly 75 percent Greece’s self-employed workers declare incomes below the lowest tax level so that they would not have to pay any taxes, including doctors, lawyers and other professions with big incomes but no tax liability, putting the onus on workers who have taxes taken out of their checks. The underground economy is estimated to encompass 30% of the Gross Domestic Product (GDP), creating another major revenue drain, and critics said the tax hikes have pushed otherwise law-abiding Greeks to find ways to avoid paying taxes because tax cheats escape prosecution. The government collects only about 1 percent of outstanding balances, which adds to the country’s debt and has helped build the economic crisis.
Another area of inspection during the visit was expected to be the long-delayed liberalization of closed professions which enjoy monopolies, particularly the tax industry. Officials of the temporary hybrid government of PASOK Socialists and their bitter rival New Democracy Conservatives are at odds over what to do about the strong taxi lobby which has succeeded in blocking reforms and which last year went on repeated strikes and blocked access to ports and other transportation areas during the height of the tourist season. Successive Greek governments have also failed to open the closed professions which the Troika has said is critical to increasing competition and lowering prices because those favored industries have guaranteed profits.
The demands will fall on the new government once elections are held, expected to be on either April 29 or May 6, according to government spokesman Pantelis Kapsis. Recent surveys show that New Democracy is still in the lead, with between 17.8-20.3 percent support, while PASOK was second, although all the polls show support for the two parties which have ruled Greece for more than 35 years is dropping because, while ideological opposites, they both voted for and supported the austerity measures which have created two years of protests, strikes and riots. Despite those harsh measures, some Greeks continue to give their support to those major parties, although the levels are slipping.
New PASOK leader Evangelos Venizelos, who just stepped down from his post as Finance Minister after doubling income and property taxes and taxing the poor while failing to garner any prosecutions of major tax evaders, said he is open to the idea of a continued coalition with New Democracy, but the Conservatives’ leader Antonis Samaras said he wants Greeks to give him a mandate outright. Kathimerini said Venizelos has put a condition on his support for another coalition: he wants a non-partisan Prime Minister appointed to the position Samaras covets. That most likely would mean that current interim Prime Minister Lucas Papademos would stay in his position and that there would be no change in the current government after the election, despite a rise in support for anti-bailout parties who would be marginalized and have no say in the next administration, meaning no change for Greeks.