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Victoria Mindova

The government's objectives for the development of the Greek economy next year are too optimistic, a local financial analyst who wished to remain anonymous comments for GRReporter. This was one of the worst years for the country and the expectations for next year are that the difficulties will continue. The government expects a recession of 4.5% whereas the supervisory Troika (the International Monetary Fund, the European Central Bank and the European Commission) provides for a slighter economic shrinkage of 4.2%.

"This is a very optimistic outlook as is the forecast of unemployment. If the measures to support the economic activity such as the privatisation and the attraction of new investments do not yield results I think that we will have a very serious problem next year," forecasts the expert. He stresses that Greece must continue to work at full speed like the current government is acting at present in order to secure internal social equilibrium by the autumn of 2013, when the German elections will take place.

The Greek government is required to properly fulfil, in the coming months, its obligations under the bailout agreement. The tranche of 34.4 billion euro, which Greece received in the middle of December, has almost melted - 16 billion euro went for the first part of the refinancing of banks, 11 billion euro covered the buyback of government bonds (The Greek Buyback) and about seven billion euro filled the gaps of this year’s budget. Currently, the government is in a hurry to fulfil its new obligations in order to receive the next cash injection of 9.3 billion euro by the end of January 2013.

By 21 January next year, when the next meeting of the Eurogroup will take place, Greece must have voted on and adopted the new tax changes, which cancel the taxable income for individuals and increase the tax burden on the majority of taxpayers. The non-taxable minimum income per year is replaced with an automatic tax refunding of not more than two billion euro for those who declare an annual income of up to 25 thousand euro.

The financial expert is clear that no matter how the tax system of the country changes, there will be no positive change unless tax supervision and inspections tighten. "It is known to all that the greater the taxes the more serious the incentives for tax evasion and unfairness. Without regular tax inspections and controls, we are likely to continue to have gaps in the revenue and to not be able to fulfil the budget targets."

In the coming weeks, the government will announce its decision on the new increase in electricity prices. According to the latest information, the average rise in the price of electricity will reach 11%. Before the payment of the new tranche, a commissioner should be assigned to the Ministry of Finance to supervise the tax revenues. He will be dealing exclusively with the activities of the tax departments and will be taking care of the performance and accountability of revenue to the state treasury. In order to receive another nine billion euro, the government should cut 10% of doctors working in the National Organisation for Health Care Provision, ensure greater independence of the Agency for Privatisation and launch strict supervision of budget performance in various ministries.

The cabinet is currently discussing specific actions to prevent new outbreaks of social unrest, says the financial expert. The new increased taxes, the growing unemployment, the heavy indebtedness of households and the drastic decline in living standards in Greece accumulate negative energy in the ordinary citizens, which trade union leaders in various spheres of activity additionally catalyze. The disclosure of the names of major traders and businessmen, who have not paid taxes for years, and of false pensions, which have drained five billion euro from the social funds over the past 10 years is being considered a step in the right direction.

"Restricting tax unfairness more seriously, returning some of the obligations of the state to the private sector and creating investment incentives will prevent another social breakdown in the long run," explains the analyst. He stresses that the benefits of deferring the repayment of bank loans by the needy will significantly contribute to appeasing the spirits in the country. The same will be the effect of the privatisation programme that has aready been delayed for two years.

"2013 will be critical for Greece. This will be the seventh consecutive year of recession and the stakes are very high. Measures to stimulate economic growth should be taken. This will relieve the taxpayers of some of the burden and will help prevent another major public resistance against the new higher taxes and additional cuts that come with the new year, which we saw in the past period," the financial analyst concludes.

The financial circles in Greece are of the opinion that the country should maintain its current course of policy and action until the German parliamentary elections. The prevailing opinions in the country are that after the German elections, the lenders will give the green light for a new massive restructuring of the Greek external debt, which this time will affect the public sector rather than private investors. Although Berlin and Brussels still strongly deny such scenarios, financial experts note that Greece's debt will continue to increase due to the negative dynamics of the GDP and it will not get away with another haircut. The new victims this time will be the European Central Bank and the European countries whose central banks hold Greek government bonds.