Saturday, September 29, 2012

Greece: Class warfare, banksters and money laundering

Instead of an analysis of what kind of "austerity measures" and for whom the troika and its vassals in the Greek government have been preparing, I'll just show you a table of taxes before and after the the new tax system, that is part of the latest austerity package, is implemented, by income category. This is income tax only, it does not include social security taxes... The really fun part is at the bottom of the table [from, I took the liberty of translating the labels]

A fair tax system
This comes on top of a new tax system for freelancers / professionals, which imposes a flat tax (somewhere at the 25-35% range as government sources are leaking) from the first Euro earned, on all such non-wage earners, on top of a 500 Euro per annum fee. Now it is true that a mass of tax-evaders are such "free professionals" as they are called here (doctors, lawyers, engineers, but also designers, translators etc), included though in this category are precarious and part-time workers, young people with under minimum wage employment, second jobs etc.The number of the underpaid young, and not only, professionals that are in this category is perhaps over 250.000. So these people will be asked to be some obscene amount of their income in taxes (include another 500 - 5000 Euro on social security tax, depending on seniority - again not depending income) and ~300.000 professionals have zero or negative income this year after taxes. On the other hand if you are making over 100k per year, you have just moved the part over 100k, from a 45%, and everything between 60k and 100k from a 40% income bracket to the 25-35% rate.  Bizarrely this is sold as "taxing the tax-evading professionals", because the government has stopped even trying to make some sort of mathematical sense and hopes that soundbites substitute for arithmetic for enough people....

A cash injection for corruption

This new series of destructive measures estimated to be upwards of 14 billion Euros (that's like 7% of GDP and rising) would be enough to kill the economy if it weren't dead already. That this is demanded by the troika despite the fact that unemployment is climbing toward 30%, about a million and a half Greeks are living in households with no income at all, and that, if things go as planned, by the end of next year we will be well beyond a Great Depression scale slump, at a projected GDP decline of 30% over 5 years, does not seem to bother anyone that "matters". The new coalition government, elected on a platform of renegotiating the terms of the memorandum or at least lightening up the burden of austerity, is sending its electoral program to the dust-bin, proceeding with measures such as a reduction of farmers' pensions (from 330 Euros to 300 euros per month). Greek society is near unanimous in condemning this policy as unfair , but Samaras is adamant that he will honor none of his pre-election pledges and has been running around Europe playing the role of the good and obedient vassal.

What's at stake is the loan installment of 40 billion euros that will be used among other things to recapitalize already bankrupt and bailed-out private banks. This recapitalization was supposed to have occurred in the first half of 2012, following the successful completion of the PSI deal, yet the troika has unilaterally and against all signed agreements, held the loan back... Preparations are being made: the publicly owned banks, although arguably in better shape than the private ones, were exempt from the PSI recapitalization deal, (as were the pension funds with truly murderous consequences) are being given to bankrupt private banks, surviving only due to loans shouldered by the Greek taxpayer. ATE, owner of mortgages of half the farming land in the country was given away to Piraeus bank recently, but only the healthy parts: the bad parts will still be shouldered by the taxpayers. Piraeus bank incidentally, apart from being the recipient of successive bailout funds, was involved in a scandal recently, something exceptional as news, only because banks are almost fully protected from media scrutiny in Greece... Since the Greek banking system is the at the heart of clientilism and cronyism and since there are media magnates and other oligarchs in dire need of a liquidity transfusion, the whole corrupt banker - oligarch - political complex, is in urgent need of this loan. Public contractors and state suppliers will acquire liquidity, political parties in the verge of bankruptcy (ND and PASOK, especially PASOK) might avoid it, and the cientilist system can be set in motion again, albeit at a much lower rate of return for the troikan parties' bought voters.

10 billion euros laundered

Meanwhile, one of the few remaining relatively independent, if right-leaning newspapers in Greece published an amazing story, that if confirmed might offer a view of the scale of plunder that the country has been subjected to by the elites. Real News published last Sunday details of an investigation on money laundering involving over 10 billion Euros, the current Speaker of parliament, Vangelis Meimarakis, and at least two more conservative former ministers:

...Meimarakis is one of more than 30 politicians and public figures who have come under the microscope following a probe by the Financial Crimes Squad (SDOE) into corruption in public life.
Prosecutor Popi Papandreou, who has taken over the probe from SDOE, is expected to focus on claims against Meimarakis, former Transport Minister Michalis Liapis and former Public Order Minister Giorgos Voulgarakis.
All three were implicated in a multi-billion-euro money-laundering network in a Real News report last Sunday. Before summoning the three politicians, Papandreou is expected to call two contractors -- Iosif Livanos and Giorgos Zografakis -- who allegedly accused the three ex-ministers of involvement in money laundering with rival contractor Yiannis Carouzos.
This investigation was under wraps and going nowhere for at least a year and a half. The Speaker of the House maintains his innocence and has definitely lost his cool, although this sort of macho - hoodlum behavior is par for the course in today's New Democracy...

This is BTW why the Greek elites and their media are in complete terror that a party like SYRIZA, with no ties to this pyramid of corruption, might eventually win an election. In point of fact SYRIZA's immediate economic program is not much to the left of Paul Krugman. What is destabilizing however is the threat of local elites losing control of the web of graft that they cling on to since their grandfathers emerged after the war, as nazi-friendly black-marketeers who bought a suit and became businessmen. That EU elites chose to support the parties that nurtured this system, is probably telling as to where their interests lie...

Postscript: Athens. Social Meltdown

Finally, this is a very good brief recap of Greece's turmoil and destruction these past two years, from the ground:

Athens: Social Meltdown from Ross Domoney on Vimeo.

Cross-posted at Eurotrib

Monday, September 10, 2012

Comical Welt: All's well in the austerity front. No, really!

This has to be read to be believed "Die Welt: Happy Days Ahead? Euro Zone Austerity Measures Starting To Work" [Original in German]:

If the numbers are right, the European crisis countries are apparently healing faster than the markets have realized -- or want to realize.

An astonishingly positive total picture emerges from the various statistics. The economies of the euro zone's periphery nations are more competitive than they were just a few months ago; their industries are selling more abroad, and trade deficits are narrowing.

"Blood, sweat and tears -- everything people in these economies have been through is paying off," says Bert Colijn, a jobs market expert with Conference Board, a private economic research institute." The competitivity of the crisis countries is improving, and these first signs of improvement are encouraging. The periphery countries are moving in the right direction."

What is this right direction that brings PIIGS singing out in joy at the good effects of austerity? Well people there are working for pennies now! And doesn't that make everybody happy?

One particularly salutary development is cheaper labor costs. In Ireland, Spain and even Greece, unit labor costs have fallen significantly over the past few years. Conference Board economist Colijn and his colleague Bart van Ark researched that development, and report that of all the euro zone countries, the one that has increased its competitivity most is Ireland. Unit labor costs in Irish industry have fallen by 41.5 percent since 2008, which means that labor costs in Ireland are lower than they are in Poland and other middle and eastern European countries.

So we're there? Ordoliberal austerity's Land of Canaan has been reached? Herbert Hoover has been vindicated? Well not quite yet... it remains for the Archons of Investment to take heed of the redemption of the sinners, and in, a not quite adequately determined time-frame, we will have some sort of Growth and Jobs:

It will take time before lower unit labor costs produce full effects, but already they have made goods from those countries cheaper. In the long run, it will make them more interesting to investors.

At the moment, however, uncertainty about the future of the monetary union is keeping companies from investing. Only when they start investing again can the results of lowered costs bear its real fruit in creating growth and jobs.

Yes. At last! We're talking low paying jobs of course. And no welfare state - goes without saying. Possibly a large spike at infant mortality. And those pensions? Well the good thing about a reduced life expectancy is that fewer will feel their absence...

But let's try to confirm the "competitivity" improvement under austerity for most of the PIIGS countries from 2008 to 2012. We'll be using The Global Competitiveness Report, a composite index that has more to do with an investor's take on how they would like a country to be, rather than anything else. As investor sentiment seems to be the driving argument in the quoted article it seems useful to check the related rankings... So:

  • In the Global Competitiveness Index rankings for 2007-2008, Portugal was ranked 43d, yet this year it is ranked 49th...

  • Ireland was ranked 22d in 2007-2008, and 27th this year (despite or probably because of the >40% drop in unit labor values there I wonder?)

  • Italy was the only one of the PIIGS countries to improve from 49th (2007) to 42d, possibly because it was the country least inflicted with austerity of the five

  • Greece has dived from 67th place to 96th, as its economy was destroyed by unprecedented turbo austerity

  • Spain dropped from 29th to 36th.

Is that an improvement or what?

The whole propagandistic tenor of the piece (fox news on weed) is breathtaking since it is running counter to pretty much every published assessment of the situation. For example Bloomberg recently wrote about Spain that:

"We fear that things are likely to get worse before they get better," said Martin van Vliet, an economist at ING Bank in Amsterdam, who expects Spain will seek additional financial aid as early as next month. "With much more fiscal austerity in the pipeline and unemployment at astronomic highs, the risks are clearly tilted toward a more protracted recession."

Separate data today from the ECB showed that private-sector deposits at Spanish banks fell by a record in July, dropping 74.2 billion euros ($93 billion), or 4.7 percent, to 1.51 trillion euros. That's the biggest decline since at least 1997, when the ECB's data series started.

As Migeru pointed out in an f/b conversation, this is running counter to Die Welt's other coverage ("Spain on the brink of bankruptcy" on Sept 7, just five days after the posted article).

Could it be some sort of sarcasm that is being missed in translation? Is it part of a propaganda effort to create a more positive atmosphere toward the south in German public opinion? What? I don't know but is sure reads funny in a dark and obscene way... Cross-posted in the European Tribune