Greece's annual Thessaloniki International Fair will not close a deepening divide between Greeks who pay taxes and those who depend on the state to collect them, financial columnist Agis Veroutis argued in a piece published by Capital.gr on Tuesday.
Veroutis wrote that Greece's headline numbers look strong from the outside: a primary budget surplus near 5% of gross domestic product, record tax revenues, a rising stock market, growing wages and a debt-to-GDP ratio falling faster than lenders and the so-called troika of creditors had projected. But he said that picture is misleading.
He argued that a surplus of that size was never actually the goal. Under Greece's third international bailout memorandum, negotiated while Alexis Tsipras was prime minister, the agreed target was a primary surplus of 3.2% of GDP for the earlier years and 2.2% for the years that followed, he wrote. A surplus of 4.9%, in his view, is a policy failure rather than an achievement, because it drains 1.8 percentage points of GDP more from the economy each year than the state actually needs, at the cost of lost growth, lost investment by firms shut out of bank credit, lost consumption, and damage to small businesses and the self-employed. He wrote that the government of Prime Minister Kyriakos Mitsotakis has an openly stated goal of pushing such businesses to close, so that larger companies face less competition and can expand into the gap.
What the Thessaloniki Fair is
The Thessaloniki International Fair is an annual trade exhibition in northern Greece where the prime minister traditionally delivers a keynote address setting out the government's economic and social policy priorities for the year ahead.
Veroutis wrote that Greece, a country of about 10 million people with fewer than 8 million economically active, has close to 4 million tax registration numbers carrying overdue debts to the tax office, 2.5 million loans classified as non-performing, perhaps 1 million people behind on payments to social security funds, and an unknown number in arrears with electricity providers. He said it was impossible to credibly claim that four to six million people are strategic defaulters, a label he said is used by those who live off the public purse and are paid from other people's taxes.
Given that, he wrote, the 72-installment debt repayment scheme should never have been scrapped over the past three years. Instead, he argued, Greece should have created a permanent 120-installment scheme for people worn down by 17 years of heavy taxation. He noted that taxes are paid by a narrow slice of the productive economy, so a tax burden equal to 42% of total GDP falls far more heavily on that group than on people whose taxes are simply deducted from public-sector pay.
Billions in unpaid tax and insurance debt
Citing figures covering what he described as a seven-year period, Veroutis wrote that non-performing debts owed to the tax authorities grew by €55.4 billion, out of a total of €113 billion owed today, while debts to social security funds grew by roughly a further €20 billion. He said he was not certain whether the total owed to those funds was €50 billion or higher.
He said this worsening picture, stretching back almost two decades, has created what he called an invisible rift between two groups: those who pay and those who collect. He wrote that anyone who has spoken with an accountant serving small businesses over the past three years would hear about the market's illiquidity and sense a build-up of hostility toward both the government and the opposition, which he said shares the same tax-focused instincts.
Veroutis wrote that accountants describe a state that systematically squeezes whoever it can reach, regardless of the effect on their survival. He pointed to past remarks by Finance Minister Kostis Hatzidakis describing some taxpayers as devious, and by a minister named Theoharis, who said small businesses needed to close for the market to be cleaned up, as comments that anger people on the paying side of the system.
Meanwhile, he wrote, actual tax evaders continue their activities unimpeded, whether that means smuggling fuel and cigarettes, public school teachers giving undeclared private lessons, or construction workers and cleaners, because a state already sated on revenue from the rest of the productive economy does not bother pursuing them.
Housing, demographic and liquidity risks
Veroutis wrote that Greece's housing shortage and demographic decline have already become framed as existential problems for society, and that a liquidity problem in the market is expected once funding from the European Union's recovery fund ends. He called this almost certain, pointing to what he described as an artificially concentrated banking sector of two or three small banks and four large ones, compared with more than 400 banks in Austria, a country with a similar population to Greece.
The real question for the Fair speech
Veroutis argued that the central question for this year's Thessaloniki Fair speech is not whether the government will lower presumptive tax assessments for people early in their careers or close to retirement, trim the employer contribution to the EFKA social security fund, add €500 a year to pensions, or restore a 14th monthly salary for civil servants, measures he said were being floated as relief ahead of the address. The real question, he wrote, is whether Mitsotakis, or anyone else in government, has any genuine intention of bridging the divide between those who pay and those who collect.
He said that intention does not yet need to be a full plan, only a credible, stated commitment.
He was critical of the opposition, writing that both Tsipras, who previously served as prime minister and now leads a smaller party, and Nikos Androulakis, leader of the PASOK party, talk only about raising taxes, speaking from what he called an unrealistic world of their own. He said the rest of the opposition is single-issue and fringe, and dismissed the Communist Party of Greece, KKE, saying it has nothing to offer beyond calls for a proletarian revolution.
He closed by asking whether anyone else had said anything different that he might have missed.
