In the next three months, the new government that emerged from last Sunday’s elections, which, with the exception of the absence of the hard-line drachma-advocates on its far left, admittedly doesn’t look terribly different from the one who came to power last winter with a promise to rip up the 2nd bailout, will be called upon to legislate over 60 separate action items contained in the 3rd bail-out agreement that it signed after six months of clumsy negotiations in order to secure Greece’s continued membership in the Eurozone. I, for one, hope they succeed in their legislative mission. Not only because this legislation is a pre-requisite for subsequent tranches of aid and the funds to recapitalize the ailing Greek banking system (and protect the savings of hundreds of thousands of depositors, poor and rich alike), but also because it contains, along with a number of painful austerity measures, a surprising number of much needed reforms, some of which ironically figured in previous bail-out agreements but were never implemented.
A hopeless romantic who continued to cast his vote for a pro-European, reform-oriented progressive party that still seems to be stuck in single-digits (and did considerably worse in these elections), I didn’t opt for the majority, leftist government partner, Syiza, that won the elections. Still, I tend to agree with its highly capable Minister of the Economy, Euclid Tsakalatos, when he says that the 3rd bail-out program is arguably the best that could have been secured. Along with the prospect of finally addressing the problem of the country’s staggering public debt, the program that he negotiated, if fully implemented, offers a ray of hope in battling Greece’s long-standing problems—tax evasion, the black-market economy, an inefficient public sector and the bureaucratic stranglehold on private investment to name a few.
During the election campaign the conservative opposition party (falsely) claimed that the package was worse than the previous agreements its government had signed. Syriza, for its part, talked about the room for maneuvering the new bailout program allowed. Strikingly absent from the political dialogue preceding the elections was a discourse about the positive benefits of the agreement. Journalists and talk-show hosts rightly focused on the costs of the agreement to the average citizen, but unfortunately made little or no reference to the reforms it foresees. Although political analysts now argue that the distinction between pro- and anti-bailout factions (the “memorandists” and “anti-memorandists”) has lost its relevance in Greek politics, to claim you are actually in favor of the program invites disapprobation and censure from voters and viewers, not to mention friends and acquaintances. The agreement was portrayed to a great extent as a necessary evil.
I wonder, though, how many voters who are so rabidly opposed to the agreement, many of whom decided not to vote in the elections, indeed, many of those who voted for one of the five political parties that have signed or approved one or more of the bailout packages, have actually read the details of the 3rd program?
Granted, there are painful measures in this program, including the requirement to ensure that pension systems do not operate on a deficit. On the other hand, failing to reform a pension system that operates in a country with a falling birthdate in which 40% of the population in 2040 is expected to be pensioners and with a black-market economy just below 30% of GDP is criminal.
And yes, the much-hated national property tax (ENFIA) has its share of unfairness and inefficiencies, all of which should be addressed, but it is still, with the exception of the highly regressive VAT tax that we, like all Europeans, pay on products and services, one of the most equitable taxes in the country, if only because everyone who owns property pays it (in contrast to income taxes, which various well-heeled doctors, lawyers, plumbers, restaurant owners and others continue to evade through the non-issuance of receipts).
The daily print and digital newspaper Naftemporiki recently published a list of the 65 action items that need to be legislated on in the next trimester. It is worth looking at a few hypothetical cases that these measures address. If you answer yes to the majority of these questions, perhaps you, too, are in some way a “memorandist” too.
- A businessman with a hefty bank account owes over €70,000 in taxes. Should the state, as the Memorandum foresees, be entitled to electronically confiscate a portion of the person’s assets to pay the outstanding taxes?
- A car owner has not had his vehicle inspected for safety violations (as required by law) for several years, thus endangering his own safety and those of others on the road. Should this person (again as the Memorandum foresees) be fined?
- A dermatologist with an office in the high-rent district of Kolonaki declares an annual income of only €20,000. The Tax Office has no immediate way of knowing that this taxpayer transferred more than €400,000 abroad in the last five years. Should banks, as provided for in the bailout agreement, be required to provide the state with a statement of all this person’s bank transfers?
The list of reform measures to be passed this fall continues:
- Should someone with outstanding taxes and a high-bracket income be subject to having his or her salary garnished? The bailout program says yes.
- Should the state, as dictated by the 3rd Memorandum, liberalize the energy sector on the basis of international and EU best practices? (Reminder: Portugal, another country saddled with troika-imposed reform measures, has managed with a similar mandate for rationalizing its energy sector to reduce dependence on exports to single-digit levels and now produces over 60% of its energy needs from renewable sources)
- Should the state establish mobile units to crack down on smuggling?
- Should someone with rental income over €12,000 a year be taxed on this income at a higher level than on the income earned by a moderate-income wage earner?
- Should unfair and preferential tax exemptions be abolished?
- Should the state devote more resources to its unit dedicated to taxpayers who owe very large amounts of taxes?
- Should the General Secretariat of Public Income, something akin to the IRS, be protected from political and party interference?
- Should the state draw up a plan to crack down on tax evasion that will include the ability to work with EU governments to identify bank accounts abroad that have not been reported to the Tax Office?
- Should the state promote and facilitate the use of electronic payments (e.g. credit cards) in an effort to cut down on tax evasion?
- Should the names of big tax evaders be published?
- Should the state draw up and implement a plan of action to facilitate exports?
- Should the state be obliged to draft and implement an action plan to reduce the size of the black-market economy, protect workers from illegal labor, and ensure that their employers provide for social security contributions?
- Should access to “closed professions” – notaries public, pharmacists, tour guides, lawyers, etc.—be facilitated?
- Should the state establish a national wealth registry so that it will know the amount of assets taxpayers—and tax evaders—own?
- Should the state set priorities for tax collection and instances of tax evasion so that it will focus on cases in which there is a decent chance of securing back taxes?
- Should the state implement best practices from the International Labor Organization?
As it’s probably clear by now, I do not subscribe to the oft repeated conspiracy theory that the bailout program is an orchestrated attempt on the part of Northern Europe to economically ravage Greece so that their companies can snap up Greek assets at a bargain price. I can’t see how the prospect of a politically unstable, destitute country in such a geopolitically strategic location is something the political leadership in Berlin and Paris is particularly keen on. Many of the measures in the 3rd bailout program, which are based on international (yes, capitalist) best practices and which in the case of Portugal, for example, has allowed to country to now borrow at negative interest rates, seek to reform the state apparatus, encourage investments, and battle tax evasion. Together they are more than just the price Greece needs to pay to remain in the Eurozone. They are perhaps as well—along with the imperative restructuring of public debt, without which Greece is condemned to a never-ending spiral of austerity measures—the country’s last chance for recovery. Much will depend on the ways in which these measures are enforced, but as I said, they seem to offer a glimmer of hope for modernizing the pubic sector.
I’m not naïve. Implementing these measures will demand from the new government considerable political will to stand up against vested interests and corruption. I hope it will find it.
Featured image: Zinaida Serebriakova, “Boris Serebriakova” (1908). The painting, by one of the first women Russian painters to gain international acclaim, may at first glance seem only tangentially related to the subject of the post. I found, however, this portrait of her husband striking in its depiction of the act of reading, which, when one reads wide and critically, seems to me a condition of informed political discourse. Especially on things one disagrees about.