Greece's 2012 budget

Submitted by martin on 22 November, 2011 - 8:54

By Theodora Polenta

Greek minister of economics Evangelos Venizelos has submitted an even tougher 2012 budget.

Using habitual social democratic double-talk, Evangelos Venizelos declared that no extra measures are included in the 2012 budget other than the ones that have already been voted in parliament.
He contradict himself in his very next sentence, stating that no extra measures will be introduced provided that the Greek people cooperate in the collection of the multiple new taxes and provided that the predicted parameters of the budget on growth, deficit reduction, and increased exports are validated.

Almost two years' continuous squeeze on disposable income makes the collection of some of the taxes economically not feasible. Workers with a meagre income of Є300, Є400 or Є500 will not pay taexs.

The 2011 budget resulted in a negative growth of -5.8% (as against predictions of -3%) and a deficit of 9% of the GDP (predicted 7.6%). The 2012 budget is asked to raise an extra Є2.5 billion to compensate for the 2011 deviations as well as an extra Є5 billion to cover previous overly optimistic prediction of growth for 2012.

The accuracy of the financial calculations of the 2012 budget depends upon many dubious assumptions. For example, they assume that Greek exports increase by 6.4%, which is unlikely amidst the eurozone crisis. They are based on an estimate of unemployment at 17.1%, while Greece's national statistical agency has estimated unemployment at 18.4% at the end of August and real unemployment is well above the 20% barrier.

The 2012 budget is set to sink Greece into a fourth year of negative growth. Amid a crisis and a regress on any short of productive investments; the answer by the government and troika to the above failure is more and more extensive attacks on the working class. Those are going to reduce further the tax contributions of workers and send more workers into unemployment and dependence upon the benefit system. The vicious circle will sucks workers' pensions and wages into the bankers' black hole.

Venizelos and prime minister Papademos want to speed up the 2012 budget discussions and to put the budget to a vote prior to the 8 December European Union summit. The president of Parliament Petsalnikos has agreed for it to be fast-tracked and put to a final vote in parliament on 7 December. The schedules of the eurozone bosses take priority over the remaining elements of parliamentary democracy.

71% of government spending goes directly into the bankers' pockets, in interest and principal payments on Greek bonds and other financial expenditure.

Taxation on the Greek population is to increase by a whopping 29.1%, whereas business and company taxation is to decrease by a further 22% relative to the 2011 budget. Government spending on public sector wages, pensions, welfare, and insurance contributions on pension funds, is to decrease by 5.3% relative to the 2011 budget.

Direct taxes are set to raise Є24.2 billion, up by 17.4% relative to the 2011 budget. Taxes on pensioners, workers, small shopkeepers, peasants will be up by 29.1%; taxes on companies, down by 22%. The new regressive property tax is set to raise Є3.6 billion.

VAT levels will rise. Fuel prices will rise. Household tax reliefs will be abolished or cut. Multiple levels of emergency taxation will be introduced.

On the spending side, Є19.4 billion are allocated to pensions, down by 3.3% in relation to the 2011 budget). The public sector wage bill is expected to go down drastically; for example, the monthly wage of a young school teacher is expected to go down from Є1240 to Є850 by the end of 2012.

Overall public spending on pensions, education, health, and transport is to be reduced from Є18.8billion in the 2011 budget) to Є17.1billion.

But arms spending will increase by a whopping 66.7% in relation to the 2011 budget, from Є600 million to Є1 billion.

Between now and the end of 2011, 30,000 public sector workers will effectively lose their current jobs and be placed in new positions of "reserve employment". The salary of these workers will be slashed by 50% to 60%, and eventually they will be entirely sacked with the pretext of making a more lean and efficient public sector.

Meanwhile, the bankers are on average paying 7% of their profits on taxes, while Greek workers pay 27% tax on their wages. The capitalists of the merchant fleet, which is the biggest in the world, are contributing four times less in taxes than the revenues they receive in immigrants' fees for legalisation.

The Greek government's debt has increased from Є340 billion in 2010 to Є364 billion at the end of 2011. Despite or because of the austerity packages, the debt has increased by 7.1%. Relative to Greece's GDP the debt has increased from 150% in 2010 to 167% in 2011.

In the coming year, with the "50% haircut" and an additional Є54.7 billion paid out on interest and principal, the Greek debt is expected to go down to Є317 billion. The much advertised 50% haircut of the Greek debt is thus estimated to lead to a reduction of only Є47.2 billion despite Є54.7 billion being poured in to feed the debt. If the Greek capitalists and their companies were taxed at the same tax rate as the Greek people, then the Greek debt would have been brought down to 90% of the GDP and it would have been considered as viable.

A recent study by Bank of America and Merrill Lynch states that "the governments of the eurozone are getting prepared for Greece's disorderly bankruptcy".

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