Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
A poor job of revenue collection IMHO is quite on the money, and as I mention above it is a systemic poor job of revenue collection.

In fact if the deficit was the problem, then it should be possible to eliminate it in a few years simply by capturing tax-evasion

A few days ago the associate finance minister revealed that taxes certified, yet owed to the Greek government are on the order of ~30 billion Euros, of which 20 billion Euros are owed by 8000 people (that's almost the size of the current deficit). He further claimed that total tax evasion is around 40% of GDP - that's around 95 billion Euros. In fact the National Bank of Greece has recently added up tax-evasion and black economy to around 50% of GDP [in Greek]. The deficit could be turned around, it seems if this was simply a technical issue, simply by a stricter tax evasion detection and tax inspection mechanism (some small parts of which, we see now hastily implemented) and serious reform in public spending allocation, especially in the disgustingly corrupt and inefficient public health system, where corruption and mismanagement easily cost 2% of GDP per year - never mind the enormous and piling hospital debts. (Or it would were not the Greek GDP collapsing, thus reducing real revenue, taxed or not). This, in fact was what the Governor of the Bank of Greece, Yiorgos Provopoulos was urging in April 2009, a year before the crisis exploded, in his annual address:

"[To blunt the effects of the crisis, we need..] A fast and deep correction of the fiscal debt so that it disappears by 2012 [at the time the officially projected deficit was 6% of GDP, but Provopoulos must have had seen by that time evidence that it would reach at least 9%]. This is feasible, if part of the enormous tax-evasion is captured and, especially, if waste is cut substantially and public expenditure becomes more productive...
... We need significant primary surpluses (of the order of 4,5-5% of GDP) if we are to  reign in the public debt in order to diminish the ratio of debt to GDP to the reference level of the Maastricht treaty (60%), within a reasonable time-frame of, say, 10 years... Establishing numerical limits for expenditure, reinforcing the transparency and quality of fiscal statistics, limiting tax andsocial security contribution-evasion can play a role in deleting the deficit"

At the time, Provopoulos might not have realised that we were dealing with a 13 percent deficit, by it seems quite probable that he knew it was close to 9%.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Tue May 25th, 2010 at 06:51:49 PM EST
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