Bring-that-money-home plan

Following the example of other European Union countries, Greece is enacting a program for the repatriation of residents’ capital funds languishing abroad, promising tax asylum and exemptions from the law requiring the identification of the sources accounting for the accumulation of such funds to those who will take advantage of this new possibility. The General Accounting Office is projecting an inflow of about 20 million euros as soon as the scheme becomes operational, while the minister of economy and finance, Giorgos Alogoskoufis, appears more modest in his projections, speaking of only 5 to 10 billion euros expected to be immediately repatriated. During a press conference in Athens yesterday, Alogoskoufis urged Greeks keeping savings abroad to repatriate them in order to assist in the further development of the national economy. The bill allows for the repatriation of funds either by individuals or legal entities who keep them in any kind of bank account abroad, within a six-month period after its ratification. The same oportunity will be available to Greeks who live abroad if they decide to transfer their funds to Greece. Those doing so will be subject to a 3 percent one-off tax on the capital repatriated. Payment of this tax absolves the owners of any tax violations related to these funds in the past, but it appears they will still be subject to laws 2331/95 and 3034/2002, concerning financial crime or the funding of terrorist groups. Alogoskoufis made clear that the repatriation of funds is limited to transfers «from bank accounts abroad to bank accounts in Greece, in order to avoid money being imported in suitcases and from unidentified sources.» He noted that the legally repatriated assets could be used to finance new investment. «Investing such capital will lead to the creation of new jobs, and enhance the liquidity of the banking system and the turnover of banks; we also consider it will give a boost to construction activity, since we believe that a large part of such funds will be invested in real estate.» The previous PASOK government also tried to invite the repatriation of funds in 2002. The effort proved unsuccessful as the then-economy minister, Nikos Christodoulakis, faced with signs of government corruption, decided the time was inopportune. Today, the drive for the repatriation of funds seems to have a better chance at succeeding, as the common currency has eliminated the exchange risk factor which was characteristic of the drachma era. If the projections of the General Accounting Office for the repatriation of up to 20 million euros prove true, the Greek government could have additional revenues of up to 600,000,000 euros in financial years 2004 and 2005 with receipts from the taxation of interest accumulated thereof also increasing. Compounded debts Alogoskoufis also announced a definitive end to the problem of non-performing bank loans which have ballooned due to compound interest. «We do not intend to open the subject again in the future,» he said, adding that the phenomenon was rooted in the high interest rates that prevailed in the 1980s and ’90s and led to a serious social problem. The new bill brought to Parliament is favorable for debtors, allowing them to seek a fair restructuring of their loans while freeing them from the burdens of compound interest. According to the bill, the total repayments of all loans taken out in the past and those that will be taken out in the future may not accumulate to more than three times the size of the loan. Specifically, for farmers’ loans, total payments will have a ceiling of twice the amount of the original capital. At the same time, farmers who had restructured their debt before 1990 will be obliged to a total repayment amount no higher than 150 percent of the debt settled by the 1990 restructuring. The bill forestalls all auctions of real estate property put up as collateral for bank loans until December 31, 2004. Banks that refuse to reschedule debt as provided by the law will not be able to auction off the property of debtors. As was the case with the previous such rescheduling scheme, total debts (initial capital plus conventional interest) exceeding 2.2 billion euros will be exempted from the favorable provisions of the new law. But the freezing of property auctions until the end of December applied to them as well in order for banks and debtors to seek their restructuring by negotiation. The bill also allows for any repayments made at any time by the debtor to be subtracted from the total amount calculated to be outstanding.