It is normal for the government and the political establishment in general to ask for more loans to be given to the owners of small- and medium-size businesses to provide some relief from the sharp economic slowdown, but it is a big mistake to demand that these loans be extended even when the borrowers are not creditworthy, as favored by some Greek politicians and media. Greece has its sacred cows and small business proprietors along with farmers and some other professional groups are among them. The fact that these groups command many votes has made successive governments bow to their demands for tax breaks and other favors. It is no coincidence that the new Finance Minister, Yannis Papathanassiou, revoked his predecessor’s unpopular decision to impose a 10 percent tax on the first 10,500 euros of income earned by professionals in 2008 and 2009. Still, everyone who knows what is going on in the wonderful world of Greek small-and-medium size businesses will agree that tax evasion is widespread. It is known that the owners of small firms disclose only a small proportion of their actual profits every year in full cooperation with their accountants. The decision to show a profit or loss is to a large degree quite subjective. It is also no coincidence that an accountant is usually judged by his ability to minimize a small firm’s taxable profit by taking advantage of loopholes in the tax system. So, the state would end up collecting hundreds of millions in taxes if the tax authorities were actually doing their job right and the tax code were simpler and most tax loopholes were closed. Of course, this is easier to do during boom years, rather than in the midst of an economic slowdown which may turn into a recession. It is not easy for two reasons. First, the authorities do not want to aggravate the situation for one of the backbones of the economic system. It is worth noting in this respect that there were about 800,000 firms operating in the country in 2008. About 400 of these were large, 6,000 were medium-size companies and the rest, that is, 794,000, were small firms. Second, the government does not want to alienate hundreds of thousands and even millions of voters. However, this does not mean it must tolerate this widespread tax evasion for ever and put pressure on state-controlled and private sector banks to grant loans to small businesses irrespective of their financial situation. But this is exactly the message being sent by politicians of different parties to the banking community, on the grounds that they should be helping small businesses weather the economic storm. In some cases, there have even been calls for the nationalization of some large banks to facilitate the process. The state has even been subsidizing loans to small firms with an annual turnover of up to 300,000 euros, provided they were profitable in the last three years, and some calls have been made to further relax the criteria in order to include more small firms. This would be a good measure, but it looks as if some of the taxpayers’ money is actually beefing up the time deposit accounts of an unknown number of small businessmen. The latter get the interest-free loans from banks, subsidized by the budget, and put the money in time deposits, earning higher interest rates of up to 5 percent. Moreover, some state-controlled banks appear to show more leniency in giving loans to small businesses, which otherwise may have been reluctant to lend. Still, the political pressure on banks – private and state-controlled – participating in the 28-billion-euro rescue plan to grant loans to small firms is growing. At the same time, bankers confess that some of the new applicants are firms which have been rejected by other banks because of their credit history, financial situation and fears that any amount loaned to them will be lost. Of course, there may be other reasons preventing some banks from granting loans, such as liquidity or the need to first help out their own customers who may be in need, rather than new ones who may not be creditworthy. However, it would be a big mistake to press banks to give loans to small firms that do not meet the new lending criteria. Doing so simply means the taxpayer will pay the bill down the road and, of course, it is rather strange to hear the same people who criticized the banks a couple of years ago for giving out too many loans now doing an about-face and demanding that more loans be given to small firms irrespective of their credit rating.