The paper napkin

The government’s efforts to find a way to narrow the ever-widening deficits are like a nightmare in which an unfortunate soul tries to cover his nakedness with a paper napkin that keeps getting smaller. We need only look at the figures that were made public on Wednesday – a truly black Wednesday for our economy – to see the truth of this. Eurostat announced that Greece’s public deficit in 2008 came to 5 percent of gross domestic product, or 12.29 billion euros (an amount that the government reached on its fifth revision). On the same day, the International Monetary Fund forecast that Greece’s GDP would shrink by 0.2 percent this year and by another 0.6 percent in 2010, while unemployment would climb from 7.6 percent in 2008 to 10.5 percent in 2010 (an increase of 143,000 jobless). In other words, in order to bring the budget deficit below 3 percent of GDP in 2010, as required by the European Commission, the government will have to increase revenues by 5 billion euros. But Bank of Greece figures show just how difficult a task this will be: Revenues from tourism were down 20.2 percent in the first two months of the year, while shipping revenues were down 25 percent over the same period. Higher unemployment, a market starved of cash, coupled with reduced consumption and construction all lead to lower revenues at a time when costs (especially those of borrowing and servicing debt) keep growing. So how will the deficit be covered? After a one-off tax levied on high-wage earners, the government is now thinking of raising their tax rate from 40 to 45 percent. Taxing people who already shoulder the heaviest burden highlights the government’s inadequacy. For first it admits that it had no idea where the deficit was heading, then it does not dare take on the black economy and the economy’s many real problems. The country’s tragedy is that neither the government nor the opposition parties care about real economic reforms. They prefer to fight over the ragged napkin…

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