In Greece, Property Is Debt
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The state property tax in Greece is 0% for property up to €200K. Then 0.2 to 1% from €200K to €5M. Then 2% above €2M.
Property taxes are hardly killing the Greek economy and especially not for the poor or the middle class. On the contrary, Greeks are paying very little. The problem is that Greeks used to have much more property than for example Northern Europeans.
For comparison, in Denmark the property tax is 1% up to €406,961. Then 3% for values above that. In addition to this there is a local tax on land value, which is generally 1.6-3.4%.
Many of my friends, all middle class, pay €5-10k per year in property taxes for what is really modest 100-150m2 apartments or houses in or around Copenhagen. Are you anywhere close to that in Athens?
Like others have already mentioned in other threads, land & property valuations are defined by the state, and are way inflated and unrealistic. On top of that, there's all these ridiculous things that contribute to the property tax, like how many streets neighbor the building, etc.
The scheme for a fair nominal value assessment does seem challenging to come up with, though. Perhaps you anchor your valuations in a past year, e.g. "what this house would have sold for in 2002".
Both options have the side effect of potentially adding a bit of liquidity to the housing market in a downturn.
https://en.wikipedia.org/wiki/Stamp_duty_in_the_United_Kingd...
FWIW it's a tax on buying, not selling, though I imagine it's much the same thing.
I have a wealthy friend in the UK, and I want to a party there once thrown by some wealthy greek shipping magnates. They had sold their shipping empire for billions in 2007 and bought it back in 2012 for hundreds of millions. They left the country shortly afterwards. Have all the wealthy greeks left the country? Or is there still an opportunity to do business?
Depends on what is your definition of fun living. The islands are certainly a fun place in the long summer. Greeks are still fun-loving, and our cafes are packed despite the crisis. No it's not a grim place, if thats what u are asking.
The problem though is that there is always a danger of a Venezuela style collapse but you can always move out.
ΕΝΦΙΑ is not restricted by property value (but is defined by it), meaning that even low valued properties have to pay (for houses it ranges from 2,50-16,25 €/sqm) and is a tax that was introduced at first as a "temporary" measure around 2011 or 2012 I think.
The tax you mention above is a different tax that is indeed 0% for property up to €200K. Keep in mind the €200K limit is not per property but for all your properties combined.
Here are two scenarios for you
1)I live in Greece and get 400 Euros a month and barely break even. I live in a house (inherited by my parents) that would fetch probably 90.000 in the market. Government says that it really costs 300.000 euros. I get taxed for it even though I cannot really afford it.
2)I am unemployed and live with my parents. They have a pension of 600 euros a month. My parents die. I inherit their house. The house was built in the 60's and is on an expensive island. Government says that the house values 500.000 and I get taxed even though I have no money at all on my own.
Basically the Greek government is unable to tax you directly (i.e. on the money you really make) and instead tries to guess your income by looking at the house. There are several cases however where your current house says nothing about how much money you actually make.
Move to where? Another city? Another country? Unemployment is everywhere in Greece.
I am not even mentioning the sentimental factor of being forced to sell your parents house for no particular reason.
Also if it was that easy to move somewhere else and find a job, you would have done it already (you would not wait for the government to create this tax and then think about it)
Here is a third scenario for you reading pleasure
3) I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field).
Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
If you put this hypothetical 90k euro house up for sale at a public auction tomorrow, what would it sell for? 50k? 70k? Real assets are usually sale-able, albeit perhaps for less than the owner thinks the asset is worth.
> Move to where? Another city? Another country? Unemployment is everywhere in Greece.
Since Greece is still in the EU, you can move to any member country right? UK, Germany, France? Certainly there must be places in the EU where the economy is better and there are more opportunities. People have been migrating around the world chasing economic opportunities for thousands of years. A million Syrians just traveled through Greece on their way north in search of this.
> Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
It seems that what has effectively happened is that the Greek Government has decided to confiscate a large part of the country's wealth through extremely high property tax rates. As other posters on this thread have mentioned, if the tax rate is 1% but the appraised value is 3x the actual market value, then the real tax rate is 3% and your Government is just playing games to try and hide the confiscation.
Personally I would vote for revolution - national default, totally new political leadership - and start to rebuild the country from scratch. Anything is better than decades of externally enforced austerity crippling a country's spirit as reflected in everything I read these days about Greece.
They tried that. Turns out politicians aren't actually very trustworthy...
I'm not a mathematician, but I think that would make it a 50k or 70k house.
As for the issue of finding a buyer, I am hearing rumours that many Greeks have built up sizeable assets, from not paying very much tax in the last few decades. Many areas in Greece are also popular with European buyers.
This already happens in many places with property inheritance tax in the EU. All across Southern EU the governments are valuing assets as in the peak of the bubble because it suits them.
Looking at the democratically elected politicians/governments in Greece in the last decades I don't know where a totally new political leadership [edit: which would be interested and capable of 'rebuilding the country'] should come from. It's not that the electorate didn't consistently vote for the political leaderships which are/were, at least partially, responsible for the situation Greece finds itself in right now.
That isn't really true. In both of the previous elections they voted for parties promising to end austerity.
In both cases it wasn't even as if the parties didn't want to end austerity but when they tried they were basically threatened with economic catastrophe (shutting payment systems in the entire country, indefinitely).
Last year they fired a kind of warning shot. Greek banks had to shut down for six days, cash machines only let you remove a small amount each day, capital controls were imposed. That could have been continued indefinitely.
Eventually Syriza wilted. Their mistake was assuming in the negotiations that the Troika's primary concern was getting their debts repaid. It wasn't. They just wanted greece to knuckle under and do as it was told.
The problem isn't than an elected government couldn't extricate the country from the Euro and return the country to growth, it's that kind of project would take 9 months minimum and during that entire time the country is vulnerable to the ECB flipping the switch on their economy and "turning off" Greek savings and "turning off" international trade and effecting instant 3rd world status (and not even 'good' third world status).
In effect, Greece has been converted into a puppet state that rubber stamps European Commission and ECB legislation. They issue diktats to Greece who rubber stamps them, and they're not even really pretending it's about getting paid back any more.
Technically the ECB threatens to stop providing emergency credit. That Greece has made itself completely dependent on emergency liquidity from the ECB is the country's own silly fault. Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
That said I don't think the current situation makes much sense. The odds are high that the debt will never be paid back and that Greece will never have a developed-country government. There have been some promising developments recently, but I'm sure we can all agree that Greece should never have been admitted to the Eurozone and maybe not even the EU.
> Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
G.Papandreou who campaigned with the MOTO "there are enough money for everyone", went around Europe calling Greeks crooked by default. As if every Greek is a crooked and tax-evading[1] citizen. Then came along Pagkalos of course, but the same MOTO is rhetoric is re-played time and again by politicians, just to name a few: A. Georgiadis at "Enikos", A. Loverdos before him, E. Venizelos and many others have replayed this recurring theme.
I don't believe that there is another country's population, who has received so much systemic brainwash into believing that it is it's own fault.
You want to tell me that when the Minister of Finance tells me that our banks are safe (2008), you would expect from the 60-year old public worker to understand that he is lying and believe otherwise? I don't.
So again to answer your question:
> Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
Fuck no! It's easy to be pissed with the prior generation but it is a simplistic and stupid approach.
> Technically the ECB threatens to stop providing emergency credit.
I won't enter into details because I'm bored. I've have written thousands of word regarding Greece, the EU and ECB here on HN and honestly I'm tired. The ECB was created as an apolitical instrument and it's been since then used time and again (Ireland, Greece, Portugal) as a political tool by French and German politician to save their bankrupt banks.
Do you have any idea what is really happenning here[2] ? It's not about Greece, so hatred should not cloud your judgement. If you don't know what is happening in this instance, please gets your fact STRAIGHT please.
ADDENDUM: The only politician who got it right about the ECB was M. Thatcher in her last speech in the house of commons: https://www.youtube.com/watch?v=vZZf7cLhPG8 - it's outstanding how a right-wing, libertarian politician understood, what French, Greek, Italian, etc. Socialists failed to see...
[1] The problematic relationship between Greek citizens and the Greek goes back to 1821 and it's almost exclusively the state's fault. There are cultural and historical reasons why this is, however, the state still today sees the average as tax-evader a priori.
The German people have had a significant amount of education about their culpability in the events of the second World War.
Technically, they were threatening to shut off access to target2.
>Are ordinary Greeks to blame? Yes
Ioannis Papandoniou is likely happy that you're unwilling to let him take too much of the blame. I guess he's suffered enough already right?
Goldman Sachs too (couldn't have happened without them).
>That said I don't think the current situation makes much sense.
It seems to be functioning as intended. Desperation in Greece is driving emigration to Northern Europe which is keeping a lid on wage inflation there and privatization of state assets in underway, which affords profitable opportunities for the right sort of person: http://www.cnbc.com/2016/09/29/greek-privatization-program-o...
The Greek electorate consistently voted for PASOK or ND, before the whole thing blew up. And only after that, when no political party could promise any unsustainable presents anymore, did a shift in the political spectrum take place.
(Anecdotally: I have a lot of Greek friends, and although I/they don't agree on a lot of things about the current situation in Greece, there's one thing they agree on: that the root of the problem was the rotten political system in Greece, and that the people (meaning in that case: the generation of their parents) consistently voted for PASOK/ND besides knowing how rotten that system was.)
(As a note: I am not arguing about whether Greece is a puppet state, the situation now is only the fault of (the) EU/EC/Germany/[place devil here], or if austerity is the way out or the real problem. I leave that to people who know more about it or at least think they do.)
Why is that that everybody else starting from EC and ECB and ending with corrupt polititians (who, it would seem, have magically appeared from amongst non-greek) is to blame but I'm yet to see any citizen taking responsibility. "Yes, it felt good voting for populists and enjoying massive social benefits from the state and not really having to pay taxes but now I have a hangover". That's democracy for you. Your right to vote comes with a responsibility for the consequences.
They're not trying to get their money back. They're simply taking the reins of power and threatening economic catastrophe if they're disobeyed.
It ought to be obvious to anybody with a functioning brain that Greece is not paying down its debts and that the European Commissions directives are clearly not about making Greece more able to do so.
The question you have to ask yourself then is, what are they asking of Greece? Because it's definitely not when are they going to pay us back?
>That's democracy for you.
It's democracy when you inadvertently voted for somebody who handed the reins of power over to a foreign country. That's the transition of democracy to dictatorship.
>Your right to vote comes with a responsibility for the consequences.
Which country do you exercise your vote in?
You write this as if some Greek politicians just woke up one morning and decided to hand over sovereignty to foreigners. That's not how it happened. Greece was forced into it, because Greece had to have foreign money in order to survive. It's been known for 3000 years what the consequences of that situation are - the borrower becomes the lender's slave (Proverbs 22:7).
So the "that's democracy for you" part was when they voted for people whose bad decisions put Greece in that situation.
What Proverbs failed to mention is that if the debt is big enough with respect to the lender, it's the other way around.
True. But as a US citizen, that's also very frightening at the moment...
No, and it never was (though they may have pretended that it was at one time). It is, and was, about keeping Greece from economically destroying all of Europe.
But since they're providing the money that keeps Greece out of the abyss, they get to call the tune, no matter whether it's about getting their money back or not...
We also held a referendum but the gov capitulated... From there on, I'm not sure who's going to the ballots and why it matters. I mean, for all important matters such as this tax for example, decisions are made at Troika level (EU/ECB/IMF), our gov is just the executive.
That was actually the best of Greece's bad choices, but they were strongarmed by the IMF and the ECB into not defaulting and pulling a brick out of the financial pyramid scheme upon which western society is based.
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws. Real assets are salable, but in this case the government has crippled the market's ability to clear.
All of which just reinforces your last point; the existing legal structure pretty much guarantees perpetual economic crisis.
Like the US, Greece has many properties which would be illegal to build from scratch under existing zoning laws. Unlike the US, Greece has pushed a law requiring that all properties be certified as "having no illegal constructions" prior to sale.
I'm trying to imagine the crisis you would get if you enforced zoning laws against secondary sales in the US. At the very least, all of Boston would be uninhabitable.
A large part of our electorate thinks like that, and thus came Syriza (Syriza may be a household name, but not everyone knows that it stands for "Coalition of radical-left parties"). Yet when push comes to shove syriza turned instantly back into austerity. The electorate acted like an angry teenager. Magic bullets don't exist.
This was regarded as a major incipient problem in California at once point. So a policy to address it was put in place - Proposition 13. It caps property tax increases to a quite low level.
Cities and counties cope by voting on a random assortment of taxes and assessments every two years. In major cities, where most people rent, this means property owners have their taxes go up very unpredictably. Though rarely more than single digit percentages.
This sounds great, but in practice it's created havoc. Turns out some solutions are worse than the problems.
Interesting. I've heard about the predictable 2% YOY residential property tax increases allowed by Prop 13 (in Los Angeles), but I haven't heard about people experiencing significantly larger, unpredictable property tax hikes.
I'm curious about the very unpredictable property tax hikes you're describing. How big have these been? Are these on apartment buildings or other commercial properties?
Some of them are property value percentages. Some of them are flat parcel taxes. The two fall differently on multi-family and single-family buildings. I believe commercial property is generally not exempt.
I'm not aware of any tax hikes that large in recent history, but sometimes the re-assessment at sale from Prop 13 can cause jumps bigger than that.
> 3) I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field). Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
You sell the house and move somewhere with a cheaper COL. Presumably the assumption here is that neither you nor your wife work, so you are unproductive members of society (this is meant without negative connotation). However, there's no reason you should continue to be subsidized by the people living around you who are, again presumably, fine with paying the property tax. They are more able to put this popular area to good economic use.
> But now, catastrophic value inflation, property taxes, eminent domain, etc. threaten that expectation of stability.
If you enjoy value inflation of your assets, be prepared to pay appropriate property taxes that go hand in hand with that. Not sure why those people expect to have their cake and eat it to, at the cost of all the other taxpayers.
In the scenario you are responding to, the family isn't trying to stay in the one house for the next generation - it's occupied entirely by a retired couple with no income.
...if they weren't expropriated by their overlords, driven off by war/disease/famine/poverty, etc. Staying in one region was common, but having the same house for generations on end was still an exception.
Besides, moving every 30 years or so is hardly migratory.
This is a way bigger hurdle than anyone is making it out to be.
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws.
Why on earth are we assuming that Greece has smooth-running property markets that allow people to sell houses for their nominal (or any) value?
You bought the house when you were 9 and 4 years old, respectively?
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws.
Real assets are salable, but in this case the government has crippled the market's ability to clear. If your market can't clear, you can easily end up with a high value asset which is totally impossible to sell. That's the Greek situation, where the requirement to pay tax on a house doesn't mean it's actually possible to sell it for value.
FYI i live in greece and could not afford a house during the boom years. Now i can but it's just a bad deal. It's cheaper to rent.
1. http://www.globalpropertyguide.com/Europe/Greece/Rental-Yiel...
2. http://www.tornosnews.gr/en/greek-news/society/19928-new-yor...
If someone died and I got their property.. I would need to pay tax. Not sure how that is "unexpected"? If the tax was more than I could afford, I would sell it. If I liked the place, maybe I would move there.
1. https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State...
* people can't afford it for themselves
* won't buy-to-let (because people can't afford the rental)
* won't buy-to-invest since there's a worry about market or government collapse and loss of investment
To prevent the government from harassing you in to forced sales they don't intend to complete, make it a guaranteed minimum of the larger of 90% of the assessed value or 85% of the final sale price. Also the government, while the property is for sale, allows your continued use as previous and pays you 0.005% of the assessed value of the property //per month// for the privilege of listing it and allowing buyers to view it during normal business hours.
At any time the government can cancel the deal and re-assess the value of the property, which shall be official retroactively for tax purposes (as far back as re-filing is allowed).
At any time the current owners can cancel the deal, but then agree that the valued price is fair and valid as well as are required to hold the property for a full year after the cancellation.
There's a similar corruption issue on the government-sets-buy-price side, where unscrupulous officials can transfer wealth to individuals, but at least the corruption there is much more able to be audited.
The US isn't corruption free, but in my limited experience, it's hard to have an assessment wildly out of line with reality, 3x would be hard to justify.
No you have not. The tax is based on a tag price the gov puts on your property which might be 10x more than the actually market value (sometimes even 50x, not kidding).
Greece is a more like a dormitory these days. It's a miracle people still survive here, but economic activity is virtually dead and indirect taxation is still on the raise.
Given that the values have been recently reassessed [2016], i would like to know where these 10x and 50x values are. Not disputing you, but curious to know.
MY experience is from a bid in 2012-13. But out of curiosity, how would you asses this[1] situation? It's a random article I just googled...
http://www.zougla.gr/greece/article/kalite-na-plirosi-enfia-...
I know for a fact that my parents that live in Greece, and do not rent and own 3 flats and 1 house all of them divided equally to a different person within the family including me have to pay an "emergency" taxation on the electrical bill which is a lot of money. (A LOT OF MONEY!)
Atm my parents are pensioniers and they don't rent neither have any money in the bank. They are called out to pay 4000 euros / 2 months tax on the property they own. Eventually they will have to sell their property in order to be able to afford to live. Issue is that the market has crushed and the money they gonna make if they sell their property that has been with them from grandgrand parents and more which means sentimental value as well, is gonna be sold for pennies.
The problem is that people around the world don't understand that middle class Greeks are suffering for what "RICH" Greeks and politics have caused. Sure its middle class people that voted those politicians in and didnt hang them up including rich people but meh...
Seriously Rich people in Greece pay no tax and they don't care as well.
Dictatorship has been governing Greece for a very long time including now.
Btw sorry for coming strong on you, its just that your facts are literally off.
Also don't forget the sentimental value as well, my dad bought 1 of the flats himself with his hard earning while he survived the invasion of Cyprus and lost everything there. He is old as well so good luck getting him to sell the only thing he acquired in his life.
Same goes for my mom, she inherited the 2 flats and the house and they belonged to her family since before WW2 for the flats and since the 1900 for the house. Very hard to sell on that.
But again think even if someone more greedy that doesn't understand the sentimental value of the property gets his/her hands on it, still imagine you have to sell for 250k-300k while in 2008 it was costing 1m. Again this is just an example but it shows the price drop and again since they are in central Athens which is a city for a very long time in history at some point their prices will climb up again, not the the maximum but still.
> Seriously Rich people in Greece pay no tax and they don't care as well.
Maybe you should realize your parents are the rich people.
Someone that inherits property doesn't automatically mean that he/she is rich.
They never rented out or sold any property, and they worked for private companies their whole lives. The money they had were pretty limited on what they could do.
Also property in Greece is not like other countries of EU. Atm you can find flats in central Athens for 20k euros... Go buy 10 flats and then say you are rich because you own property valued at 200k.
So yes your argument is pretty stupid, you just want to blow off steam for some reason I am guessing you are a German.
If someone that owns 3 flats and 1 house is considered rich then all good I am rich, why am I even working for? damn, why my parents can't pay their electricity(tax) bills and have to make arrangements with the government to pay in installments, noone knows, we are just rich, I'll go get my private jet and fly off this comment section now.
Well I don't have to pay any tax at all. Because I don't own anything. Sometimes it's just very hard to sympathise with people who are several times as wealthy as I am, and who complain because they will now have to pay taxes for it.
Because let's not forget that the devaluing of properties is a very recent thing. Until now having a couple of properties meant a steady stream of income- which most people would probably not have paid any tax on... because they dodged it. Which contributed to the dire situation we are in right now. And in particular caused the current government to resort to the harsh measures that are being imposed.
No, really- I don't want to see anyone punished, or having their properties repossessed, that's truly awful. But I can't really find it within me to feel, you know- compassionate.
________________
[1] To non-Greek readers: all those are very posh, very expensive districts in Athens or Corfu, the latter being one of the more well-off (and therefore, expensive) islands in the Ionian sea, the more upmarket set of Greek islands.
[2] A newly introduced property tax.
That depends on the value though. They could be asset rich, and (very) cash poor. That's a tough spot to be in. Arguably, that could even be worse if you can't sell them. But you said the apts are currently worth around €300k each?
Is there no way to unlock cash from them, e.g. by renting them out at €1,000 a month or by taking out a €100,000 bank loan against them? Alternatively, how about AirBnb? I know a guy making good money with a small business renting out several AirBnb apts in a popular city. That way you would at least not have to sell them.
And Goldman Sachs as well!
http://www.independent.co.uk/news/world/europe/greek-debt-cr...
Imagine it is some kind of way to dodge taxation since it is still considered unfinished?
Have also read Michael Lewis' "Boomerang", which also has a lot of similar anecdotes about Greece (and Iceland, Ireland, etc).
But the problem isn't taxes or respect of the law. The problem is that there are no jobs, partly because high taxes require a reorganization of the job market, and partly because no-one wants to trade with Greece, given they seem capable of switching to Communism any day from now.
I'm sorry for your situation. I hope you can find a remote job in programming, and bring a bit of business into your country.
...And I pray that France doesn't fall into this situation in 15 years. Too few people in France are invested in making businesses run, and most people believe employers are thieves, with barely any knowledge of how the economy works.
Not an expert, nor a citizen/resident, but these seem like a basic things to do. Parents back home had to provide same things recently just for renovation, and much more.
There are laws to address this, albeit considered kind of a joke in southern Europe for a long time. People would build whatever they wanted, hack together unsafe constructions to cut costs, then bribe an official to validate all of that. Then earthquake comes and people die. Standards for buildings are reactions to disasters, I don't see anything wrong with it.
Or am I missing something?
Similarly sellers have to get a professional surveyor to do a survey which is that available to all potential buyers.
Upstate NY is a great example -- property taxes are oppressive, and while property does sell, the value is kneecapped because the tax costs are so high. In my city, a house in a nice area valued at $200k (which is a 3-4 BR, 1-2 BA house) is taxed around $6000-6500. So a typical homebuyer who needs a mortgage automatically loses around $550/mo in buying power. In a suburban area, those taxes are $4500-5000, which boosts the value.
At the macro level, it's more insidious. With multifamily property, there's little incentive to maintain property, so the business model in urban areas is to suck as much value out of the property as possible, stop paying the taxes and let the county sell it at auction. The lower tier of scum landlord buys these properties, restores them to minimum code compliance and rents them to subsidized tenants.
Why is there little incentive to maintain property? Just because it's worth "only" $200k?
More problematic are single homes where the owner of the land who contracts their construction decides to take shortcuts, as well as industrial buildings (the RIKOMEX building at the 1999 earthquake
Can't imagine how I would do that if energy certificates were optional, I would have to bring with me a construction engineer while looking for apartments?
There is no 'Greek' system or 'English' system - it's all the same, it's all interconnected - so someone in Europe must live the consequences of political decisions in China or the United States or any other country, really.
And that's to be expected, because the system was not 'engineered', but hacked together in time - sometimes in response to crises, sometimes influenced by insane political promises or compromises, sometimes by greed or fear.
Yet we try to fix the problems in each individual 'state' - this might work for some problems, but for others - the ones faced by countries such as Greece - it's hopeless - the solution (if any) might not be in Greece at all.
This is the rare case when refactoring just doesn't cut it, we need a complete rewrite of the whole thing.
Furthermore, the idea of needing to overhaul things at a global level makes many assumptions. For example, that anyone has the authority and intelligence to tell the entire world how it should function.
Meanwhile, Schäuble's policy of Austerity über Alles mean the Greek government has been forced to abandon policies that might've rebooted the economy, and be forced to cut spending in hopes that the "confidence fairy" shows up. Even the IMF has said this policy is stupid...
First I've heard of this, but I haven't been following it. It sounds quite far-fetched though. I must be missing something.
The current measures are beyond stupid. They've crippled the country's economy, shut down a large majority of businesses, made the climate hostile to new businesses, and generally ensured that the country doesn't recover.
I don't think we've still seen the worst of it, because the economy has shut down almost completely, and it's still getting worse. The effect of this much deterioration on such a large system will take years to show, and what we're seeing now are the results of policies five years ago.
I'm pretty confident it will get even worse in the next half-decade. Very much to blame for this is the leftist mindset of the average Greek, who thinks "bosses are the devil" and that making the country friendlier to entrepreneurship and investments is anathema.
At the end of the day, it's the banks' job to assess risk, they lent money to Greece, and they're only getting paid because of this bailout. What's greece paying in interest, again? Some kind of huge risk premium, probably?
> First I've heard of this
I suggest listening[1] to Yanis Varoufakis talk about his negotiations with the rest of the EU's finance ministers. He talks about the rigged process, and the ultimatum they gave him when he pushed for a saner refinancing plan. Schäuble's response, according to Mr. Varoufakis, was "Elections cannot be allowed to change the economic policies applied to Greece!"
For background on how this situation was created, see Mark Blyth's very nice discussion[2] of the Greek situation and how it fits in with the larger Euro problem.
- The Euro hid huge debts in the same way securitised debt did in US. People would lend (via bonds) to risky countries (Greece and Spain) at the same EuroBond rate they lent to less risky countries (Germany, and well just Germany).
And Greece took this and spent - at first on good infrastructure but slowly on low performing roads to nowhere and a lot on non capital spending (social welfare) And particular Greek social Problems made it far worse (a political class removed from the populace, etc)
As the crisis hit Greece could not repay these huge debts and could not devalue their currency (the Euro was not theirs). And they got loans from Germany (cos a lot of German banks owned the A rated bonds) and paid interest with the loans thus doing nothing to solve the problem. After a few years of this the Greek people voted in a whole new radical party. The goal was to cancel the impossible to pay debt and follow sensible Keynesian rebuilding. The cancelling of the debt (spearheaded by charismatic economist Yanis Varoufakis) was not insane but it would mean all other countries in similar problems would also follow suit. So the Big players in Euro (Schable being the biggest) opposed it everyway they could. The Greeks took it to the brink but the PM could not plunge Greece into leaving the Euro and not being able to keep hospitals open backed down
No solution - and we end up here
The EU was sort of a beta version of a United Europe. They weren't as luck as the U.S., where a highly educated but small group of people tried to come up with the simplest thing they could that wouldn't fail. Instead it looks like quite a bit of architecture astronaut syndrome going on. If I'm right, and I'm just a passerby, the sooner they start down the road to refactoring the better it will be for everybody.
pretty much
> architecture astronaut syndrome
Not really. It started well. The Euro currency was the great achilles heel, as it meant there MUST be fiscal harmonisation between countries that were arguing over the amount of meat in a sausage. That said the more I learn about USA and the states, especially the southern states, the more I realise we need things like TIPP and TPP and the WTO. The states generally hate being in a federal system.
I would try and listen to Yanis Varoufakis stuff online. (https://yanisvaroufakis.eu/ is his blog but there is a lot there with little organisation)
Is in favour of defeating Pikkety with UBI:
https://www.project-syndicate.org/commentary/basic-income-fu...
The current Greek government doesn't seem to want anything other than line their pockets. They've gone back on every single big promise they made before getting elected, and are spreading lies and propaganda to try and keep their positions, even while being wildly unpopular.
The entire system is fucked, and I would consider booting everyone out of the parliament and becoming an EU protectorate a better option for the future of Greece, austerity or no austerity.
More than 90% of the bailout money went to banks, not to Greece. Bank recapitalization via the back door while blaming Greece.
Well, they saved me by forcing me out of the country, so +1 there.
But the parent comment alleges a breakdown of the international system meriting, as I read it, global revolution. Given that we're in something of a golden age of humanity--what with record-low rates of per-capita violent-death rates, relative economic prosperity and technological advantage--the claim needs more than a First World country experiencing hardships around paying property taxes.
There is no self determination possible for Greece
Bingo! Greece can do whatever it wants. If they want to stay in the Euro, then they can stay in the Euro but have to follow certain guidelines. If they want to do what they want to do then they can leave the Euro, but they should not complain when their overspending ways catch up to them and it all falls apart.
"Elections change nothing. There are rules." -- Wolfgang Schäuble (in reference to the election of a Greek government in 2015)
[Well, in a way, they are free to do so -- at the risk of losing every bit of credibility as a debtor... What Schäuble pointed out is: if you want more money, respect your obligations]
> at the risk of losing every bit of credibility as a debtor
This mentality about debtor and creditor nations within the EU will eventually destroy the Euro.
It's the way our system works - I want avocados now, even though I'm thousands km away from an avocado tree. One solution would be for me to give up on the avocado, but then the world needs me to buy it, otherwise the balance of avocados in the economy will move and the futures will go down and everyone panics and now maybe I will say no to mangos too ... sell, sell, sell!
This is how it works - not because someone conceptualised, thought through the whole complexity - it just ended up being like this..
> For example, that anyone has the authority and intelligence to tell the entire world how it should function.
I'm not getting my hopes too high for a global change - in fact I think this can't happen without some sort of global crisis or conflict preceding it.
It's very easy to see that the system is broken - much harder to fix it of course.
I would like to push back on one point of the top though, I don't think the world is so locked in to the consumption of a small nation or any small population. Indeed, panic would happen if America banned imports. But if many in Greece had to take a step back and dramatically reduce their IPhone consumption until they invented new ways to add value, I doubt anyone would notice. The panic of a Greek default seemed to more step from the many who invested there without expecting a collapse. Even now I think a Greek default would be pretty non-eventful given how much warning time everyone had. (Debt defaults of small countries being relatively common)
0,021% death rate is far from "extremely dangerous", and why the focus on this one specific chart? Amazing cherry-picking you've done.
What I am contesting is that you are conflating absolute and relative measurements to try to make a point, and that you are reducing such a complex matter into a question of political ideology that governs the countries. Also, lots of weasel-wording there - e.g, "hundreds of deaths" in country of 320+ million people, comparing with countries that are 100x smaller? - which do show a lack of intellectual honesty.
At least that is the impression that it gives when I read your response as some kind of counterpoint to the comment from GP about socialism and the associated bureaucracy.
If I have read your statement correctly and indeed you meant something along the lines of:
- The USA is doing worse than Greece in this one metric.
- Greece has more Socialist/Welfare-state inclinations than the US.
- Therefore if we want to improve this one metric we ought to adopt more Social-Democratic policies
But then again, I could have completely misread what you meant. Please correct me if I misinterpreted any of your statements.
[1]: http://taxfoundation.org/blog/estonia-has-most-competitive-t...
(Note to down-voters: do you really think that anything I wrote is so offensive or damaging to the forum, to the point that it deserves to be in negative mark? Gee, I know it is election season for most of you, but let's please keep a HN a place where people can have an honest discussion?)
I'm don't really think that socialism == bureaucracy == failure is a cogent argument.
Does anyone have access to the world government dev environment?
I mean the code may need re-writing but we could probably use the same infrastructure.
The banks with super admin privileges to create money in their databases do.
Doesn't the major-banks' sandbox extend across the world to any person or government who accepts the dollar?
[1]http://www.businessinsider.com/congressional-budget-makes-ro...
For example, Greece.
http://www.tradingeconomics.com/greece/money-supply-m3
Expand it out to the max - this is an old style, US Great Depression monetary collapse. Their money supply has dropped by about a third since 2009. Some of that is loan write-offs, a lot of it is money being withdrawn from the country, either by rich people who want their money in safer banks, or as debt repayments to european banks. Cost of being in the Euro, very hard to stop this.
Knowing that the money supply has dropped by 1/3, we also know that the lending supply has dropped by 1/3, loans create money etc. Knowing that credit influences prices, we know that property prices are dropping through the floor. Knowing all that, we also know that tax revenue has dropped, because there´s less money circulating to be taxed. (Well, it´s a bit more complex than that but not much.)
The big issue in this kind of monetary collapse is very simple. In a market based economy, most prices can adjust to changes in the money supply and production over time. The one exception is debt, which keeps its coupon value until people default.
Revalue Greece debt though, and there goes a whole bunch of European banks with greek debt on their books, and a GFC style cascade failure to who knows where in the system.
It probably could still all be sorted out if we put some decent computer scientists on the case, but I certainly don´t expect the economists to get there in time.
So I guess Greece will just have to invade Germany.
If that's true, then one possible solution would be to let the cascade failure happen while the ECB prints enough money to replace the losses in money supply (and then some) and distribute the money equally to everyone in the Eurozone.
And I won't even start with devaluation, the geopolitical position of Greece or the chaos on the streets.
#The economy is gradually recovering from a deep recession but high social costs persist
Following a deep and prolonged depression, during which real GDP fell by 26%, the economy is projected to grow again in the course of 2016 and 2017, but a full recovery will take time. Competitiveness has improved markedly, but exports and investment remain weak. The unemployment rate, at 25%, is still high despite a moderate decline since 2013. The depression has pushed many people into poverty and income inequality has increased. Tax and benefit reforms have materially improved the budget position, but the burden of adjustment has been uneven and public debt is still very high. The banking sector has recently been recapitalised, but credit creation remains weak due to the high burden of non-performing loans on banks’ balance sheets, and reduced demand for loans.
#Significant structural reforms have been legislated, but their mix and implementation were uneven
Greece has implemented significant labour market reforms, but progress has been less on reducing oligopoly power, the regulatory burden and weaknesses in the public administration, due to administrative capacity constraints, little ownership of past reform programmes and vested interests. The depressed economy, lack of bank finance and remaining structural impediments are holding back the modernisation of the Greek economy.
#Stronger exports and investment are a key to sustained recovery
Remaining structural barriers and administrative burdens raise costs of exporting. Greece’s integration in global value chains is low due to insufficient investment in human and knowledge-based capital, low inward FDI, the small size of enterprises and the manufacturing sector and weak infrastructure. Network industries have been liberalised but the still restrictive regulation of the energy and transport sectors reduces trade in both goods and services.
Many old houses at the village are derelict and the small olive groves have little financial value. The olive groves are generally small because they have been divided among the children through the generations. If an olive grove is not tended for 5-10 years, it becomes unusable and costly to fix.
Home ownership in Greece is quite sacred (around 70% own a home) and the current government is even avoiding forced evictions for those that do not pay their home loans.
Ooh, damn, that might require some time investment and manual labour! What is this, the 20th century? Dump this rotten crap!
> If an olive grove is not tended for 5-10 years, it becomes unusable and costly to fix.
Ooh, damn, that might require some time investment and manual labour! What is this, the 20th century? Get outta town.. ;D
Also olive trees are very easy to cultivate, very durable and last for centuries! disagree strongly on this.
http://taxation.lawyers.com/property-tax/when-you-cant-pay-y...
Let's say that in the US you buy a house, get a loan and your payment is $1000 a month. You make your calculations and think that you are ok for the next 10-20 years. You even have some slack and can afford a payment of $1200
You move into the house and the next day a new law passes and a new tax is introduced that will cost you extra $600 a month for the house you just bought.
How would you feel?
If the property tax in Greece was introduced in a gradual way complaints would be less.
Not sure why countries like india leave property tax on the table.
You can't look up appraisal values from county tax office like you can in most counties in usa.
This prevents panic selling and even though seems like a "delaying-the-inevitable-drop" cop-out, it really does work.
Greece Government are stupid as hell for letting everybody sell their homes all at once. Mass selling off in a region will just cause the housing market to death spiral, just like it does with stocks.
[1]http://www.jpx.co.jp/english/equities/trading/domestic/06.ht...)
It does not filter through inheritances that may not be worth the money to pursue.
Besides, I'd like to question the conventional wisdom that falling stock markets or falling housing markets are a problem which justifies government intervention. Another view on the same phenomenon is that your cash just increased in value. Like when prices go up, some people will lose money, some people will win money. In the end it's a zero sum game.
And the difference between "inheritance" and "parental donation", is that the latter was set up decades ago when it was cheap to do so.
What you are reading in this article is cases where they did not plan for the future.
In addition, the article does not provide information about the condition of the property. In many cases, the property would be an old house at a village that may not habitable or small olive groves that have little value.
Weird how that sentence became what it is with the benefit of hindsight. If things had gone the other way, and inheritance was cheaper than parental donation, you'd be saying "those chumps donated when it was more expensive and did not plan for the future".
It's easy to plan for the future when you already know what it will be. In other cases, I wouldn't be so absolute.
My stronger point in the reply should be my hunch that many of the inheritances may not be profitable enough to pay the inheritance tax. There should be an article that dives into those rejected inheritances and figure out what exactly was not accepted.
How bad is it?
It looks like property tax tops out at 2% annually of assessed value. This is similar to tax rates in Wisconsin, but if they play the same games in Greece that some local governments do, the properties are assessed well above anything you could sell the property for.
I'd be lucky if I got half of that If I actually tried to sell it at the moment.
[1] - http://www.bestplaces.net/economy/city/washington/tacoma
The problem is with properties that are not rented long term.
The economic troubles of Greece have been similar to those of the eastern european countries. The issue with Greece is that the politicians did not take tough measures early in the crisis and the recovery is too far ahead.
While other countries reduced their headcount in the public sector, in Greece the headcount remains much the same. I blame the politicians, though the political party that manages to win, is the one that offers not to reduce the public sector headcount.
This inability of the politicians is also reflected in the enforcement of the smoking ban. While in public transport there is no smoking, in most restaurants, cafes and elsewhere, the ban is not enforced. Even in the Greek parliament there is smoking, and even the Minister of Health is regularly seen smoking. See https://www.reddit.com/r/europe/comments/52dif3/the_sad_real... and weep.
Frankly, investors should use the smoking issue in Greece as an indicator whether the country is actually recovering. As long as the smoking ban is not enforced, the recovery is not happening.
The property tax can be about 200 euro / year for relatively small apartments in lower class neighborhoods and rise pretty fast (e.g 800 euros / month) for better neighborhoods. If you own the land (you aren't leaving in an apartment) things go south even faster.
Also the property tax doesn't consider any special cases. For example you could have build your house 60 years ago in a remote location, now rich people came to leave around you and you have to pay 6000 euros / year on a 600 euro / month pension.
I ask because this is still pretty difficult in America, as most state and local law publishers do not publish them as (free) ebooks and make it hard to use their websites for anything but a reference. (I.e., it is difficult to read the law through and through online, as versus looking up individual sections.)
Lawyers are the ones who have all the power on this aspect.
Property taxes have this interesting economic plus side: It stops being profitable to just amass wealth, instead, you have to use it to create wealth in order to keep it.
Also, unlike what people in the comments are trying to make of it, countries high property taxes in EU are in good economic condition, like Luxembourg and the UK where they are respectively 1.5x and 2x what they are in Greece. In fact all the countries with high property taxes from OECD are amongst the top economic performers of OECD.
https://data.oecd.org/tax/tax-on-property.htm
It should be clear just from that, that there is absolutely no correlation between high property taxes and a bad economy.
So now they have both high unemployment and high taxes, the latter discourages if not out right prevents new businesses from starting. You cannot recover any economy by taxing your way out of your malaise
That is quite simply a lie. Recent GR governments have not pushed for pension or social security reform, only cuts in spending, all of which the Parliament approved and set into effect _immediately_. As far as I know they're all still in effect.
The results are well understood.
I'll gladly enjoy the comments, but this is my protest at allowing sources that are paywalls (except, perhaps, if a given story is in a fully public section).
edit: (requires karma level > 500)
Greeks didn't scam anybody, on the contrary, they were scammed by EU leaders and bankers. After signing the EU pacts, there was little their politicians could do to avert the catastrophe (and what little they could, they still didn't.)
Why doesn't thing go bad for Poland? Or Czech Republic? Because their finances are solid, not based on vaporware, and they don't lie to the world and themselves to get short-term benefits. And they actually work.
Having TTIP, CETA and all those globalization pacts make this article reality in an EU country. It's not about Greek people waking up after a blissful dream, it's about nation facing reality of capitalism and bankers.
As it is now you cannot really buy a house, you need a mortgage for live and work your entire life to pay interest. If this continues every house in the entire world will become unending debt and ever more unattainable, except for the rich of course.
This is also why basic income could never work in practice, as the house prices keep increasing you'd also need to increase the basic income. And where goes the money? Indeed, to the rich property owners..
If only someone had thought of that before! http://econlib.org/library/Topics/College/pricecontrols.html
> This is also why basic income could never work in practice, as the house prices keep increasing you'd also need to increase the basic income. And where goes the money? Indeed, to the rich property owners..
If that actually happens, then it's pretty simple to fund basic income entirely from property taxes.
I never mentioned price controls in general.
In Auckland, New Zealand, investors are buying property and houses en masse. They blow up the market price for profit. In the news you can read that most people born now in New Zealand will likely never be able to buy a house in their lives, and this is a very hot issue there right now. It has never been this bad and it only gets worse every day.
If the price per square meter never exceeds for example 0.25% of the average minimum income, most people should be able to own a house. Property owners could than make profit on the quality of a house, which is fair enough for now, but not anymore on the square meter property price.
How can it be that you are born on this planet and not being able to ever have your own place? Because it is all owned and inherited by a handful of people that took profit of a flawed system?
That isn't exactly a bad problem to have--if free construction is allowed and property taxes (or better yet, land value taxes) aren't constrained, it would be fairly straightforward to fund a significant portion of the governments' budgets, plus a basic income or rent subsidy, by a taxing foreign investors.