Wouldn't the solution in either case be to sell the house and move somewhere you can find a job?
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