Accordingly, the Greek government in this latest torture cycle to get the next bailout loan tranche has decided to remove tax exemptions from self-employed people and tax them at 35%/ 65% marginal rates according to purported income based on various arbitrary factors like where they reside and what car they drive.
This is symptomatic of where things are going in Greece in terms of highly aggressive taxation. Last year, the Greek government assessed a real estate tax that was linked to electrical bills. This caused severe liquidity problems with the Greek Public Power Corporation since people could not pay both the tax bill and electric bill. The present Greek government is cutting power to these people and threatening to put their property on auction. Likewise last year, the government aggressively raised income taxes across the board on businesses and private income. The result: many businesses faced substantial tax bills without the income to pay, forcing them into bankruptcy. All this is causing immense social upheaval and fragmentation of the political system.
The May elections resulted in a sharp decline of the two major traditional parties. The socialists (PASOK) fell from 40 percent in October 2009 to only 12 percent. The conservative party (New Democracy) dropped to below 20%. The main winners were the Euro-Communist (SYRIZA) and the far right Golden Dawn party, which is nostalgic for the years of rule by the military junta when Greece was a thriving emerging market economy with rapidly rising per capital income levels.
Both parties attracted droves of Greek youth, but SYRIZA had the edge because many former PASOK members sought refuge there. There was no majority in the May elections; but under threats and with media support, the Greek political elite concocted out of the subsequent June elections — to the great joy of Brussels — the current ND-PASOK coalition with basically the same unpopular pro-austerity program and many of the same people as the previous government.
Greece is a small, very dependent country. The political elite are conditioned to think like a client state latching on to a patron with deep pockets to resolve their problems. Greek politicians think of state-centered, top-down economic strategies funded by EU loans and state-sponsored deals with private and public investors. Traditionally, the Greek public sector has been the employer of last resort.
An example of this mentality is the popular concept that Greece could resolve its economic problems by getting a loan from Russia on favorable terms in exchange for giving Moscow a naval base.
Another key element to understand Greece is the rapidly aging and shrinking population. The 2011 census results were horrible. The economic crisis is leading to increasing emigration by younger Greeks fueled by 50 percent youth unemployment. These people have no interest in being burdened by big debts at home and want to seek their luck abroad.
Ultimately, the major decisions concerning Greece’s future will not likely be made by Greeks, but rather by EU policymakers and the politicians of other countries. They will decide whether Greece will be allowed to stay in the euro currency zone.
Greece today is a broken country, unable to break out of the vicious circle of EU over-dependency. The political elite have no problem sacrificing a whole generation of their young in this process; but for the Greek people on the whole, the purported utopia of European prospects is turning into a bitter, ugly nightmare.