Fiscal Theater

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Tax Plan Heralds New Greek Tragedy

greek flags-Reuters-CHANGED
Still side-by-side, for now.
  • Why it matters

    Why it matters

    Greece has made economic progress since its debt crisis peaked in 2012. But the government appears to be re-establishing some of the tax policies that led to its depression, threatening future stability.

  • Facts

    Facts

    • Greece’s GDP is about €188 billion, its debt €363 billion.
    • The country’s GDP dropped by just 0.3 percent in the past few months, its best performance since 2008.
    • Proportionately Greece uses more oil, coal and nuclear energy than many European nations, yet is well-located to exploit renewables.
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    Audio

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In the past few months, Greece has made important advances in crisis management. Its gross domestic product dropped by just 0.3 percent – the best performance since 2008 – and a slight increase is possible in 2014. A tourism boom and restoration of competitiveness have contributed markedly to its economic recovery. The Greeks have achieved a primary surplus in the national budget and regained their footing in international capital markets.

Greece deserves acknowledgement for this. But Prime Minister Antonis Samaras, with an eye on his political future, is now requesting more financial leeway from European partners, mostly on tax policies.

Even socially minded economists (I count myself as one) who would have absolutely allowed the Greek people compensation for their income losses are pained about Mr. Samaras’ plans. His strategy is going in the wrong direction.

If he goes through with it, Mr. Samaras will restore the old Greece instead of laying the cornerstone for a new one. For example, he wants to reduce the extra levy on heating oil first introduced in 2011. Although the country would seem, from its geographic location, predestined for the expansion of renewable energy sources, proportionately Greece uses more oil, coal and nuclear energy than many European partners.

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