Wednesday, 24 June 2015
The Greece Fiasco
This could well be a crucial week for Greece. You’ve probably read that sentence somewhere every week since the banking crisis of 2008.
I’ve never been to Greece. In the early 70s I organised a holiday there but it was cancelled for reasons beyond my control. I’ve never had a desire to try again.
How often have we heard about Greece’s financial problems in the last few years? It’s becoming boring and I’ve more or less given up reading about the country’s woes as the same protracted negotiations with the EU rumble on.
It appears the Greeks want to stay in Europe. Little wonder really because if they returned to the drachma they would have to make all purchases in cash.
Without a release of cash before 30 June, Greece would become the only developed country in history to default on the International Monetary Fund.
A family friend has just returned from a week’s holiday in Greece. They were on the mainland but became acquainted with an Athenian couple who own two hotels in the Aegean Islands. During the week the political problems of Greece were discussed and the Athenians were angry at their government’s proposal to increase the VAT on the islands. Profits would be greatly reduced and their intention was to sell their businesses if possible. That didn’t seem to concern them as they seldom kept an island business for more than a few years and when asked why, the answer was ‘It’s good to keep moving around’. The horror of having to pay tax was too much for them to bear it seems.
What could possibly go wrong with the latest proposals for VAT on island businesses? One of the major problems is that the Greeks do not pay tax so the cunning plan to ask them to pay massive new taxes is a non-starter.
Greece has never had a large enough GDP to service the interest on it’s €320bn debt, let alone any of the capital yet the ECB has continue to loan them billions.
I’ve no doubt by 30 June a suitable arrangement will be made with the ECB financiers and the people will once again be lulled into a false sense of security - until the next time their government can’t meet their creditors demands.
It won’t be too long.