The Greek government-debt crisis is one of a number of current European sovereign-debt crises. In late 2009, fears of a sovereign debt crisis developed among investors concerning Greece's ability to meet its debt obligations because of strong increase in government debt levels. This led to a crisis of confidence, indicated by a widening of bond yield spreads and the cost of risk insurance on credit default swaps compared to the other countries in the Eurozone, most importantly Germany.
Fight against corruption and tax evasion
Methods to reduce tax evasion The OECD estimated in August 2009, the size of the Greek black market to be around €65bn (equal to 25% of GDP), resulting each year in €20bn of unpaid taxes. This is a European record in relative terms, and in comparison almost twice as big as the German black market (estimated to 15% of GDP). Another study found that seven out of 10 self-employed Greeks significantly under-report their earnings, with only 200 Greeks declaring incomes of over €500,000. Undeclared income from self-employed Greeks (particularly doctors and lawyers) amounted to €28 billion in 2009, more than 10 percent of the country's gross domestic product that year. The state lost €11.2 billion in tax revenues as a result. Above all, ship owners benefit from dozens of tax exemptions. A rapid increase in government revenues through implementing a more effective tax collecting system has been recommended but several successive Greek governments had failed to improve the situation. Implementing proper reforms is estimated to be a slow process, requiring at least two legislative periods before they start to work.
In 2010 the government implemented a tax reform. In November 2011, the new Greek finance minister Evangelos Venizelos called upon all persons who owe the state more than €150,000 to pay their outstanding taxes by 24 November or find their names on a black list published on the Internet. The government later revealed the list, which also includes a number of prominent Greeks, including pop stars and sportsmen. In January 2012, Athens was considering the establishment of a 100-strong unit to go after wealthy tax evaders. The year 2012 also saw the introduction of a duty of non-cash payments for amounts over 1,500 Euros. Meanwhile, the Greek police have established a special unit, which deals exclusively with tax offenses. Germany has offered experts from its financial management and tax investigation office to help build a more efficient tax administration.zeit.de 17. November 2011: Auf der Jagd nach den reichen Griechen. – Rund 60 Milliarden Euro an Steuern schulden die Griechen dem Staat. Die Regierung in Athen greift nun hart durch, unterstützt von einem Deutschen. However, months later it was not clear whether Greek officials would accept the offer.reuters.com 19 February 2012: Germany urges Greece to accept offers of help
By the beginning of 2011, out of 5,000 cases suspected of tax evasion gleaned from Greek bank records, only 334 have been conclusively settled. Furthermore, the Greek government has refused to look into a list of 1,991 potential tax evaders with Swiss HSBC bank accounts, it received in 2010 from former French finance minister Christine Lagarde. Initially, officials claimed at various times to have lost or misplaced the information. On 29 October 2012 the government changed its position saying it would not use stolen information to prosecute suspected offenders. Instead, Greek authorities arrested Kostas Vaxevanis, journalist and editor of the weekly magazine Hot Doc, who published the "Lagarde list". He was charged for breaching privacy laws with sentences of up to two years in prison, but he was immediately found not guilty in trial. The list includes an advisor to Greek prime minister Antonis Samaras, as well as a former minister and a member of Samaras' New Democracy political party. The list also contains the names of officials in the finance ministry. On 30 October the Greek prosecutors received a testimony from the former head of the Financial Crimes Unit (SDOE), Yiannis Kapeleris, that former finance minister Giorgos Papakonstantinou (serving the office from October 2009 until June 2011) never asked him to carry out a detailed investigation into the Lagarde list, and after he had reported the first 10 cases of irregularities to Papakonstantinou he was never instructed to continue searching for other irregular cases nor to open up detailed investigations. As the wife of a former Economic and Finance minister also appeared on the Lagarde list, a parliamentary committee also ordered this particular case to be investigated in full details on 8 November.
In 2011, the Ministry of Finance stated that Greeks with Swiss bank accounts would either be required to pay a tax or reveal information such as the identity of the bank account holder to the Greek internal revenue services. That solution still had not been effected as of 2015. That year, estimates indicated that the amount of evaded taxes stored in Swiss banks was around 80 billion euros. By then, however, a tax treaty to address this issue was under serious negotiation between the Greek and Swiss governments. An agreement was finally ratified by Switzerland on 1 March 2016 creating a new tax transparency law that would allow for a more effective battle against tax evasion. Starting in 2018, banks in both Greece and Switzerland will exchange information about the bank accounts of citizens of the other country to minimize the possibility of hiding untaxed income.
In 2016 and 2017, the government was encouraging the use of credit card or debit cards to pay for goods and services in order to reduce cash only payments. By January 2017, taxpayers were only granted tax-allowances or deductions when payments were made electronically, with a "paper trail" of the transactions that the government could easily audit. This was expected to reduce the problem of businesses taking payments but not issuing an invoice; that tactic had been used by various companies to avoid payment of VAT (sales) tax as well as income tax.
Numerous businesses were required by law to install a point of sale (POS) device to enable them to accept payment by credit or debit card by 28 July 2017. Failure to comply with the electronic payment facility can lead to fines of up to 1,500 euros. The requirement applied to around 400,000 firms or individuals in 85 professions. The greater use of cards was one of the factors that had already achieved significant increases in VAT collection in 2016.
Anticorruption measures
Transparency International, an independent corruption monitoring NGO, found that 13% of Greeks paid fakelaki (bribery in the form of envelopes with cash donations) in 2009, which was estimated to account for €787 million in yearly payments. At the same time it was estimated that roughly €1 billion was paid by companies in bribes to public institutions for avoiding bureaucratic rules or to get other benefits. When calculating all sorts of corruption in Greece, the total amount is estimated to be roughly €3.5 billion per year (equal to 1.75% of the Greek GDP). Compared with corruption levels measured by Transparency International for 160 other countries, Greece ranked at 49th in 2004, was down at 57th in 2008, and slumped to 71st in 2009.
The government elected in October 2009 had on its agenda to increase the fight against fakelaki and other forms of corruption. The Inspector General of Public Administration has started an online census of civil servants. In connection with this census he has uncovered a number criminal offences, including an entire non-existent health authority.SZ: Herkules versus Verwaltung, 16 July 2010
Improving the economy
Business climate
According to the latest Doing Business Report, Greece is among the 10 economies of the world that showed the largest improvement of business climate in 2011/12. It ranks 78 in the Ease of doing business index in 2012, a big step forward compared to the previous year when it ranked 100, a bigger leap in improving its regulatory environment than in any of the previous six years. The authors of the report note that the reasons for Greece's good performance were the implementation of regulatory reforms in the following three areas: 1) It "reduced the time required to obtain a construction permit by introducing strict time limits for processing permit applications at the municipality". 2) It "strengthened investor protections by requiring greater immediate and annual disclosure of material related-party transactions", and 3) it "enhanced its insolvency process by abolishing the conciliation procedure and introducing a new rehabilitation proceeding".
Austerity packages and reforms
When the first three austerity packages had been negotiated and agreed upon from February to May 2010, they featured a total fiscal tightening of €41 billion of which €28bn was related to 2010–11 and the remaining €13bn scheduled for 2012–14. Because of a worse than expected recession, this was however followed by a need for the government also to pass a fourth austerity package in June 2011 and a Fifth austerity package in 2012. The two extra packages increased the total amount of fiscal tightening for 2010–2014 to €65 billion (equal to 31.9% of the 2012 Greek GDP), with the first €36bn in 2010–11 followed by €13bn in 2012 and €16bn in 2013–14.
The Fifth austerity package only introduced a new tightening of €13.5bn for 2013–14, but this was in addition to the fiscal tightening of €2.5bn being implemented during the years as leftover from the earlier packages, resulting in €16bn of tightening for 2013–14. Creditors attributed the increased need for fiscal tightening to the Greek government's inability/unwillingness to implement the needed economic structural reforms, while the government viewed the recession as the result of the austerity measures.
First austerity package (February 2010) The First austerity package was a minor austerity package in order to limit the deficit. This event was preceded of the First Economic Adjustment Programme for Greece memorandum. It emerged after the promise of the Greek prime minister in the World Economic Forum of Davos, Switzerland. He promised that he would take some measures so that the deficit was cut. The package was implemented on 9 February 2010 and was expected to save €0.8 billion; it included a freeze in the salaries of all government employees, a 10% cut in bonuses, as well as cuts in overtime workers, public employees and work-related travels.
Second austerity package (March 2010) The Second austerity package included further moves to increase government income, decrease outgoings, and improve the economy. This event was preceded of the First Economic Adjustment Programme for Greece known as memorandum. The package emerged after the rapidly rise of Greek/German 10-year debt yield spread and the downgrading of Greek economy by all United States of America's nationally recognized statistical rating organizations. So, amid new fears of bankruptcy, the Greek parliament passed the "Economy Protection Bill", which was expected to save another €4.8 billion. The package was implemented on 5 March 2010 and it included 30% cuts in Christmas, Easter and leave of absence bonuses, a further 12% cut in public bonuses, a 7% cut in the salaries of public and private employees, a rise of VAT from 4.5% to 5%, from 9% to 10% and from 19% to 21%, a rise of tax on petrol to 15%, a rise in the (already existing) taxes on imported cars of up to 10%–30%, among others.
Third austerity package and reforms (May 2010)
The Third austerity package came as a result of First Economic Adjustment Programme for Greece known as memorandum that was announced by Greek prime minister on 23 April 2010 and was signed on 2 May 2010. Changes aimed at saving through 2012, representing the biggest government overhaul in a generation.