by John Galt
July 8, 2012 16:00 ET
There is this myth that by funneling new debt into Greece, or any of the other PIIGS nations for that matter, will be a practical tool for these indebted nations to create leverage despite economic contraction to pay old debt back. Theoretically it sounds nice and placates the professors and politicians to a point where they can publicly proclaim success, even if in reality those in the know understand that a total collapse and default it is an inevitability, with many nations being forced to depart the European Monetary Union (EMU) to eventually solve the problem.
The ideas promoted by the traditional banking powers who have the greatest liability and providing most of the solutions are based on archaic macroeconomic models which never considered the prospect of a collapse in the economic viability of so many nations in such a short period of time. The primary concerns of Belgium, the Netherlands, Finland, France, Germany, etc. is not the collapse or condition of the economies of Greece and the other economic sows of Europe, but the maintenance of payments to the financial institutions within their own nations to support an imbalance of trade within the European Union and overseas. This is akin to a crack dealer providing credit to their customers and assuming that eventually they will steal enough or become responsible enough for repayment at some future time when the dealer actually needs the funds. Thus the idea that by forcing these nations to move from the Euro-Socialist models of high taxation without any productive expansion of economic activity is beyond futile, it is foolishness.
The story of the coming failure of the Grecian Formula is pronounced and spectacular as demonstrated by several stories over the past week. The primary theme behind these stories is not something that this author created but reported by the Greek newspaper Ekathimerini and the Associated Press via Business Insider. What the story tells is of a civilization on the precipice of collapse.
First from the Greek newspaper Ekathimerini by Prokopis Hatzinikolaou on July 5, 2012:
The Finance Ministry has been unable to collect court-ordered tax fines totaling 12.6 billion euros, or 6.2 percent of the country’s gross domestic product, according to data posted on Thursday on the website of the ministry’s General Secretariat of Information Systems.
The court orders came about after the taxpayers concerned disputed the fines imposed by the tax monitoring mechanism. However, partly due to being understaffed as a result of the voluntary exit program and retirements, as well as to the absence of electronic applications, the tax collection mechanism has only managed to collect 630 million euros, that is just 4.77 percent of the total sum of 13.2 billion.
The above amount includes the fine of 4.8 billion euros imposed on the Acropolis stockbrokerage for its role in the structured bonds scandal three years ago. The state has not received a single euro of that yet.
There are in excess of 180,000 outstanding tax cases in the Greek courts and there is no sign that this number will shrink significantly any time soon. While Athens had intended to have 50 percent of the pending cases heard by last month and 80 percent by the end of December, ministry data indicate that only 2.1 percent of cases made it to court in the first half of the year.
As a result it is hardly surprising that sources from the ministry are suggesting that the budget’s net revenues are showing a 1.5 percent decline from the same period in 2011, which means there is still a 1-billion-euro black hole in the budget.
Ahead of the official first-half figures to be released by the ministry later this month, sources point to a 1 percent increase in revenues in June compared to the same month last year. However, this was due to the withholding of tax returns, which were 10 percent lower than last year: The revenue figures exempting tax returns are said to show a 0.5 percent drop from June 2011. Receipts from the 2009 Single Property Tax managed to boost revenues somewhat.
Also in June, income tax receipts fell by 30 percent while value-added tax receipts declined by 7 percent.
In other words, the Greek ministry which is supposed to collect the taxes for the European banking cartel to repay the new debt being used to repay the old debt is unable to do so in an efficient manner which will satisfy the creditors over the short or long term. Yet the financial media refuses to listen to reality nor will the European Union allow many of its press organs to report the truth regarding the inevitable exit and collapse of the Greek economy from the EMU. The internal story from the same newspaper I’ve quoted from above is far worse:
And from Business Insider via the AP:
Translation from Bullcrap to English? The Greek nation is about to collapse. The sooner they can adopt the Drachma, accept a brief period of hyperinflation and then deflation the better. Iceland endured the pain and now their economy is primed to become one of the most stable in the Western world and what do they produce of note? Sardines? Anchovies? Whale Blubber? In other words those nations who are able to print their own currencies and withdraw from the inter-Atlantic Western banking cartel’s influence of the Fed, BoE, and ECB have a chance to survive and enjoy some degree of sovereignty.
The problem is that the fear of actually having to engage in a lifestyle of capitalist self-sufficiency and the willingness to accept that the mistakes of the past have had a cost will result in a nation descending into anarchy. As this final story from the Greek newspaper I have been quoting extensively illustrated this past Friday;