The current problems of the Greek government are directly related to decreasing public expenditures through imposing more and more taxes upon its citizens and domestic economy. Under constant pressure from EU’s bureaucrats in order for Greece to receive a new round of loans and re-capitalize its banks, the limited time left to find alternative sources for tax revenues, create a hostile environment for the private sector and the real economy.
Imbalances in the government’s budget, negatively distort the real economy. Companies remain non-competitive because of the amount of taxes they have to pay and because they can not be financed in a healthy way anymore. Even if a myopic political party achieves to present a significant decrease in the government’s deficit, it can irreversibly hurt thousands of small and medium size businesses, further increase unemployment and establish a new problematic status quo for the employer (more taxes and insurance contributions) – employee relationship (short term job contracts, uncertainty in the workplace, etc.).
There is only one way to properly increase tax revenues and this is the adoption of a national plan for the economy’s growth which can return the fruits of real job creation and enough tax revenues to positively shift Greece’s government budget imbalances and deficits. Greece needs a sustainable tourism and agricultural industry that creates jobs, exports new products & services and pays a fair amount of taxes similar to other developed countries. Imposing more taxes with the side effect of enlarging an existing black market, will only extend the austerity.
In times like the ones that Greece is going through, the cost of desperately attempting fiscal consolidation means Greece’s GDP will continue to decrease and the official unemployment statistics increasing.
Co-founder of Hellene.gr
Operations Consultant Moovit Greece
Economist & Web Consultant
Image source: http://touchstoneblog.org.uk/