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Creditors’ Bail-Out Throws Drowning Greece an Anchor

Aug. 13, 2015 (EIRNS)—Details of the new Greek bail-out program have leaked out. On the top of the list are the conditions on bad debts held by the banks, which are already threatened with a bail-in on the Cyprus model. According to the European Banking Authority definition, "non-performing exposures" (NPEs) hit 40% of banks’ portfolios last year. According to the new memorandum of understanding, Greek authorities commit to changing corporate insolvency laws to speed up the liquidation of non-viable companies. By the end of November, the government will take further action to facilitate the resolution of impaired loans, including coming up with specialized court chambers for corporate and household insolvencies. All this is designed to speed up the seizure of property.

Worse are the new tax measures, which border on the absurd. The diesel fuel tax for farmers will more than double on Oct. 1, 2015, going from €66 euros per 1,000 liters to €200; and then rising again on Oct. 1, 2016, to €330. The part of farmers’ income tax to be paid in advance, will rise from 27.5% to 55%. How farmers bordering on bankruptcy are to pay taxes in advance is not mentioned. Income tax for farmers is set to rise from 13% to 20% for 2016, and to 26% for 2017.

Independent contractors, which include engineers and doctors, many of whom are unemployed, will be subject to a gradual increase from 55% to 75% in advance tax payments for income earned in 2015. Thus, they have to pay taxes in advance on money they have not earned. If they don’t pay, they will be considered in violation of the tax laws and could have their property seized.

Private education, previously untaxed, will now be taxed at 23%, including the tutoring schools (frontistiria) to which most Greeks send their children, but excluding preschools. Reduced value-added tax rates for the islands are to be abolished completely by the end of 2016, which will compel more islanders to flee the islands.

Greece’s vital shipping industry will also be subject to new tax increases, including a rise in tonnage tax by 4% annually between 2016 and 2020. A special contribution by foreign cargo carriers will remain in place until 2019.

The privatization fund TAIPED will immediately put into motion selling off its portfolio, including the Piraeus Port Authority (OLP) and the Thessaloniki port authority, OLTH; railway transport operator TRAINOSE; and the Hellenic Railways Organization (OSE), without material changes to the tender conditions. Despite all of this, TAIPED’s fire sale will only raise—if it is lucky—€6.4 billion over 2015-2017, which will pay off a measly 1% to 2% of the debt mountain imposed on the country.