Only 8 days have passed since the general elections, but the Greek state already feels it in its coffers: some Greek citizens are responding to the high uncertainty and deferring tax payments.
Well, why pay the state if it could go bankrupt soon? Why give away valuable euros when they could soon turn to cheap drachmas? According to a report, Greece has only €1.5 billion in its coffers, and may find it hard to pay salaries and pensions.
The Greek president already warned about outflow of money from banks. A slow Greek bank run already began a long time ago. Now a massive tax rebellion may be underway.
Most payments are made at the end of the month and the state might struggle to make it. Greece’s Imerisia reported about it. The headline about Greece having only a billion euros and a half was picked up by Bloomberg, but the interesting detail about the impact of elections on tax payments wasn’t. Here goes, courtesy of Google Translate (emphasis mine):
Agents of the Ministry of Finance, do not hide their concern about the state of revenue and VAT where mainly located in big trouble and appreciate that the precipitation of tax revenue has played a role in the campaign and the political uncertainty that followed the results of the polls. Many taxpayers are awaiting political developments, choose to defer paying taxes later and settle their outstanding debts to the State.
Greece needs to pay bonds worth around €435 million on May 15th. As no new government has been formed, the outgoing government of Lukas Papademos needs to make a decision if to pay these English law bonds or default on them.
The decision is hard to make: paying will leave the coffers even more starved, while not paying may add to the huge turmoil, following the elections.
A “grexit” is now mainstream, with many ECB members openly discussing it and playing it down. Nevertheless, a Greek exit of the euro-zone will have a severe impact on the value of the euro, which is falling from low to lower support, the French banks and will have immediate contagion effects, on countries such as Greece.
Greece is already working on a “Plan C” just after approving new bank measures. As the Chinese say, “interesting times”.
Further reading: Greek banks in worse shape than estimatedGet the 5 most predictable currency pairs