Greek Economy Getting into a Deeper Hole

By GEORGE GEORGIOPOULOS | REUTERS | APRIL 24, 2012

Greek GDP to slump 5 pct in 2012. Current account gap to shrink to 7.5 pct of GDP. Inflation seen at 1.2 pct in 2012. Strict adherence to reforms urged.

Greece’s economy will contract a deeper than expected 5 percent this year, the country’s central bank chief said on Tuesday, piling more pressure on to a citizenry already battered by crippling austerity and record joblessness.

The projection topped a previous forecast the central bank made in March, when it projected the 215 billion euro economy would contract 4.5 percent after a 6.9 percent slump in 2011.

Twice bailed-out Greece is in its fifth consecutive year of recession.

Speaking to shareholders at the central bank’s annual assembly, George Provopoulos, also a European Central Bank Governing Council member, urged strict adherence to reform and fiscal adjustment commitments Greece has agreed with its euro zone partners, saying they were needed to return the economy to sustainable growth.

Athens is under pressure to apply more fiscal austerity to shore up its finances as part of a new rescue package agreed this year with its euro zone partners and the International Monetary Fund (IMF) to avert a chaotic default.

Its continued funding under the 130 billion euro package will hinge on meeting targets.

Provopoulos warned that Greece’s euro zone membership was at stake if it failed to follow through on its pledges, especially after national elections next month.

“If following the election doubts emerge about the new government and society’s will to implement the programme, the current favourable prospects will reverse,” he said.

Greece is set to pick a new government on May 6, with the two main parties in the current coalition seen barely securing a majority in parliament, according to the latest opinion polls.

Whoever wins will have to agree additional spending cuts of 5.5 percent of GDP, or worth about 11 billion euros for 2013-2014, and gather about another 3 billion from better tax collection to keep getting aid, the IMF has said.

IMPROVING COMPETITIVENESS

The central banker projected Greece’s current account gap, a key indicator reflecting eroded economic competitiveness, would shrink to 7.5 percent of gross domestic product (GDP) this year from 9.8 percent in 2011. In March the central bank forecast the gap would drop to 7 percent of GDP this year.

“The expected drop in unit labour costs in 2012-13, coupled with the projected price trends will lead to a marked improvement in competitiveness, contributing to a rise in exports and import substitution,” he said.

Consumer inflation is seen slowing to 1.2 percent this year and may fall below 0.5 percent in 2013. Weak domestic demand combined with downward wage pressures have shrunk the country’s inflation differential with other euro zone states.

The central bank estimates that by the end of this year the economy will have regained up to three quarters of competitiveness lost during 2001-09. Greece joined the euro in 2001 and enjoyed a consumption boom on lower borrowing costs.

Provopoulos said the fiscal shortfall had come down markedly but remained high. Last year Greece shrank its budget gap by 1.2 percentage points to 9.1 percent of GDP and aims for a 6.7 percent deficit this year.

Austerity measures including income and property tax increases, a rise in value-added tax rates and cuts in wages and pensions, helped reduce the gap from 15.6 percent of GDP in 2009, when its debt crisis erupted.

“The sought attainment of primary surpluses from 2013 is now achievable,” the central banker said.

Provopoulos also said private sector bank deposits had declined by more than 70 billion euros since the end of 2009, a sum equivalent to about one third of the country’s GDP, in a blow to the banking sector’s lending capacity.

IMF Robs Banks, Banks Assault Us

PrisonPlanet.com

The global banking elite are preparing to assault Americans with two huge new tax increases as President Obama contradicts the Tax increaseassurances of White House aides and his own campaign trail promise by asserting that a VAT tax is still on the table, as the IMF outlines a new tax on financial transactions that is being hailed as a blow to the banks yet represents another stealth tax on the people.

“President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days,” reports the Associated Press.

Obama’s signal that he may embrace a European-style VAT tax follows former Fed chairman Paul Volcker’s call for a value-added tax. In response, the U.S. Senate passed a nonbinding “sense of the Senate” resolution labeling any such move, “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.”

Not happy with hitting Americans with a roughly 20% increase in living costs that a VAT tax would impose, Volcker also called for a carbon tax in the name of solving the widely discredited scam of man-made global warming, a new levy that is already being introduced at the state level.

Despite the fact that White House aides dismissed the prospect of a national sales tax only on Monday, Obama’s u-turn once again contradicts his pre-election promise that he would not raise taxes for American families earning under a quarter of a million dollars a year.

During a speech on the campaign trail, Obama promised, “No family making under $250,000 dollars a year will see any form of tax increase.”

However, the VAT tax is a flat rate levy that applies to everyone, and it will dramatically increase the cost of living for Americans already laboring under the greatest financial meltdown since 1929. As CNS News highlights, VAT is also labeled “consumption tax, because it applies to items at every stage of production. Such a tax would affect purchasers at all income levels.”

Obama’s failure to keep his promise that families would not “see any form of tax increase” has force him to lie in public addresses and claim that he only ever promised not to increase income tax on families earning under $250,000.

“And one thing we have not done is raise income taxes on families making less than $250,000,” Obama said on April 10. “That’s another promise we’ve kept.”

As CNS News’ Fred Lucas points out, in addition to any future VAT tax, “The $1-trillion health care overhaul bill contains at least 12 taxes and fees that will affect households earning less than $250,000.”

In our special report on tax increases contained in the Obamacare bill, we identified dozens of tax increases, most of which would apply to families making under $250,000 a year.

While the Obama regime plans to whack Americans with a whopping new VAT tax, international bankers are busy preparing their own financial assault by readying a new tax on all financial transactions, a tax that would inevitably be passed down to consumers but one which globalists and the corporate media are stealthily introducing under the illusion that its aim is to target large banks and financial institutions.

Publications like the London Guardian are hailing the new IMF “FAT tax” as a necessary move that will “rein in banks” by taxing their profits and bonuses. However, what they’re less keen to stress is that this new “FAT tax” will also be accompanied by a financial stability contribution (FSC), “Which should be paid by all financial institutions, not just banks, and used to bail out weak and failing firms.” (Emphasis mine).

In other words, every single financial institution, including local credit unions, mom and pop’s car showroom business, small local banks, local student loan unions, and any company that offers small loans, will be forced to pay another slice of whatever meager sum they have left after the VAT tax, the carbon tax and the myriad of new health care taxes, directly to the G20 and the IMF, who will then dole it out to their Goldman Sachs buddies or whichever other giant financial megalith that is suddenly in need of a bailout.  More…