Bankruptcy risk without debt easing

Parliamentary State Budget Office also warns excessive taxation will prevent consolidation of growth

Parliament’sState Budget Office (PBO) warned yesterday that the country will continue to face the risk of bankruptcy unless there is a serious easing of the national debt, adding that tax policy needs to change because it is hampering growth.

The PBO’s quarterly report stresses that the lightening of the debt is necessary because interest payments will soar after 2020: In the six years from 2021 to 2026, 84.3 billion euros will be required for interest payments alone, according to data from the Public Debt Management Agency.

“Without a serious lightening of the debt Greece will be bankrupt,” argues the office headed by Professor Panagiotis Liargovas. It is also in favor of Greece being relieved of the obligation to achieve very high primary budget surpluses that are asphyxiating the economy, generating a vicious cycle of recession.

High taxation is seen as a risk to growth. A special chapter of the report concludes that “the tax policy implemented in recent years, based on the increase in taxation, is hampering growth in the country. The continuation of the tax-centered policy increases the economy’s suffocation, while on a practical level a large part of the taxes are not collected.”

The report further notes that “the distribution of the tax burden among citizens is not balanced, with a large section of taxpayers paying mini- mum taxes – which highlights the high rate of tax evasion and the high rate of poverty – and relatively high incomes being taxed excessively, creating counterincentives for labor.”

Total tax revenues as a percentage of the gross domestic product soared from 30.8 percent in 2009 to 36.4 percent in 2015, while the average rate in the European Union rose from 25.1 percent to 26.9 percent during the same period.

The PBO further refers to the end of the bailout program and Greece’s return to the markets: “Even a ‘clean’ return to the markets does not entail an exit from all supervision,” it argues, adding that economic supervision will be required for “a possibly necessary precautionary credit line, not to mention the measures to lighten the public debt.”

It says that despite the improvement in the macroeconomic figures, the signs of the crisis are evident on a corporate level, while business prosperity is necessary for the country to return to growth.