The state property tax in Greece is 0% for property up to €200K. Then 0.2 to 1% from €200K to €5M. Then 2% above €2M.
Property taxes are hardly killing the Greek economy and especially not for the poor or the middle class. On the contrary, Greeks are paying very little. The problem is that Greeks used to have much more property than for example Northern Europeans.
For comparison, in Denmark the property tax is 1% up to €406,961. Then 3% for values above that. In addition to this there is a local tax on land value, which is generally 1.6-3.4%.
Numbers don't really say anything if you don't explain who decides them.
Here are two scenarios for you
1)I live in Greece and get 400 Euros a month and barely break even. I live in a house (inherited by my parents) that would fetch probably 90.000 in the market. Government says that it really costs 300.000 euros. I get taxed for it even though I cannot really afford it.
2)I am unemployed and live with my parents. They have a pension of 600 euros a month. My parents die. I inherit their house. The house was built in the 60's and is on an expensive island. Government says that the house values 500.000 and I get taxed even though I have no money at all on my own.
Basically the Greek government is unable to tax you directly (i.e. on the money you really make) and instead tries to guess your income by looking at the house. There are several cases however where your current house says nothing about how much money you actually make.
Nobody would buy the house (apart from foreigners) because it is now linked to the tax that everybody wants to avoid. Also cash flow is a big problem for everybody so it is hard to find somebody that has 90.000 in cash and also willing to buy it.
Move to where? Another city? Another country? Unemployment is everywhere in Greece.
I am not even mentioning the sentimental factor of being forced to sell your parents house for no particular reason.
Also if it was that easy to move somewhere else and find a job, you would have done it already (you would not wait for the government to create this tax and then think about it)
Here is a third scenario for you reading pleasure
3) I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field).
Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
If you put this hypothetical 90k euro house up for sale at a public auction tomorrow, what would it sell for? 50k? 70k? Real assets are usually sale-able, albeit perhaps for less than the owner thinks the asset is worth.
> Move to where? Another city? Another country? Unemployment is everywhere in Greece.
Since Greece is still in the EU, you can move to any member country right? UK, Germany, France? Certainly there must be places in the EU where the economy is better and there are more opportunities. People have been migrating around the world chasing economic opportunities for thousands of years. A million Syrians just traveled through Greece on their way north in search of this.
> Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
It seems that what has effectively happened is that the Greek Government has decided to confiscate a large part of the country's wealth through extremely high property tax rates. As other posters on this thread have mentioned, if the tax rate is 1% but the appraised value is 3x the actual market value, then the real tax rate is 3% and your Government is just playing games to try and hide the confiscation.
Personally I would vote for revolution - national default, totally new political leadership - and start to rebuild the country from scratch. Anything is better than decades of externally enforced austerity crippling a country's spirit as reflected in everything I read these days about Greece.
Personally I would vote for revolution - national default, totally new political leadership - and start to rebuild the country from scratch. Anything is better than decades of externally enforced austerity crippling a country's spirit as reflected in everything I read these days about Greece.
Looking at the democratically elected politicians/governments in Greece in the last decades I don't know where a totally new political leadership [edit: which would be interested and capable of 'rebuilding the country'] should come from. It's not that the electorate didn't consistently vote for the political leaderships which are/were, at least partially, responsible for the situation Greece finds itself in right now.
Bringing SYRIZA to power was a sort of revolution. For 40 years the Greek political was dominated by 2 parties and before that there was a series of dictatorships, wars, etc. It was another era.
We also held a referendum but the gov capitulated... From there on, I'm not sure who's going to the ballots and why it matters. I mean, for all important matters such as this tax for example, decisions are made at Troika level (EU/ECB/IMF), our gov is just the executive.
>It's not that the electorate didn't consistently vote for the political leaderships which are/were, at least partially, responsible for the situation Greece finds itself in right now.
That isn't really true. In both of the previous elections they voted for parties promising to end austerity.
In both cases it wasn't even as if the parties didn't want to end austerity but when they tried they were basically threatened with economic catastrophe (shutting payment systems in the entire country, indefinitely).
Last year they fired a kind of warning shot. Greek banks had to shut down for six days, cash machines only let you remove a small amount each day, capital controls were imposed. That could have been continued indefinitely.
Eventually Syriza wilted. Their mistake was assuming in the negotiations that the Troika's primary concern was getting their debts repaid. It wasn't. They just wanted greece to knuckle under and do as it was told.
The problem isn't than an elected government couldn't extricate the country from the Euro and return the country to growth, it's that kind of project would take 9 months minimum and during that entire time the country is vulnerable to the ECB flipping the switch on their economy and "turning off" Greek savings and "turning off" international trade and effecting instant 3rd world status (and not even 'good' third world status).
In effect, Greece has been converted into a puppet state that rubber stamps European Commission and ECB legislation. They issue diktats to Greece who rubber stamps them, and they're not even really pretending it's about getting paid back any more.
That isn't really true. In both of the previous elections they voted for
parties promising to end austerity.
The Greek electorate consistently voted for PASOK or ND, before the whole thing
blew up. And only after that, when no political party could promise any
unsustainable presents anymore, did a shift in the political spectrum take
place.
(Anecdotally: I have a lot of Greek friends, and although I/they don't agree on
a lot of things about the current situation in Greece, there's one thing they
agree on: that the root of the problem was the rotten political system in
Greece, and that the people (meaning in that case: the generation of their
parents) consistently voted for PASOK/ND besides knowing how rotten that system
was.)
(As a note: I am not arguing about whether Greece is a puppet state, the
situation now is only the fault of (the) EU/EC/Germany/[place devil here], or
if austerity is the way out or the real problem. I leave that to people who
know more about it or at least think they do.)
>shutting off all forms of payment in the entire country indefinitely
Technically the ECB threatens to stop providing emergency credit. That Greece has made itself completely dependent on emergency liquidity from the ECB is the country's own silly fault. Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
That said I don't think the current situation makes much sense. The odds are high that the debt will never be paid back and that Greece will never have a developed-country government. There have been some promising developments recently, but I'm sure we can all agree that Greece should never have been admitted to the Eurozone and maybe not even the EU.
>Technically the ECB threatens to stop providing emergency credit.
Technically, they were threatening to shut off access to target2.
>Are ordinary Greeks to blame? Yes
Ioannis Papandoniou is likely happy that you're unwilling to let him take too much of the blame. I guess he's suffered enough already right?
Goldman Sachs too (couldn't have happened without them).
>That said I don't think the current situation makes much sense.
It seems to be functioning as intended. Desperation in Greece is driving emigration to Northern Europe which is keeping a lid on wage inflation there and privatization of state assets in underway, which affords profitable opportunities for the right sort of person: http://www.cnbc.com/2016/09/29/greek-privatization-program-o...
As a Greek I'm aghast by fellow know-it-all Greeks who bought in in this we deserver what we're going through. And it's not just random commentators on HN, it is an entire political class.
> Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
G.Papandreou who campaigned with the MOTO "there are enough money for everyone", went around Europe calling Greeks crooked by default. As if every Greek is a crooked and tax-evading[1] citizen. Then came along Pagkalos of course, but the same MOTO is rhetoric is re-played time and again by politicians, just to name a few: A. Georgiadis at "Enikos", A. Loverdos before him, E. Venizelos and many others have replayed this recurring theme.
I don't believe that there is another country's population, who has received so much systemic brainwash into believing that it is it's own fault.
You want to tell me that when the Minister of Finance tells me that our banks are safe (2008), you would expect from the 60-year old public worker to understand that he is lying and believe otherwise? I don't.
So again to answer your question:
> Are ordinary Greeks to blame? Yes, they're responsible for the people they elect.
Fuck no! It's easy to be pissed with the prior generation but it is a simplistic and stupid approach.
> Technically the ECB threatens to stop providing emergency credit.
I won't enter into details because I'm bored. I've have written thousands of word regarding Greece, the EU and ECB here on HN and honestly I'm tired. The ECB was created as an apolitical instrument and it's been since then used time and again (Ireland, Greece, Portugal) as a political tool by French and German politician to save their bankrupt banks.
Do you have any idea what is really happenning here[2] ? It's not about Greece, so hatred should not cloud your judgement. If you don't know what is happening in this instance, please gets your fact STRAIGHT please.
ADDENDUM: The only politician who got it right about the ECB was M. Thatcher in her last speech in the house of commons: https://www.youtube.com/watch?v=vZZf7cLhPG8 - it's outstanding how a right-wing, libertarian politician understood, what French, Greek, Italian, etc. Socialists failed to see...
[1] The problematic relationship between Greek citizens and the Greek goes back to 1821 and it's almost exclusively the state's fault. There are cultural and historical reasons why this is, however, the state still today sees the average as tax-evader a priori.
Why is it that these people are nice and kind when they finance your government spending for decades but turn into facist greedy bastards when they come asking for their money back? That's what it boils down to.
Why is that that everybody else starting from EC and ECB and ending with corrupt polititians (who, it would seem, have magically appeared from amongst non-greek) is to blame but I'm yet to see any citizen taking responsibility. "Yes, it felt good voting for populists and enjoying massive social benefits from the state and not really having to pay taxes but now I have a hangover". That's democracy for you. Your right to vote comes with a responsibility for the consequences.
>Why is it that these people are nice and kind when they finance your government spending for decades but turn into facist greedy bastards when they come asking for their money back?
They're not trying to get their money back. They're simply taking the reins of power and threatening economic catastrophe if they're disobeyed.
It ought to be obvious to anybody with a functioning brain that Greece is not paying down its debts and that the European Commissions directives are clearly not about making Greece more able to do so.
The question you have to ask yourself then is, what are they asking of Greece? Because it's definitely not when are they going to pay us back?
>That's democracy for you.
It's democracy when you inadvertently voted for somebody who handed the reins of power over to a foreign country. That's the transition of democracy to dictatorship.
>Your right to vote comes with a responsibility for the consequences.
Well, that's how it goes when you take money from someone in order to keep from disaster. They get a say in how things go thereafter.
You write this as if some Greek politicians just woke up one morning and decided to hand over sovereignty to foreigners. That's not how it happened. Greece was forced into it, because Greece had to have foreign money in order to survive. It's been known for 3000 years what the consequences of that situation are - the borrower becomes the lender's slave (Proverbs 22:7).
So the "that's democracy for you" part was when they voted for people whose bad decisions put Greece in that situation.
I didn't defend it. I said that, in the real world we actually live in, that's the way it goes. Actions have consequences. Ignoring that, and then claiming "It's not right!" when the consequences hit... that's not very wise.
> ... and they're not even really pretending it's about getting paid back any more.
No, and it never was (though they may have pretended that it was at one time). It is, and was, about keeping Greece from economically destroying all of Europe.
But since they're providing the money that keeps Greece out of the abyss, they get to call the tune, no matter whether it's about getting their money back or not...
Turns out when people have to actually govern the thing they're pragmatists. That's what happened to Syriza. They're not "untrustworthy", they're just doing the best with the hand they inherited considering what EU politics are right now.
It's always nice to say you'll demand x, y and z from a third party during elections. But if you have no leverage, and the other party says no, there's little one can do.
Well put. If the house, 'valued' by the government at 300k, is actually a '90k' house that will in fact sell for 50k, perhaps it's time to get real, save time and call it a EUR 50k property from the start. Everything sells for the right price.
As for the issue of finding a buyer, I am hearing rumours that many Greeks have built up sizeable assets, from not paying very much tax in the last few decades. Many areas in Greece are also popular with European buyers.
Yeah, and then the government will still tax the owner for the full self-assessed amount. Even if the full sale doesn't pay for the tax, and then prosecute you for the unpaid tax.
This already happens in many places with property inheritance tax in the EU. All across Southern EU the governments are valuing assets as in the peak of the bubble because it suits them.
>Personally I would vote for revolution - national default, totally new political leadership - and start to rebuild the country from scratch.
That was actually the best of Greece's bad choices, but they were strongarmed by the IMF and the ECB into not defaulting and pulling a brick out of the financial pyramid scheme upon which western society is based.
Ok, a revolution. But, praytell, who would finance that new fresh government? There's little capital in the country, people don't evidently like the idea to start paying taxes all of a sudden and you just screwed over a large group of investors. That money is going to be way more expensive than the average market yield. That means your economic growth will likely not cover the interest payments. Which means you'd take on new loans to pay back your old ones with interest. And we'll be having the exact same conversation in 25 years or so. Yeah, your generation is going to so okish. But the next one will do even worse than you after a fresh round of damage on Greece reputation on financial markets.
No financing is required unless you want to run a budget deficit. Greece is one of the most popular tourist destinations in the world. They could use that sector as the cornerstone to rebuild. They would be poor (to start) but they would also be free. I think this is their destiny eventually but I don't think the pain is bad enough yet.
I think the answer to your first question is "if you put it up at public auction tomorrow, that would be totally illegal."
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws. Real assets are salable, but in this case the government has crippled the market's ability to clear.
All of which just reinforces your last point; the existing legal structure pretty much guarantees perpetual economic crisis.
Zoning laws in the US don't govern anything other than the initial certificate of occupancy in most US states. They are irrelevant for subsequent sales.
Like the US, Greece has many properties which would be illegal to build from scratch under existing zoning laws. Unlike the US, Greece has pushed a law requiring that all properties be certified as "having no illegal constructions" prior to sale.
I'm trying to imagine the crisis you would get if you enforced zoning laws against secondary sales in the US. At the very least, all of Boston would be uninhabitable.
In order to sell (in Italy) the building must have the same plan (roofs, doors, windows, walls, ...) that was declared when it was built first. You can pay a fine if there are differences, but only if the actual plan obeys the zoning laws now and would have obeyed them at the time the certificate of occupancy was last released.
> Personally I would vote for revolution - national default, totally new political leadership
A large part of our electorate thinks like that, and thus came Syriza (Syriza may be a household name, but not everyone knows that it stands for "Coalition of radical-left parties"). Yet when push comes to shove syriza turned instantly back into austerity. The electorate acted like an angry teenager. Magic bullets don't exist.
> 3) I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field).
This was regarded as a major incipient problem in California at once point. So a policy to address it was put in place - Proposition 13. It caps property tax increases to a quite low level.
Cities and counties cope by voting on a random assortment of taxes and assessments every two years. In major cities, where most people rent, this means property owners have their taxes go up very unpredictably. Though rarely more than single digit percentages.
This sounds great, but in practice it's created havoc. Turns out some solutions are worse than the problems.
> In major cities, where most people rent, this means property owners have their taxes go up very unpredictably.
Interesting. I've heard about the predictable 2% YOY residential property tax increases allowed by Prop 13 (in Los Angeles), but I haven't heard about people experiencing significantly larger, unpredictable property tax hikes.
I'm curious about the very unpredictable property tax hikes you're describing. How big have these been? Are these on apartment buildings or other commercial properties?
Prop 13 limits direct property taxes, but voter-approved direct assessments aren't limited. Depending on how votes go in Oakland and Alameda County next week, assessments might go up anywhere from $0 to $600+/yr on a single family home. I cited places where most people rent because it's easier for renters to think of property taxes as taxes that get paid by people who aren't them and it's always easier to vote for taxing someone else.
Some of them are property value percentages. Some of them are flat parcel taxes. The two fall differently on multi-family and single-family buildings. I believe commercial property is generally not exempt.
I'm not aware of any tax hikes that large in recent history, but sometimes the re-assessment at sale from Prop 13 can cause jumps bigger than that.
I think one big issue with Prop 13 was having it apply to business property, which makes no sense to me. How did they push that proposition to people with that? I can sympathize with the elderly being taxed out of their housing, but businesses? Not so much...
> I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field).
You bought the house when you were 9 and 4 years old, respectively?
Doesn't make a real difference, in some areas of Greece prices multiplied in mere years during urbanisation periods and during asset bubbles. Also, in rural areas plots and properties can go back several generations quite commonly.
Out of all the scenarios you posted, this is actually the easiest to solve:
> 3) I am 75 years old living with my wife who is 70 years old in the house that we bought in 1950. We are both retired farmers. Our pension is 500 euros in total. In 1950 the area we selected for our house turned out to be a popular one (in 1950 it was just an empty field).
Government passes the law and our house has a value of 500.000 (because of the area around it). Now out of the blue we have to pay property tax. What do we do?
You sell the house and move somewhere with a cheaper COL. Presumably the assumption here is that neither you nor your wife work, so you are unproductive members of society (this is meant without negative connotation). However, there's no reason you should continue to be subsidized by the people living around you who are, again presumably, fine with paying the property tax. They are more able to put this popular area to good economic use.
I want to make explicit the sentiment that I think underlies some of the comments here. For much of Western human existence, families could own, inherit, and stay in one place for generations. But now, catastrophic value inflation, property taxes, eminent domain, etc. threaten that expectation of stability. It shouldn't be surprising that people who don't value a migratory lifestyle are upset by being forced to abandon what they see as their little demesne.
Well to be honest most of these houses were build in the past 3 decades from the parents so their children have a ready-made home for them. We had a property boom in greece that was fueled by dirt-cheap loans from easy ECB money. Now the loans turned red, people don't have jobs, taxes have skyrocketed. It's a mess. But somehow the market has to move. Standing still is not a solution.
> For much of Western human existence, families could own, inherit, and stay in one place for generations.
In the scenario you are responding to, the family isn't trying to stay in the one house for the next generation - it's occupied entirely by a retired couple with no income.
Tough shit for the Western human existence then, I guess. Not sure why I'm expected to feel sympathy for those who enjoyed this brief and anomalous period in human history by luck of their heritage and place of birth.
> But now, catastrophic value inflation, property taxes, eminent domain, etc. threaten that expectation of stability.
If you enjoy value inflation of your assets, be prepared to pay appropriate property taxes that go hand in hand with that. Not sure why those people expect to have their cake and eat it to, at the cost of all the other taxpayers.
When black people are forced out by rising property taxes apparently it's fine but God forbid the same thing happen to old white people, Prop 13 gets passed in 5 ms then.
> For much of Western human existence, families could own, inherit, and stay in one place for generations.
...if they weren't expropriated by their overlords, driven off by war/disease/famine/poverty, etc. Staying in one region was common, but having the same house for generations on end was still an exception.
Besides, moving every 30 years or so is hardly migratory.
You sell the house. You have invested your money well, your property has increased in value. Congratulations! Now pay a bit of taxes to support the people who have not been as fortunate and stop complaining. Your property taxes are actually lower than in other countries by a margin, how can they be a problem, then? Quite frankly I think the notion of actually having to pay taxes has not been there for decades and it just feels tough to get over it once other people stop financig your lifestyle.
Government valuation is probably higher than the actual price that the house would get on the market. Add to that all the red tape involved in selling the house.
This is a way bigger hurdle than anyone is making it out to be.
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws.
Why on earth are we assuming that Greece has smooth-running property markets that allow people to sell houses for their nominal (or any) value?
So your house price went from EUR10000 (optimistic) to EUR 500000 (actual price 8 years ago , nowadays ~40% cheaper). You're still property-rich. why are you complaining?
There are huge legal barriers to property sales, including requirements for energy audits and certification that the construction is wholly legal - which is probably isn't. Just like in the US, a great many safe and livable Greek properties violate zoning laws.
Real assets are salable, but in this case the government has crippled the market's ability to clear. If your market can't clear, you can easily end up with a high value asset which is totally impossible to sell. That's the Greek situation, where the requirement to pay tax on a house doesn't mean it's actually possible to sell it for value.
Yes transactions costs are high in greece, but it's not what stopping people from buying. Prices are still too high. Rental yields do not justify buying at this time[1], even for newer constructions that are 100% legal. While the government could certainly reduce transaction costs, the homeowners themselves are sabotaging the market[2].
FYI i live in greece and could not afford a house during the boom years. Now i can but it's just a bad deal. It's cheaper to rent.
So as somebody NOT from Greece (from the US in fact).. I have always had to pay tax on any property I own.
If someone died and I got their property.. I would need to pay tax. Not sure how that is "unexpected"? If the tax was more than I could afford, I would sell it. If I liked the place, maybe I would move there.
Different perceptions - Greek market was and still largely is heavily regulated and closed. It will take many years for people to adapt to a free-er market. It doesn't help that government does not communicate it to people. For example, there was no real property tax in greece. Then after the crisis they instituted an "Emergency tax" on property that they promised "would be just one-off". Of course it became a two-off, 3-off etc. Greek govt. and the electorate have been playing cat and mouse for decades.
Estate tax in the U.S. is nil under $5 million [1]. If you paid tax on property you inherited, then I congratulate you on your windfall and mourn the loss of that relative.
You have no way to challenge the assessor? Here (U.S.) you could put together a book of 50-100 similar houses and their sale prices. Take that to court and have the house reassessed.
The US isn't corruption free, but in my limited experience, it's hard to have an assessment wildly out of line with reality, 3x would be hard to justify.
No you have not. The tax is based on a tag price the gov puts on your property which might be 10x more than the actually market value (sometimes even 50x, not kidding).
Greece is a more like a dormitory these days. It's a miracle people still survive here, but economic activity is virtually dead and indirect taxation is still on the raise.
> which might be 10x more than the actually market value (sometimes even 50x, not kidding
Given that the values have been recently reassessed [2016], i would like to know where these 10x and 50x values are. Not disputing you, but curious to know.
Thats really a fringe case of some long-forgotten property in a no-construction zone. The solution is to disown the property. It's not a comparison of real price <> assessment
You think so? I came across another 2 cases of people I know who did not accept inheritance (houses in villages by remote dead relatives) because of ENFIA. How do you call that? Another fringe case? :-)
Corrupt tax valuations are a problem, but it's practically one of the tenants of property tax that it is supposed to elbow you out if you can't afford the tax. It's not "nice" to say, but one of the purposes of property tax is to serve as a market force to encourage better usage of valuable land.
One possible fix is a law that states the government must purchase properties at the assessed price (or at something like 85% of the assessed price). Then if the tax office assesses your house at triple its actual value, well, they just handed you a giant pile of cash.
I actually like this idea. Lets take it a tiny bit further.
To prevent the government from harassing you in to forced sales they don't intend to complete, make it a guaranteed minimum of the larger of 90% of the assessed value or 85% of the final sale price. Also the government, while the property is for sale, allows your continued use as previous and pays you 0.005% of the assessed value of the property //per month// for the privilege of listing it and allowing buyers to view it during normal business hours.
At any time the government can cancel the deal and re-assess the value of the property, which shall be official retroactively for tax purposes (as far back as re-filing is allowed).
At any time the current owners can cancel the deal, but then agree that the valued price is fair and valid as well as are required to hold the property for a full year after the cancellation.
That runs into the problem of incentivizing various poison-pill type strategies to make it expensive in other ways to accept the standing offer to sell. Like, a high-level mobster could easily list their properties well below market rate while letting it be known to potential buyers that actually trying to purchase the property means saying goodbye to your kneecaps.
There's a similar corruption issue on the government-sets-buy-price side, where unscrupulous officials can transfer wealth to individuals, but at least the corruption there is much more able to be audited.
Not everyone is lucky to inherit a house. Houses are overpriced and out-of-reach for middle class incomes in Greece. We also pay exorbitant income taxes. Is that fair?
Ah won't anyone think of the unskilled person who inherited money and wants to continue to live well? Let this guy stay on this land and make the people who worked hard pay!
Let's get facts straight. The state property tax in Greece is calculated on a nominal value far removed from market value. This means that a 300K nominal value property cannot sell today for 150K (I know, I have tried.) In practice, as the article mentions property value approaches zero as the market is incredibly shallow. Recalculate on the basis of that and then make the comparison.
I would assume one can challenge that valuation with the tax authority or through the courts. A building isn't actually worth €300k if it can't be sold for €300k. If I buy something from a third party for €100k today, it's worth exactly that.
Tax lawyers are expensive. If people can't even pay the tax, how would they afford a tax lawyer? I have achieved beneficial settlements with unreasonable tax collectors with a good lawyer, so often it is that easy.
I didn't pretend to describe all the rules in detail. In Denmark, property taxes are also calculated based on values that are not the current market value. Currently, 95% of Danes pay the state property tax based on a 2001/2002 value assessed by the tax authorities.
In the larger cities, prices have surged over the past 15 years, in more remote areas, they have fallen slightly. There are plans on the table ATM to bring taxation in better line with valuation. As one may predict, this is not popular with city folks who imagined the tax rebate to be a perpetual thing.
I didn't pretend anything. Even if your property is taxed at €500k although it's worth €250k, you are still paying very little compared to Denmark. And actually, it is close to zero.
Many of my friends, all middle class, pay €5-10k per year in property taxes for what is really modest 100-150m2 apartments or houses in or around Copenhagen. Are you anywhere close to that in Athens?
Yes, easily more than €5k/year for a 120m2 house. (not me actually, my parents, but I doubt they lie to me about how much they spend)
Like others have already mentioned in other threads, land & property valuations are defined by the state, and are way inflated and unrealistic. On top of that, there's all these ridiculous things that contribute to the property tax, like how many streets neighbor the building, etc.
If the market is perverted or highly irrational, it does make some sense. For example, just because there are no buyers on the market, doesn't mean your home has no value. (Think of black markets. It's hard to find a buyer, but the item definitely has value) And many governments depend in part on property taxes, it would be a double crisis if a perverse stagnant housing market also bankrupted your government.
The scheme for a fair nominal value assessment does seem challenging to come up with, though. Perhaps you anchor your valuations in a past year, e.g. "what this house would have sold for in 2002".
If it's a pure property tax (as opposed to a LVT) the simplest way to do it is to either (i) let the government set the taxable valuation but oblige them to buy the house at that price (plus a premium) if the owner disputes it or (ii) let the owner value the house but grant the government the right to buy the house at that valuation (plus a premium) if they dispute the valuation.
Both options have the side effect of potentially adding a bit of liquidity to the housing market in a downturn.
In Greece, when most people refer to property taxes they mean a tax called ΕΝΦΙΑ in greek (another user already mentioned it) which is a different tax than the one you mention.
ΕΝΦΙΑ is not restricted by property value (but is defined by it), meaning that even low valued properties have to pay (for houses it ranges from 2,50-16,25 €/sqm) and is a tax that was introduced at first as a "temporary" measure around 2011 or 2012 I think.
The tax you mention above is a different tax that is indeed 0% for property up to €200K. Keep in mind the €200K limit is not per property but for all your properties combined.
I won't agree with you just because you are presenting "some" numbers.
I know for a fact that my parents that live in Greece, and do not rent and own 3 flats and 1 house all of them divided equally to a different person within the family including me have to pay an "emergency" taxation on the electrical bill which is a lot of money. (A LOT OF MONEY!)
Atm my parents are pensioniers and they don't rent neither have any money in the bank. They are called out to pay 4000 euros / 2 months tax on the property they own. Eventually they will have to sell their property in order to be able to afford to live. Issue is that the market has crushed and the money they gonna make if they sell their property that has been with them from grandgrand parents and more which means sentimental value as well, is gonna be sold for pennies.
The problem is that people around the world don't understand that middle class Greeks are suffering for what "RICH" Greeks and politics have caused. Sure its middle class people that voted those politicians in and didnt hang them up including rich people but meh...
Seriously Rich people in Greece pay no tax and they don't care as well.
Dictatorship has been governing Greece for a very long time including now.
Btw sorry for coming strong on you, its just that your facts are literally off.
because the flats value is 30% of what it was in 2008, while we know that 2008 and before is not coming back, they are located in Central Athens and no matter what happens in lets say 50 years from now their value might be up to what it was before.
Also don't forget the sentimental value as well, my dad bought 1 of the flats himself with his hard earning while he survived the invasion of Cyprus and lost everything there. He is old as well so good luck getting him to sell the only thing he acquired in his life.
Same goes for my mom, she inherited the 2 flats and the house and they belonged to her family since before WW2 for the flats and since the 1900 for the house. Very hard to sell on that.
But again think even if someone more greedy that doesn't understand the sentimental value of the property gets his/her hands on it, still imagine you have to sell for 250k-300k while in 2008 it was costing 1m. Again this is just an example but it shows the price drop and again since they are in central Athens which is a city for a very long time in history at some point their prices will climb up again, not the the maximum but still.
Totally understanding that. My parents are too holding on to some real esatate mostly for emotional value. But renting them out should be an option to generate cashflow?
No and here is your mistake, sorry I have to call you an idiot because you triggered me.
Someone that inherits property doesn't automatically mean that he/she is rich.
They never rented out or sold any property, and they worked for private companies their whole lives. The money they had were pretty limited on what they could do.
Also property in Greece is not like other countries of EU. Atm you can find flats in central Athens for 20k euros... Go buy 10 flats and then say you are rich because you own property valued at 200k.
So yes your argument is pretty stupid, you just want to blow off steam for some reason I am guessing you are a German.
Yeah, this is typical. I know this lady who owns one house in Plaka [1] right under the Acropolis, another in Kifissia [1] and lives in a house in the Liston [1], in Corfu (think Plaka, but on an Ionian Island). She never stops complaining about ENFIA [2] and how unfair it is that she has to pay property tax.
Well I don't have to pay any tax at all. Because I don't own anything. Sometimes it's just very hard to sympathise with people who are several times as wealthy as I am, and who complain because they will now have to pay taxes for it.
Because let's not forget that the devaluing of properties is a very recent thing. Until now having a couple of properties meant a steady stream of income- which most people would probably not have paid any tax on... because they dodged it. Which contributed to the dire situation we are in right now. And in particular caused the current government to resort to the harsh measures that are being imposed.
No, really- I don't want to see anyone punished, or having their properties repossessed, that's truly awful. But I can't really find it within me to feel, you know- compassionate.
________________
[1] To non-Greek readers: all those are very posh, very expensive districts in Athens or Corfu, the latter being one of the more well-off (and therefore, expensive) islands in the Ionian sea, the more upmarket set of Greek islands.
If someone that owns 3 flats and 1 house is considered rich then all good I am rich, why am I even working for? damn, why my parents can't pay their electricity(tax) bills and have to make arrangements with the government to pay in installments, noone knows, we are just rich, I'll go get my private jet and fly off this comment section now.
> Someone that inherits property doesn't automatically mean that he/she is rich.
That depends on the value though. They could be asset rich, and (very) cash poor. That's a tough spot to be in. Arguably, that could even be worse if you can't sell them. But you said the apts are currently worth around €300k each?
Is there no way to unlock cash from them, e.g. by renting them out at €1,000 a month or by taking out a €100,000 bank loan against them? Alternatively, how about AirBnb? I know a guy making good money with a small business renting out several AirBnb apts in a popular city. That way you would at least not have to sell them.
You're not wrong. Greece experienced a property bubble that is bursting painfully slowly. Homeownership is high in greece; it's part of the culture and successive governments protected it despite its heavy cost as a populist measure (e.g. by instituting laws that disallowed foreclosures). The bubble has not yet burst completely, that's why rent prices are very cheap.
Is it worth moving to Greece at this point if you have sufficient (ways of generating) capital to sustain your lifestyle? Or would that be a fools errand given the state of the economy?
Sure it is. Greece is still a very safe country with excellent climate. Avoid athens, the overcrowded center and heavily-hit by the crisis. You will find the cost of living is very cheap for a european country (provided that you have your own source of income as you said- don't rely on finding a job here)
Sounds interesting. I can, but it's not much fun living in a country where very little is happening. Is there still stuff happening in Greece, or has the economy been thoroughly fucked up by the austerity measures? At first glance, for example, taxes still look low compared to other EU countries.
I have a wealthy friend in the UK, and I want to a party there once thrown by some wealthy greek shipping magnates. They had sold their shipping empire for billions in 2007 and bought it back in 2012 for hundreds of millions. They left the country shortly afterwards. Have all the wealthy greeks left the country? Or is there still an opportunity to do business?
Hey we are not all shipping magnates! For a greek at this point, the taxes are extremely heavy, because you have to add mandatory insurance costs. The current govt. has chosen taxes instead of public sector cuts, so greece is bad for business at the moment. Local businesses are looking to neighboring low-tax countries for relief (bulgaria/cyprus).
Depends on what is your definition of fun living. The islands are certainly a fun place in the long summer. Greeks are still fun-loving, and our cafes are packed despite the crisis. No it's not a grim place, if thats what u are asking.
big subject, and i m likely to start civil war with other greeks here. Certainly its better somewhere with an airport (preferably international). Salonica can be great, or some island. I am biased, but Crete is usually loved by visitors and expats.
If you can generate income from all over the world Greece is a great place to work at. Great weather, great food, private health coverage with about 1K per year, private international schools for about 1K per month. Life and especially rent is pretty cheap compared to other European cities.
The problem though is that there is always a danger of a Venezuela style collapse but you can always move out.
A lot of people are thinking to move out because of the steps backwards in all fronts such as law enforcement, health and social care quality, education quality etc. Everyday life gets worse for everybody more or less. Economy does not collapse without collateral damage.
If you have an outside source of income, moving someplace with distressed prices can be a great idea if a) there are other draws beyond the low cost (such as great weather or something else you value) and b) the distress is not to the level of making the area excessively dangerous for you.
There has been an emergency additional property tax (called ΕΝΦΙΑ) and at some point will be merged with other property taxes. For an appartment or a house, the tax amounts to about one or two months of rent, if the property was rented.
What's even worse- in the UK everyone but full-time students has to pay council tax, which is a tax on the property you live in even if you don't own it. Try telling that to the Greeks. They think you're joking.
I live in Greece and things are bad but as a matter of fact, the real problem is that we ,the Millennials, feel that we're screwed because we compare ourself with our parents. Our parents and our politicians really scammed the whole europe into believing that we have a strong economy but the truth is that everyone avoided paying taxes, they got huge loans that could never pay of and our politicians where really corrupted ,as well. The result was that our parents made a fair amount of wealth without having the skills and the education of the rest of europeans. They worked hard, but they lived in a bubble. I believe that the biggest problem in Greece is that right now we are in a declining economy and probably wont succeed economically as our parents did. We are going from high to low and we cant see whats following.
I wouldn't argue in favor of Goldman Sachs ,we can all agree on the shady stuff they've done. The real corruption came from our former prime minister Costas Simitis who tricked EU and Maastricht Treaty. Those complex financial deals created by Sachs would be meaningless if our politicians weren't corrupted . Compare Greece to Estonia , a former Soviet nation with really poor economy, yet they managed to meet the Maastricht rules trying for years without "cheating".
Went to Crete a few years ago and was surprised by the number of (what seemed residential) buildings with unfinished roof/terrace, but otherwise being used and perfectly normal. You could see the concrete pillars with the steel bars coming out on top.
Imagine it is some kind of way to dodge taxation since it is still considered unfinished?
Have also read Michael Lewis' "Boomerang", which also has a lot of similar anecdotes about Greece (and Iceland, Ireland, etc).
Unfinished buildings isn't a way to dodge taxation . You can see a lot of them in the whole country because people don't actually have the money to finish them and even if they had ,they wouldn't spend a dime to something so undervalued like real estate is in Greece.
How many years ago? You might be experiencing the property boom - everything under construction with cheap loans from a careless ECB. It's not a way to dodge taxes. Many of those constructions were finished, others stayed halfway. What many of them have in common is they are looking for buyers.
This was fairly recent, 2013. The houses were otherwise perfectly good. Painted, with normal windows, normal doors, etc. Didn't seem like a they had been "completed" on a best effort basis (non-matching cheap windows, dodgy doors, etc).
I was wondering whether some Greeks saw through the surface. Your opinion seems the right to me: The older generation didn't know what paying taxes feels like. In France, if you have a company, 63% of the company's income goes into taxes before it lands as purchasing power to you (mostly, our VAT is 20%, mandatory insurances are 46% of the remainder, income tax is 23% and so on). When I hear outrage from the Greek people, it's often that their taxes are getting aligned with the norm and are still lower.
But the problem isn't taxes or respect of the law. The problem is that there are no jobs, partly because high taxes require a reorganization of the job market, and partly because no-one wants to trade with Greece, given they seem capable of switching to Communism any day from now.
I'm sorry for your situation. I hope you can find a remote job in programming, and bring a bit of business into your country.
...And I pray that France doesn't fall into this situation in 15 years. Too few people in France are invested in making businesses run, and most people believe employers are thieves, with barely any knowledge of how the economy works.
> "And yet, the leftist government recently proposed adding further documents and costs to selling or renting property — a compulsory “energy performance” certificate and a civil engineer’s assurance that there are no illegal constructions."
Not an expert, nor a citizen/resident, but these seem like a basic things to do. Parents back home had to provide same things recently just for renovation, and much more.
There are laws to address this, albeit considered kind of a joke in southern Europe for a long time. People would build whatever they wanted, hack together unsafe constructions to cut costs, then bribe an official to validate all of that. Then earthquake comes and people die. Standards for buildings are reactions to disasters, I don't see anything wrong with it.
Energy performance certificate, non-toxicity certificate, surface certificate, non-pledge certificate... The basics of a real estate sale in France - they make the transaction more transparent and I'm glad they are mandatory, both as a former buyer and a former seller... They remove a lot of the friction that distrust creates. Framing it as "red tape" that “threaten to turn the country into an endless ‘property graveyard’ where nothing will be sold, nothing will be bought and nothing will be rented” is laughable !
That statement is a little dramatic, but these sorts of things have severe impact.
Upstate NY is a great example -- property taxes are oppressive, and while property does sell, the value is kneecapped because the tax costs are so high. In my city, a house in a nice area valued at $200k (which is a 3-4 BR, 1-2 BA house) is taxed around $6000-6500. So a typical homebuyer who needs a mortgage automatically loses around $550/mo in buying power. In a suburban area, those taxes are $4500-5000, which boosts the value.
At the macro level, it's more insidious. With multifamily property, there's little incentive to maintain property, so the business model in urban areas is to suck as much value out of the property as possible, stop paying the taxes and let the county sell it at auction. The lower tier of scum landlord buys these properties, restores them to minimum code compliance and rents them to subsidized tenants.
The first part at least sounds like things are working like they are supposed to work. The same thing happens with interest rates. But we wouldn't say interest rates "kneecap" property value, would we? They're just a fact of the market, and mostly just alter where the money flows to. The buyer commits to $1,000/mo in payments- with high interest, the bank gets more and the seller gets less. With low interest, the bank gets less and the seller gets more.
Why is there little incentive to maintain property? Just because it's worth "only" $200k?
$200k house, $6k tax bill, so about 3% a year on the value of your home. That's similar to what you'd pay in urban Texas where property taxes are the primary way that state/local government gets funded. Only NY State has income tax on top of this (plus city income tax if you live in/near NYC), and Texas does not.
In the middle of selling/buying here in Scotland and energy performance certificates are mandatory and actually very useful - this was a significant factor in helping us choose a property.
Similarly sellers have to get a professional surveyor to do a survey which is that available to all potential buyers.
More often than not, most high-rise construction (that means... anything above 2 floors when it comes to Greece) is good, especially after the changes to the seismic code after the 1999 earthquake. A small drop in building quality came during the 80s.
More problematic are single homes where the owner of the land who contracts their construction decides to take shortcuts, as well as industrial buildings (the RIKOMEX building at the 1999 earthquake
Seriously, I live in Croatia (so not exactly a paragon of bureaucratic efficiency, quite the opposite) and recently bought an apartment.
Can't imagine how I would do that if energy certificates were optional, I would have to bring with me a construction engineer while looking for apartments?
In England, people somehow managed to defeat proposals for energy certificates and mandatory structural information; so, yes, every potential buyer has to commission their own structural survey. People usually ignore the energy question or guess.
There is no 'Greek' system or 'English' system - it's all the same, it's all interconnected - so someone in Europe must live the consequences of political decisions in China or the United States or any other country, really.
And that's to be expected, because the system was not 'engineered', but hacked together in time - sometimes in response to crises, sometimes influenced by insane political promises or compromises, sometimes by greed or fear.
Yet we try to fix the problems in each individual 'state' - this might work for some problems, but for others - the ones faced by countries such as Greece - it's hopeless - the solution (if any) might not be in Greece at all.
This is the rare case when refactoring just doesn't cut it, we need a complete rewrite of the whole thing.
I don't understand this comment. What about this article makes you think the Greeks can't make decisions for themselves? Is their land unsuitable for farming, and manufacture, and services? Did someone setup an embargo against them?
Furthermore, the idea of needing to overhaul things at a global level makes many assumptions. For example, that anyone has the authority and intelligence to tell the entire world how it should function.
Decisions for themselves? Hah. It's not in the article, but Schäuble and the other EU finance ministers have set out to make an example out of Greece, or the apparatchiks just don't like the radical lefties that got into power. Paul Krugman has mused, before, EUcrats could tell government officials what to do, and when they follow them, even if the country fails and they get voted out, they'd get cushy EU jobs. But the current Greek government don't want cushy EU jobs, they want to save the population. That and other things (domino effect, if Greece gets forgiveness, the other countries would want it too) mean it is in the EUcrats' best interest to see Greece fail.
Meanwhile, Schäuble's policy of Austerity über Alles mean the Greek government has been forced to abandon policies that might've rebooted the economy, and be forced to cut spending in hopes that the "confidence fairy" shows up. Even the IMF has said this policy is stupid...
I don't know, all I see is a goverment that tries to perpetuate the old system, only with their people in place. The recent TV spectrum fiasco is a good example. A SYRIZA-friendly construction mogul got a large loan to bid on a license, with no real guarantees except from a pasture whose ownership wasn't even clear. The subsequent findings showed that the bank essentially gave him "free" loans ever since SYRIZA came into power and put their people into various positions in the bank.
The entire system is fucked, and I would consider booting everyone out of the parliament and becoming an EU protectorate a better option for the future of Greece, austerity or no austerity.
This is a really good talk that will give some valuable insight into how Greece has been bullied. (YANIS VAROUFAKIS | NOAM CHOMSKY, NYPL, 26 April) https://www.youtube.com/watch?v=szIGZVrSAyc
More than 90% of the bailout money went to banks, not to Greece. Bank recapitalization via the back door while blaming Greece.
Greeks don't have complete sovereignty in the EU. They've repeatedly voted for that arrangement (I happen to think it's a terrible one).
But the parent comment alleges a breakdown of the international system meriting, as I read it, global revolution. Given that we're in something of a golden age of humanity--what with record-low rates of per-capita violent-death rates, relative economic prosperity and technological advantage--the claim needs more than a First World country experiencing hardships around paying property taxes.
Just so I'm clear, you are claiming that the finance ministers are purposely rigging things so that Greece will fail -- that all those loans and such were part of a plan to make an example out of them.
First I've heard of this, but I haven't been following it. It sounds quite far-fetched though. I must be missing something.
That is the generally accepted view of the Greek crisis in much of Europe
- The Euro hid huge debts in the same way securitised debt did in US. People would lend (via bonds) to risky countries (Greece and Spain) at the same EuroBond rate they lent to less risky countries (Germany, and well just Germany).
And Greece took this and spent - at first on good infrastructure but slowly on low performing roads to nowhere and a lot on non capital spending (social welfare) And particular Greek social Problems made it far worse (a political class removed from the populace, etc)
As the crisis hit Greece could not repay these huge debts and could not devalue their currency (the Euro was not theirs). And they got loans from Germany (cos a lot of German banks owned the A rated bonds) and paid interest with the loans thus doing nothing to solve the problem. After a few years of this the Greek people voted in a whole new radical party. The goal was to cancel the impossible to pay debt and follow sensible Keynesian rebuilding. The cancelling of the debt (spearheaded by charismatic economist Yanis Varoufakis) was not insane but it would mean all other countries in similar problems would also follow suit. So the Big players in Euro (Schable being the biggest) opposed it everyway they could. The Greeks took it to the brink but the PM could not plunge Greece into leaving the Euro and not being able to keep hospitals open backed down
Total outsider and novice here, but from what you're describing, it seems that Greece has to leave the Euro and default on its debts. If people are electing leaders who have no control over finances, there's no democracy at work. Horrible thing to have happen in the birthplace of democracy.
The EU was sort of a beta version of a United Europe. They weren't as luck as the U.S., where a highly educated but small group of people tried to come up with the simplest thing they could that wouldn't fail. Instead it looks like quite a bit of architecture astronaut syndrome going on. If I'm right, and I'm just a passerby, the sooner they start down the road to refactoring the better it will be for everybody.
> Greece has to leave the Euro and default on its debts.
pretty much
> architecture astronaut syndrome
Not really. It started well. The Euro currency was the great achilles heel, as it meant there MUST be fiscal harmonisation between countries that were arguing over the amount of meat in a sausage. That said the more I learn about USA and the states, especially the southern states, the more I realise we need things like TIPP and TPP and the WTO. The states generally hate being in a federal system.
I would try and listen to Yanis Varoufakis stuff online.
(https://yanisvaroufakis.eu/ is his blog but there is a lot there with little organisation)
> claiming that the finance ministers are purposely rigging things so that Greece will fail
> First I've heard of this
I suggest listening[1] to Yanis Varoufakis talk about his negotiations with the rest of the EU's finance ministers. He talks about the rigged process, and the ultimatum they gave him when he pushed for a saner refinancing plan. Schäuble's response, according to Mr. Varoufakis, was "Elections cannot be allowed to change the economic policies applied to Greece!"
For background on how this situation was created, see Mark Blyth's very nice discussion[2] of the Greek situation and how it fits in with the larger Euro problem.
I wouldn't go as far as the OP: I think Heinlein's razor comes into effect here. There is a clear solution to the problem, which is debt forgiveness. The troika has known this since the crisis began. The problem is that it's politically untenable. So instead they kick the can down the road, do nothing, and hope everything gets better on its own. They've caused a depression in Greece. They've also turned me into a euroskeptic.
Very much worth noting too that the bailouts ensure banks (mostly German banks) get paid back. Bankruptcy or debt forgiveness means the banks don't get paid back. And now when EU taxpayers get pissed about paying for the bailout, the EU bureaucrats can point at those darn lazy greeks as the problem.
At the end of the day, it's the banks' job to assess risk, they lent money to Greece, and they're only getting paid because of this bailout. What's greece paying in interest, again? Some kind of huge risk premium, probably?
I don't know if it's a "plan", but it's definitely a rigidity and "it's our way or the highway", because they can afford it.
The current measures are beyond stupid. They've crippled the country's economy, shut down a large majority of businesses, made the climate hostile to new businesses, and generally ensured that the country doesn't recover.
I don't think we've still seen the worst of it, because the economy has shut down almost completely, and it's still getting worse. The effect of this much deterioration on such a large system will take years to show, and what we're seeing now are the results of policies five years ago.
I'm pretty confident it will get even worse in the next half-decade. Very much to blame for this is the leftist mindset of the average Greek, who thinks "bosses are the devil" and that making the country friendlier to entrepreneurship and investments is anathema.
Not quite like that, or at least the "rigging" part. Yanis Varoufakis, former finance ministers of Greece, has talked about how the finance ministers were pushing for the "failed policies", all through I don't remember what the reasons were.
It's not about Greece or the people of Greece or its economy, it is about existing creditors of Greek assets having time to limit exposure and fallout to the broader financial system, as well as provide a framework of deterrents for other large European countries that are practically insolvent
> But the current Greek government don't want cushy EU jobs, they want to save the population.
The current Greek government doesn't seem to want anything other than line their pockets. They've gone back on every single big promise they made before getting elected, and are spreading lies and propaganda to try and keep their positions, even while being wildly unpopular.
Just like everyone else, Greeks want to buy Samsung and Apple and Sony and VW and Facebook ads and materials and services from all over the world.
It's the way our system works - I want avocados now, even though I'm thousands km away from an avocado tree.
One solution would be for me to give up on the avocado, but then the world needs me to buy it, otherwise the balance of avocados in the economy will move and the futures will go down and everyone panics and now maybe I will say no to mangos too ... sell, sell, sell!
This is how it works - not because someone conceptualised, thought through the whole complexity - it just ended up being like this..
> For example, that anyone has the authority and intelligence to tell the entire world how it should function.
I'm not getting my hopes too high for a global change - in fact I think this can't happen without some sort of global crisis or conflict preceding it.
It's very easy to see that the system is broken - much harder to fix it of course.
I would like to push back on one point of the top though, I don't think the world is so locked in to the consumption of a small nation or any small population. Indeed, panic would happen if America banned imports. But if many in Greece had to take a step back and dramatically reduce their IPhone consumption until they invented new ways to add value, I doubt anyone would notice. The panic of a Greek default seemed to more step from the many who invested there without expecting a collapse. Even now I think a Greek default would be pretty non-eventful given how much warning time everyone had. (Debt defaults of small countries being relatively common)
Do you suggest the new government should be allowed to disrespect the obligations and commitments of the previous one, just because it's newly elected?
[Well, in a way, they are free to do so -- at the risk of losing every bit of credibility as a debtor... What Schäuble pointed out is: if you want more money, respect your obligations]
Absolutely it does. There are good reasons why respect for the principle of equal rights among nations is enshrined in international treaties. Germany has been the biggest benefactor of that, and a German minister shouldn't ride roughshod over the will of the people of another nation.
> at the risk of losing every bit of credibility as a debtor
This mentality about debtor and creditor nations within the EU will eventually destroy the Euro.
Greece does have a say. They can choose to secede from the EU, drop out of the Euro, and default on their debts. And then they'll have to live with the consequences. But democracy doesn't mean they can vote to force other countries to forgive their debts.
> But democracy doesn't mean they can vote to force other countries to forgive their debts.
Bingo! Greece can do whatever it wants. If they want to stay in the Euro, then they can stay in the Euro but have to follow certain guidelines. If they want to do what they want to do then they can leave the Euro, but they should not complain when their overspending ways catch up to them and it all falls apart.
The other problem is that the Economists who try to control it and debug it are terrible at understanding it. Every countries economy is subtly different, but they have a one size fits nobody, and doesn´t even have the right number of sleeves approach to it.
Expand it out to the max - this is an old style, US Great Depression monetary collapse. Their money supply has dropped by about a third since 2009. Some of that is loan write-offs, a lot of it is money being withdrawn from the country, either by rich people who want their money in safer banks, or as debt repayments to european banks. Cost of being in the Euro, very hard to stop this.
Knowing that the money supply has dropped by 1/3, we also know that the lending supply has dropped by 1/3, loans create money etc. Knowing that credit influences prices, we know that property prices are dropping through the floor. Knowing all that, we also know that tax revenue has dropped, because there´s less money circulating to be taxed. (Well, it´s a bit more complex than that but not much.)
The big issue in this kind of monetary collapse is very simple. In a market based economy, most prices can adjust to changes in the money supply and production over time. The one exception is debt, which keeps its coupon value until people default.
Revalue Greece debt though, and there goes a whole bunch of European banks with greek debt on their books, and a GFC style cascade failure to who knows where in the system.
It probably could still all be sorted out if we put some decent computer scientists on the case, but I certainly don´t expect the economists to get there in time.
So I guess Greece will just have to invade Germany.
> Revalue Greece debt though, and there goes a whole bunch of European banks with greek debt on their books, and a GFC style cascade failure to who knows where in the system.
If that's true, then one possible solution would be to let the cascade failure happen while the ECB prints enough money to replace the losses in money supply (and then some) and distribute the money equally to everyone in the Eurozone.
There are many uncertainties. Like the one regarding the fact that you can get an absolution from the ECB if you cause enough havoc. Or the one where you shouldn't invest in any country that may even smell slightly endangered (which would actually cause that north/south europe contruct). On the other hand it may even lure in even more "evil" investments with the right insurance. All this with a fast devaluating Euro? Sounds pretty bad to me.
I'm not sure how redistribution of wealth in case of a financial crisis counts as "absolution" from the ECB--if your 1000 person firm causes a 5000 Euro per capita loss in the money supply, your company is busted and everyone there ends up with 5 million Euros combined, which is small money by finance company/bank standards. It's not that much of a change from existing practice--all central banks defend their money supply to some extent. The only difference is that they would do so through every citizen in every country where the currency is official instead of only major banks, so the money actually gets spent instead of being hoarded and banks can't make massive profits through monetary arbitrage.
It's not redistribution of wealth when with every Euro you print, the currency gets further devaluated. This wouldn't happen. Ever. They'd rather separate it in North and Sourth Euro before somebody would even seriously think about that for a second.
The currency doesn't get devaluated in this case because the supply of Euros doesn't increase--the ECB is only replacing the money supply lost when the banks collapse.
If everybody had an account with the central banks, sure. For now the SUs only have access to the major-banks sandbox, and playing around in this sandbox does nothing except cause asset inflation.
The 2008 bailout and subsequent legislation[1] indicates it is the major-banks (i.e. JP Morgan, BOA) which have the leverage to create money at will over the central-banks (i.e. the Fed). Hence the term "Too Big to Fail" -- de facto SUs.
Doesn't the major-banks' sandbox extend across the world to any person or government who accepts the dollar?
By "sandbox" I meant that the central banks dealt directly only with major banks, who benefit and profit from being at the top of the money-creation chain.
Its still extremely dangerous to give birth in the US when compared to Greece, our maternal death rate is 7x higher [1], on par with Iran, Hungary and Saudi Arabia.
Why do hundreds of pregnant women die every year in the US, but significantly less die in Singapore, Greece, Canada, Ireland, etc? This shouldn't be a thing, and we shouldn't be this far behind other countries on this, its not an impossible problem to halve or even cut into a quarter that death rate. This isn't even discussing complications of pregnancy or infant mortality, both of which we are not doing amazing at.
I am not contesting that the US could be doing better.
What I am contesting is that you are conflating absolute and relative measurements to try to make a point, and that you are reducing such a complex matter into a question of political ideology that governs the countries. Also, lots of weasel-wording there - e.g, "hundreds of deaths" in country of 320+ million people, comparing with countries that are 100x smaller? - which do show a lack of intellectual honesty.
At least that is the impression that it gives when I read your response as some kind of counterpoint to the comment from GP about socialism and the associated bureaucracy.
If I have read your statement correctly and indeed you meant something along the lines of:
- The USA is doing worse than Greece in this one metric.
- Greece has more Socialist/Welfare-state inclinations than the US.
- Therefore if we want to improve this one metric we ought to adopt more Social-Democratic policies
Consider this: the best country in the list you provided is Estonia, the country with the "Most Competitive Tax System in the OECD"[1], which would basically be an argument that all countries should be like Estonia - a polar opposite from Greece.
But then again, I could have completely misread what you meant. Please correct me if I misinterpreted any of your statements.
(Note to down-voters: do you really think that anything I wrote is so offensive or damaging to the forum, to the point that it deserves to be in negative mark? Gee, I know it is election season for most of you, but let's please keep a HN a place where people can have an honest discussion?)
I found the OECD's executive summary for Greece (2016) for context:
#The economy is gradually recovering from a deep recession but high social costs persist
Following a deep and prolonged depression, during which real GDP fell by 26%, the economy is projected to grow again in the course of 2016 and 2017, but a full recovery will take time. Competitiveness has improved markedly, but exports and investment remain weak. The unemployment rate, at 25%, is still high despite a moderate decline since 2013. The depression has pushed many people into poverty and income inequality has increased. Tax and benefit reforms have materially improved the budget position, but the burden of adjustment has been uneven and public debt is still very high. The banking sector has recently been recapitalised, but credit creation remains weak due to the high burden of non-performing loans on banks’ balance sheets, and reduced demand for loans.
#Significant structural reforms have been legislated, but their mix and implementation were uneven
Greece has implemented significant labour market reforms, but progress has been less on reducing oligopoly power, the regulatory burden and weaknesses in the public administration, due to administrative capacity constraints, little ownership of past reform programmes and vested interests. The depressed economy, lack of bank finance and remaining structural impediments are holding back the modernisation of the Greek economy.
#Stronger exports and investment are a key to sustained recovery
Remaining structural barriers and administrative burdens raise costs of exporting. Greece’s integration in global value chains is low due to insufficient investment in human and knowledge-based capital, low inward FDI, the small size of enterprises and the manufacturing sector and weak infrastructure. Network industries have been liberalised but the still restrictive regulation of the energy and transport sectors reduces trade in both goods and services.
Some examples of inheritance would be either old houses at the village or small olive groves.
Many old houses at the village are derelict and the small olive groves have little financial value.
The olive groves are generally small because they have been divided among the children through the generations. If an olive grove is not tended for 5-10 years, it becomes unusable and costly to fix.
So overvalued property in the current economic context combined with unprecedented (for Greece) property taxes is making home ownership a burden? Plus the maintenance costs wipe out what remains of the value.
I think that the cases that the inheritance has been rejected is for property that is of little value.
The article is doing a disservice when it does not break down what inheritances they are talking about.
Home ownership in Greece is quite sacred (around 70% own a home) and the current government is even avoiding forced evictions for those that do not pay their home loans.
Gee, in the US, all property is debt as well. (Property tax.) So you don't really own your property--if you fail to pay, you will ultimately lose possession.
The problem with Greece was that the property tax was introduced out of the blue leaving a lot of home owners un-prepared.
Let's say that in the US you buy a house, get a loan and your payment is $1000 a month. You make your calculations and think that you are ok for the next 10-20 years. You even have some slack and can afford a payment of $1200
You move into the house and the next day a new law passes and a new tax is introduced that will cost you extra $600 a month for the house you just bought.
How would you feel?
If the property tax in Greece was introduced in a gradual way complaints would be less.
This is what happens when you allow uncontrolled and unregulated asset transfers. There's a reason that pretty much any index/stock in the world freezes when the daily drop exceeds a certain threshold (i.e. Japan, JPX, has a limit of usually ~7% [1]).
This prevents panic selling and even though seems like a "delaying-the-inevitable-drop" cop-out, it really does work.
Greece Government are stupid as hell for letting everybody sell their homes all at once. Mass selling off in a region will just cause the housing market to death spiral, just like it does with stocks.
I'm not sure that it would be just as easy to do this for houses. Freezing the market for a day would have little effect. Freezing it for years would be a very real nuisance.
Besides, I'd like to question the conventional wisdom that falling stock markets or falling housing markets are a problem which justifies government intervention. Another view on the same phenomenon is that your cash just increased in value. Like when prices go up, some people will lose money, some people will win money. In the end it's a zero sum game.
OTOH, if you impose high holding costs while disallowing trading, you will have either foreclosures, property abandonment or squatting on a massive scale, which are arguably worse.
Apart from inheritance, the parents can also set up a form of "parental donation" of their property to their children, but continue to make full use of the property (live on the property or keep all the rent) as long as they are alive.
And the difference between "inheritance" and "parental donation", is that the latter was set up decades ago when it was cheap to do so.
What you are reading in this article is cases where they did not plan for the future.
In addition, the article does not provide information about the condition of the property. In many cases, the property would be an old house at a village that may not habitable or small olive groves that have little value.
> What you are reading in this article is cases where they did not plan for the future.
Weird how that sentence became what it is with the benefit of hindsight. If things had gone the other way, and inheritance was cheaper than parental donation, you'd be saying "those chumps donated when it was more expensive and did not plan for the future".
It's easy to plan for the future when you already know what it will be. In other cases, I wouldn't be so absolute.
My stronger point in the reply should be my hunch that many of the inheritances may not be profitable enough to pay the inheritance tax. There should be an article that dives into those rejected inheritances and figure out what exactly was not accepted.
It looks like property tax tops out at 2% annually of assessed value. This is similar to tax rates in Wisconsin, but if they play the same games in Greece that some local governments do, the properties are assessed well above anything you could sell the property for.
The goverment defines the "objective value" of the property, which usually is way higher than the market value. The taxation is based on this "objective value"
They probably do. My apartment was made in 1963, 63sqm (670sqft). "Zone price" (i.e. what the government considers the price of 1 sqm of development in a certain region) is 1100 euros, building age multiplier for that is 0.60 so we end with a 660 euro/sqm pric, for a total assessment of 41580 euros.
I'd be lucky if I got half of that If I actually tried to sell it at the moment.
What area are you in? Compared to Seattle/Portland/San Diego prices, 40k euros seems cheap for a 1963 670sqft apt. A similar house in Tacoma would run 110k euros right now, and it is a terrible location.
It's in Kallithea, a generic south-European concrete-jungle urban center. Also, I'm not sure it's fair to compare property values between the US and Greece. The average person working on the private sector would be lucky if he made $10000/year at this point in time.
Perhaps property value is in line then if 40k euros is an inflated price, I think 110k euros in Tacoma is a price too high for that area myself, the average income down there is around 22k euros a year for a working person [1].
Dude, you can't even buy a crackerbox in Seattle for 300k euros anymore, a 500sqft apartment has gone from 270k euros to 400k euros in the past 2 years, and that is before the 4500 euros you'll pay to go to an "exclusive" wine tasting/auction to bid on the few units that are up for sale.
Yes, since I pay the tax any the property value in my name is just that apartment. All owners have to pay this tax (ENFIA). There are some reductions for unemployed people but no 0% rates.
You have to factor in that we have an extremely high unemployment rate (23.5%) and after the austerity measures the basic wage is about 550 euro/month. Many, if not most, companies took advantage of this basic wage change and forced it upon their employees or replaced them with new ones (which can't ask for more). Also another big part of the workforce is on flexible-hours, which means they may go as low as 120 euro per month.
The property tax can be about 200 euro / year for relatively small apartments in lower class neighborhoods and rise pretty fast (e.g 800 euros / month) for better neighborhoods. If you own the land (you aren't leaving in an apartment) things go south even faster.
Also the property tax doesn't consider any special cases. For example you could have build your house 60 years ago in a remote location, now rich people came to leave around you and you have to pay 6000 euros / year on a 600 euro / month pension.
Still cheaper than rent. Also you have to factor in that a house is more than money (memories, feeling of safety, etc) unless you are into real estate.
It has become bad because greece basically did not have a property tax before 2011. The tax rate is not much higher than what is usual internationally. Given the very low rental yelds however, owning property may have become a bad deal. (Also greece has a high homeownership rate)
With austerity feeding on itself as it has been for many years in Greece, the rental market seems to have become flooded with properties. If your citizens have no money, and your economy is shrinking in the double digits every year for years on end, how does anyone do anything economically?
The economic troubles of Greece have been similar to those of the eastern european countries. The issue with Greece is that the politicians did not take tough measures early in the crisis and the recovery is too far ahead.
While other countries reduced their headcount in the public sector, in Greece the headcount remains much the same. I blame the politicians, though the political party that manages to win, is the one that offers not to reduce the public sector headcount.
This inability of the politicians is also reflected in the enforcement of the smoking ban. While in public transport there is no smoking, in most restaurants, cafes and elsewhere, the ban is not enforced. Even in the Greek parliament there is smoking, and even the Minister of Health is regularly seen smoking.
See https://www.reddit.com/r/europe/comments/52dif3/the_sad_real... and weep.
Frankly, investors should use the smoking issue in Greece as an indicator whether the country is actually recovering. As long as the smoking ban is not enforced, the recovery is not happening.
On the subject of "law courts", I wanted to ask: Are Greeks able to even (practically) read the codified laws and regulations of their country online?
I ask because this is still pretty difficult in America, as most state and local law publishers do not publish them as (free) ebooks and make it hard to use their websites for anything but a reference. (I.e., it is difficult to read the law through and through online, as versus looking up individual sections.)
Half of Europe has dreamworld house prices which are unsustainable. As the boomers die out, the demographic changes are going to annihilate the fools today, taking out 450k for a bedsit. I have to say, I am looking forward to the peasants-turned-property-magnates getting a rude awakening :)
If you have no money even to pay the property taxes, what money do you have to even improve the economy with that property? Should we praise that the lands just stay there with no output?
Property taxes have this interesting economic plus side: It stops being profitable to just amass wealth, instead, you have to use it to create wealth in order to keep it.
Also, unlike what people in the comments are trying to make of it, countries high property taxes in EU are in good economic condition, like Luxembourg and the UK where they are respectively 1.5x and 2x what they are in Greece. In fact all the countries with high property taxes from OECD are amongst the top economic performers of OECD.
Funny to see so many commenters here making suggestions (e.g. "just sell the property") that assume Greece has a well-functioning economy, when the problem is that Greece doesn't have a well-functioning economy.
If the tax is more than the sale price, clearly the tax system. Tax should be limited to a fraction of the sale price, say no more than a third. That seems like a common-sense reform to do.
Contrary to what most people would have you believe, the EU has asked Greece to bring its economy in line with certain KPIs. The Greek governments have decided the best way to do that is tax the populace.
Austerity (deep cuts to government services) and tax rises were the conditions imposed on Greece as part of a series of financial bailouts from various national banks around the EU. The Greek people had riots over them, and a change of government in September 2015, before there was a consensus that there was absolutely no other option but to go along with the steps required in order to get the bailout money.
Yet Greece is still overspending in regards to propping up its social security compared to other EU nations. Courts have regularly blocked reform attempts.
So now they have both high unemployment and high taxes, the latter discourages if not out right prevents new businesses from starting. You cannot recover any economy by taxing your way out of your malaise
That is quite simply a lie. Recent GR governments have not pushed for pension or social security reform, only cuts in spending, all of which the Parliament approved and set into effect _immediately_. As far as I know they're all still in effect.
NYT == Paywall == they don't want me to read the story.
I'll gladly enjoy the comments, but this is my protest at allowing sources that are paywalls (except, perhaps, if a given story is in a fully public section).
Greeks didn't scam anybody, on the contrary, they were scammed by EU leaders and bankers. After signing the EU pacts, there was little their politicians could do to avert the catastrophe (and what little they could, they still didn't.)
Well, their politicians rigged the books to get into the treaties in the first place. Things won't be so catastrophic for them (as they weren't for anyone else in 2008-2009) if they didn't report lies on their financial well-being to get accepted.
Why doesn't thing go bad for Poland? Or Czech Republic? Because their finances are solid, not based on vaporware, and they don't lie to the world and themselves to get short-term benefits. And they actually work.
Right. And corporations are actually driven not by profit, but by ideas.
Having TTIP, CETA and all those globalization pacts make this article reality in an EU country. It's not about Greek people waking up after a blissful dream, it's about nation facing reality of capitalism and bankers.
This is not only about Greece, a house is a basic necessity of live, wether you can find a job or not. Governments should cap the price per square meter so a house will always be available for everyone.
As it is now you cannot really buy a house, you need a mortgage for live and work your entire life to pay interest. If this continues every house in the entire world will become unending debt and ever more unattainable, except for the rich of course.
This is also why basic income could never work in practice, as the house prices keep increasing you'd also need to increase the basic income. And where goes the money? Indeed, to the rich property owners..
Price controls are a terrible solution except in special and temporally limited circumstances, e.g. total war. Much better to make construction as easy and cheap as possible, i.e. no quantitative limits on it.
> This is also why basic income could never work in practice, as the house prices keep increasing you'd also need to increase the basic income. And where goes the money? Indeed, to the rich property owners..
If that actually happens, then it's pretty simple to fund basic income entirely from property taxes.
In Auckland, New Zealand, investors are buying property and houses en masse. They blow up the market price for profit. In the news you can read that most people born now in New Zealand will likely never be able to buy a house in their lives, and this is a very hot issue there right now. It has never been this bad and it only gets worse every day.
If the price per square meter never exceeds for example 0.25% of the average minimum income, most people should be able to own a house. Property owners could than make profit on the quality of a house, which is fair enough for now, but not anymore on the square meter property price.
How can it be that you are born on this planet and not being able to ever have your own place? Because it is all owned and inherited by a handful of people that took profit of a flawed system?
> In Auckland, New Zealand, investors are buying property and houses en masse.
That isn't exactly a bad problem to have--if free construction is allowed and property taxes (or better yet, land value taxes) aren't constrained, it would be fairly straightforward to fund a significant portion of the governments' budgets, plus a basic income or rent subsidy, by a taxing foreign investors.
The state property tax in Greece is 0% for property up to €200K. Then 0.2 to 1% from €200K to €5M. Then 2% above €2M.
Property taxes are hardly killing the Greek economy and especially not for the poor or the middle class. On the contrary, Greeks are paying very little. The problem is that Greeks used to have much more property than for example Northern Europeans.
For comparison, in Denmark the property tax is 1% up to €406,961. Then 3% for values above that. In addition to this there is a local tax on land value, which is generally 1.6-3.4%.