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Greece downgraded to CCC by S&P, Greek MPs plan their getaway!

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  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    vivatifosi wrote: »
    That was my thought initially, but although politically the will may be there to help out one, can that be supported for more than one?

    In other words, if you were a prudent German, how long would it be before you threatened to change government because you were fed up with bailing out a profligate debt-laden neighbour, then another; when you're not the one who made the mistakes and your loyalty to that group isn't that strong?

    This must tell in the Euro sooner or later, surely?

    Two things spring to mind:

    1. Greece (and for that matter Ireland and Portugal) are insignificant in terms of the Eurozone economy as a whole. Greece's GDP is about 3% of total Eurozone GDP IIRC.

    2. As with houses, a Euro is worth what a seller will sell for and a buyer will buy for. It is simply worth what it trades for.

    There are lots of good reasons to want to own Euros: to buy German machine tools, French wine or shares in one of the many successful European companies.

    Also, and very importantly, Central Banks seem to be trying to diversify their holdings away from the US Dollar. The next obvious currency to diversify into is the Euro as the currency of the world's biggest economic area. That will push up the currency as will traders taking bets that the currency will rise as Central Banks buy more of the currency.

    Just because Greece defaults doesn't mean the end of the Euro as a whole. It might mean the end for Greece's membership though.
  • ILW
    ILW Posts: 18,333 Forumite
    Why is the Greek government incapable of collecting taxes due?
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    ILW wrote: »
    Why is the Greek government incapable of collecting taxes due?

    Basically, AIUI at least, is that people refuse to pay.

    E.g:

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apSz28ifLL9U
    Apostolis Rigas took his Opel sedan for a 220-euro ($354) service at a repair shop in northern Athens. When he asked for a receipt, the price jumped to 260 euros as his mechanic would have to declare the income and pay tax.

    “There’s no taboo about this,” the 23-year-old student said in a Feb. 2 interview. “Tax evasion helps support families, but it’s not good for the Greek state.”



    Prime Minister George Papandreou’s drive to tackle the European Union’s biggest budget deficit and pacify investors who have dumped Greek assets may hinge on convincing more people like Rigas to abandon this tax-dodging tradition. Papandreou says that Greek workers and companies have skirted tax worth 31 billion euros, more than 10 percent of gross domestic product.



    Greece’s revenue from income tax was 4.7 percent of GDP in 2007, compared with an EU average of 8 percent, EU statistics show. Tax revenue fell by 2.5 percentage points of GDP between 2000 and 2007 to a euro region-low of 32 percent even as economic growth averaged 4.1 percent a year.
    There is no way tax can fall by 8% as GDP rises by 38% if people pay what they owe!
  • Generali wrote: »
    Basically, AIUI at least, is that people refuse to pay.

    E.g:

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apSz28ifLL9U

    There is no way tax can fall by 8% as GDP rises by 38% if people pay what they owe!


    It didn't

    It fell 2.5% & if you look at Tescos (for example) profit margins to turnover ratio I suspect that has fallen to. Therefor so would its % tax contribution to turnover.
    Not Again
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    It didn't

    It fell 2.5% & if you look at Tescos (for example) profit margins to turnover ratio I suspect that has fallen to. Therefor so would its % tax contribution to turnover.

    No, it fell from 34.5% of GDP to 32% of GDP. That is a fall of 2.5 percentage points of GDP. It is a fall of 8% however (2.5/34.5=~8%).

    Also we are talking about a country not a company. If Tescos profit margins fall on increased turnover either they are cutting prices, freeing consumers to spend money elsewhere that will then be taxed or they are paying more to suppliers who will pay more tax.
  • System
    System Posts: 178,224 Community Admin
    10,000 Posts Photogenic Name Dropper
    Why would anyone think it a safe investment, or even a daring gamble, to lend any money to Greece?

    If my IFA asked me if I wanted to buy a Greek bond for £100, I'd want a lot more than 18% pa. Something like 100% per month might tempt me.

    It's not exactly going to finance income-producing infrastructure, is it?
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
  • Ximian
    Ximian Posts: 711 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    Greece should exit the Euro and default, but I doubt that would happen, the banks have too much at stake. I'm not that convinced that the issue is mainly caused by the locals refusing to pay tax, that would assume that a large portion are self employed and have the option to not declare/pay tax.
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    STing wrote: »
    I take your point. And feel the German government are under enormous pressure from voters not bail out countries unable and/or unwilling to carry out the required reforms.

    Markets don't like uncertainty, and PIIGS troubles weigh on the currency. I could be wrong but I think this risk is already factored in, and the currency would be far higher were it not for PIIGS troubles.

    Probably not the answer your looking for. I'll bail out wait for a forex trader to explain to us all.

    The Euro is about 20% overvalued and the prediction of collapse has been made on this forum for over 3 years.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Generali wrote: »
    No, it fell from 34.5% of GDP to 32% of GDP. That is a fall of 2.5 percentage points of GDP. It is a fall of 8% however (2.5/34.5=~8%).

    Also we are talking about a country not a company. If Tescos profit margins fall on increased turnover either they are cutting prices, freeing consumers to spend money elsewhere that will then be taxed or they are paying more to suppliers who will pay more tax.

    Or their sales mix is changing.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    StevieJ wrote: »
    The Euro is about 20% overvalued and the prediction of collapse has been made on this forum for over 3 years.

    Do you think the FTSE has already priced in Greece defaulting?
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
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