Sunday 18 February 2018

Greece close to financial abyss as tax revenues plunge

Greek Prime minister Alexis Tsipras is pictures, as Greece moves closer to the financial abyss as citizens stop paying their taxes, hopeful they will be let off by the new Left-wing government (REUTERS/Yannis Behrakis)
Greek Prime minister Alexis Tsipras is pictures, as Greece moves closer to the financial abyss as citizens stop paying their taxes, hopeful they will be let off by the new Left-wing government (REUTERS/Yannis Behrakis)
Eurozone leaders want Mr Tsipras to confirm that he will stick to agreed austerity measures in return for new loans, while Mr Tspras wants to renegotiate past deals to reverse the crash in the Greek economy (REUTERS/Kostas Tsironis)
One European official described the move as a "gentle kick in the n***" for Greek Finance Minister Yanis Varoufakis, who has been touring European capitals with Alexis Tsipras to make Syriza's case (REUTERS/Fabrizio Bensch)

Bruno Waterfield and Richard Spencer

Greece is stepping nearer the financial abyss as citizens stop paying their taxes, hopeful they will be let off by the new Left-wing government, according to a senior minister.

Georges Stathakis, the new economy minister, said tax revenues were plunging, having fallen 7pc in December and by an amount estimated to be similar in January. He was quoted by The Wall Street Journal as saying the country would run out of money "within weeks" if the trend continued.

He later took to social media to say he had been misquoted, and that he expected measures to be set out by Alexis Tsipras, the new Syriza party prime minister, to reverse the problem.

The newspaper quoted him as saying: "We will have liquidity problems in March if taxes don't improve." He said on Twitter: "I didn't say that there would be problems with liquidity in March. That's not true."

However, no resolution to Syriza's conflict with the eurozone, and with Germany's hardline position in particular, seems in sight.

Eurozone leaders want Mr Tsipras to confirm he will stick to agreed austerity measures in return for new loans, while Mr Tsipras wants to renegotiate past deals to reverse the crash in the Greek economy.

A final tranche of loans, worth 7.2bn, is due at the end of the month, as the bailout agreement is concluded.

If it does not go ahead, Greece could technically default, seeing the value of past loans wiped out - and possibly be forced out of the eurozone altogether. The austerity measures have meant that apart from loan repayments, the Greek national budget has been restored to a surplus.

However, Syriza's election manifesto promise to reverse harsh tax rises has led to citizens withholding payments. Revenues fell by €1.5bn in December, Mr Stathakis said, and by a similar amount in January. As default nears, eurozone leaders and the European Central Bank (ECB) have been squeezing Mr Tsipras to try to force him into agreeing to stick to past deals.

Last Wednesday, the ECB cut off a key line of extra funding, banning Greek banks from using government bonds - money the government owes them - as collateral for new loans. Government debt is now rated as "junk" by the global markets.

The move was effectively a warning to Greek banks, which are at risk of collapse, without withdrawing support altogether. One European official described it as a "gentle kick in the n***" for Yanis Varoufakis, the Greek finance minister, who has been touring European capitals with Mr Tsipras to make Syriza's case.

"The idea was to remind the new government that, regardless of the Greek elections, it will be other people who make this decision. This is a fact of political life in the eurozone."

Senior European diplomats said that an emergency meeting of eurozone finance ministers on Wednesday would draw up a "riot act" to be read to Greece.

The next day, Mr Tsipras will attend his first full summit in Brussels.

© Telegraph

Telegraph.co.uk

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