Greeks Sink Deeper Into Debt
It may come as no surprise that the banking sector is announcing another year of record profits. Alpha Bank and Piraeus Bank are both in pinker numbers in 2004 than 2003, and even state behemoth National Bank has managed to improve its performance. Alpha and Piraeus attribute their rise mostly to consumer and housing loans to individuals, and to a much lessor extent to loans to business.
That mirrors a trend in taxation, which is being lowered this year for businesses but not for individual incomes. It also sends a worrying signal to the government about the strength of entrepreneurship and foreign investment in the economy.
Partly due to taxes and loans, but also due to inflation, the outlook for individual income earners in 2005 is not rosy. Consumers are already borrowing more than they were last year through high-interest loans and credit cards (30 percent of GDP, up from 27.5 percent) and the trend shows no sign of abating. That, in turn, helps to fuel a spiraling inflation, which causes further borrowing.
While the Government may be on the right track trying to beef up Greece as a more competitive place to do business, it may suffer from the repercussions of more of the tax burden falling onto the shoulders of individuals.
(Posted 24 March 2005. Reproduced with permission.)
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