When people come into the tiny store on the corner of the main street in this working-class town near Athens to buy a newspaper or a package of cigarettes, these days they’re greeted with an unfamiliar ritual. Shopkeeper Constantina Drikaki, 65, pushes a button on the cash register and hands them a receipt.
They don’t want the slip of paper, and she’d rather not be giving it. But recently a squad of government tax inspectors burst into her store and handed her a €200 fine for failing to document a transaction.
“It was just for a guy buying an ice cream. One single ice cream! Now you have to have papers for everything – it’s going to drive me out of business,” she says. It means, in effect, that she will be paying tax on all her sales for the first time.
This is the new reality of the Greek economy, post-crash. The tax-inspector squads and mandatory receipts for corner stores, taxicabs and other traditionally cash-only businesses are among the new austerity measures introduced by Prime Minister George Papandreou in an effort to rescue his country from Europe’s fiscal crisis – in part by reducing the size of the untaxed “shadow” economy, estimated to account for 25 per cent of Greece’s GDP.
For some Greeks, including those who have fled abroad in recent years, the reforms are a welcome cleansing, a chance for a new Greece to rise from the ashes of the old, corrupt system.
For the 23,000 people who live in Moschato, the collapse of that system had a dramatic effect. Once-secure government jobs became tenuous, loans went into default, people were thrown out of work, homes were lost.
But the recovery has proven to be even more perilous, as people learn to live without a guaranteed government job and are instead confronted with the new reality of higher taxes, a life based on saving rather than cheap and endlessly extended credit, and the requirement to declare all forms of income.
As Mr. Papandreou implements harsh austerity programs in exchange for €110-billion in bailout loans overseen by the International Monetary Fund and the European Union, he is slashing a government payroll that includes hundreds of thousands of people who have essentially been given meaningless work in exchange for votes. He is raising taxes for people and businesses and eliminating vast tax shelters for wealth. And he is increasing the retirement age from 50 (in some fields) to a universal 65 while cutting benefit payments.
This week, Greece completed a special census to determine how many people are on the public-sector payroll – a number that has never been known, making cuts or assessments of their value difficult. Analysts are optimistic that Mr. Papandreou’s reforms, now that they have been passed by parliament, are genuine and beneficial.
In Moschato, those reforms make life tough. Most people here are blue-collar government workers, often dependent on the largesse of the party in power. They have lost their job security, and sometimes their job, and they have had to declare and pay tax on hidden savings. The sales tax has risen to 23 per cent, which is even worse than it sounds because many merchants are being forced to pay it for the first time. Income tax is now payable on all earnings.
Wealthier neighbourhoods are hit hard, too. Scores of senior civil servants were recently forced to disclose tens of millions of euros worth of property each had received through their jobs and pay tax on it for the first time. In Moschato, the amounts may be smaller, but the impact of Mr. Papandreou’s reforms is no less real.
