The Greek government's new real estate tax, a desperate bid to meet its budget goals and secure fresh foreign aid, will hit the population hard. Greeks have almost their entire wealth invested in property -- and are more worried about the tax than about the prospect of a national insolvency or leaving the euro.
Jannis Foteinos doesn't look especially wealthy. The 57-year-old pensioner is wearing sandals and socks and ordinary-looking glasses, and he doesn't have that many teeth left. He lives in the working class Athens district of Aigaleo. But he owns two apartments, one 100 square meters in size, the other 130, and he is outraged at the new real estate tax introduced by the embattled Greek government on Sunday.
"We might as well shoot ourselves," he said. The government aims to collect €2 billion ($2.72 billion) in extra revenue by imposing a tax averaging €4 per square meter for two years in a desperate bid to stave off insolvency by meeting its budget goals and thereby qualifying for the payout of further aid from the euro zone and International Monetary Fund.
For people like Foteinos, the tax entails another financial burden they can ill afford. The former shop owner recently had his monthly pension cut by €200. Now he could face a tax bill of some €1,000 in the coming days. Given that prospect, he doesn't really care that politicians from Chancellor Angela Merkel's coalition have started talking openly about the possibility that
In fact, he wouldn't mind getting the drachma back. "Everyone here has had bad experiences with the euro," he said. That may be a little exaggerated. But for many Greeks, the real estate tax poses a bigger problem than the currency. "I can't judge whether the drachma would be better or worse," says Irida Thanopolous, 40, who runs a small street café nearby. She is a little embarrassed to admit that she owns six apartments. She bought one with her husband, the other five were part of her dowry. That amounts to almost 500 square meters which will now be liable to tax. "That is totally tragicomic," she said.
Many Investments in Property
Thanopolous doesn't just have six apartments. She also has three jobs. She and her husband run a clothing store next to the café, and she spends her weekends typing up documents for a law firm. Together with the rental income, she has a net monthly income of €4,000. That isn't much for a family with two teenage children, says Thanopolous. The apartments are meant to secure their standard of living.
Many Greeks did the same as Thanopolous. Because the drachma wasn't a hard currency, they invested their savings in property. Some 85 percent of the people's wealth is invested in houses and apartments. That explains the outraged response to the surprise tax. "Monster Tax," left-wing newspaper Eleftherotypia screamed in a headline, while conservative Eleftehros Typos commented: "The citizens will go bankrupt."
The country's well-oiled protest machine has already been fired up. The influential Federation of Real Estate Owners said it would only accept the tax if no other extra contributions were levied. The trade union of state energy utility DEI, which is to collect the tax and switch off the power supply to owners who refuse to pay up, said it would block the process by refusing to issue electricity bills. The threat is credible because virtually all DEI employees are union members.
Tax Seen as Worse Than Drachma Return
Helena Dougni owns a 67-square meter apartment in the upmarket Athens suburb of Koukaki. The elegant 28-year-old lost her job as a radio producer in the crisis. "I'm going to go crazy," said Dougni when she heard about the new tax. "How are you supposed to pay that on a low income?" A return to the drachma wouldn't be so bad, she said. "I don't have any savings in the bank, that's not a problem for me."
For Helena's sister Maria the tax is bad news for a further reason. The 35-year-old has been working as an engineer for a construction company linked to the Athens subway system. But the construction sector collapsed in the crisis, and some 90 percent of building workers are unemployed. Maria too will be made redundant in a few weeks, unless her firm gets new orders in, which is even more unlikely now that the tax has been imposed.
Critics argue that the tax is further evidence of how the cutbacks are wrecking the nation. The economist Savas Robolis is one of them. He is scientific director of the economic research institute INE, which is affiliated with Greek trade unions. Its researchers publish an annual report on the development of the Greek economy and labor market, and the latest one has just been released.
'I'm Not Going to Pay'
It's a long report, but the table on the first page suffices to tell whole story. It shows the development of a host of economic indicators between 2009 and 2011, and all of them point downwards.Gross domestic product has fallen to its 2005 level, purchasing power is where it was in 2003, and investments in plants and machinery haven't been this low since 1998. "The only plus is in the number of unemployed," said the professor. Unemployment has reached the level it was at in 1950. "That was the time when Greeks emigrated to Germany," he said.
Robolis said that for decades almost 70 percent of Greek state revenue has come from people in paid employment. And employees are the ones bearing the brunt of the cuts. "The big companies by contrast are paying hardly anything. In other words, they are evading tax," he said.
Many Greeks are likely to circumvent the new real estate tax, either by using loopholes, of which there are many in the Greek tax system, or by simply boycotting payments. Pensioner Foteinos has already decided what he's going to do: "I'm not going to pay. Let them shut off my electricity."