Greek referendum controversy

The Greek finance minister Yanis Varoufakis has blogged about his decision about letting the Greek people vote on the the institutions (aka Troika) proposal. The proposal itself can be found here. I genuinely recommend you read both (proposal first, then Mr. Varoufakis’s take on it) as they are very insightful. Here’s my take on it.

Let me start by using some quotes from Mr. Varoufakis’s blog:

We rejected the institutions’ 25th June proposals because of a variety of powerful reasons. The first reason is the combination of austerity and social injustice they would impose upon a population devastated already by… austerity and social injustice. Even our own SLA proposal (22nd June) is austerian, in a bid to placate the institutions and thus come closer to an agreement. Only our SLA attempted to shift the burden of this renewed austerian onslaught to those more able to afford it – e.g. by concentrating on increasing employer contributions to pension funds rather than on reducing the lowest of pensions. Nonetheless, even our SLA contains many parts that Greek society rejects.

[…]

Unfortunately, the institutions’ response was to insist on even more recessionary (aka parametric) measures (e.g. increasing VAT on hotels from 6% to 23%!) and, worse still, on shifting the burden massively from business to the weakest members of society (e.g. to reduce the lowest of pensions, to remove support for farmers, to postpone ad infinitum legislation that offers some protection to badly exploited workers).

When you read the document Mr. Varoufakis is referring to you will find that those claims are founded as everything he has mentioned is in there.

On the other hand, the proposal also includes many structural changes that he neglects to mention in his post. You will find many changes that actually do make perfect sense. Here are some of them:

Adopt legislation to:

  • close possibilities for income tax avoidance (e.g. tighten the definition of farmers), take measures to increase the corporate income tax in 2015 and require 100 percent advance payments for corporate income as well as individual business income tax by end-2016; eliminate the preferential tax treatment of farmers in the income tax code; raise the solidarity surcharge;
  • raise the corporate tax rate from 26% to 28%;
  • introduce tax on television advertisements;
  • extend implementation of luxury tax on recreational vessels in excess of 10 meters and increase the rate from 10% to 13%, coming into effect from the collection of 2014 income taxes and beyond;

Those measures above do make perfect sense. However “eliminate the preferential tax treatment of farmers in the income tax code” is one, that clearly targets some of the weakest members. In addition, they also want to take away reduced prices of heating oil during winter as well, remove the 25% cap of incomes up do 1500€ / Month and some other nasty things that will definitly have a bad impact on the poorest of the poor – despite many claims that this is not true.

Anyhow it all comes down to this: Greek is in bad need of financial aid. The EU wants to provide that aid but not without demanding to eliminating the root cause of the problem. That is perfectly reasonable. On the other hand, Greek is a sovereign nation state and many of the actions demanded by the EU are simply overstepping the boundaries here. That is because they describe very specific actions what Greek must do in order to get their assistance while the faith of Greek is in their hands. The truth is that Greek has very little to say about what is in there proposals and it is almost like blackmail: Either do as we say or die.

Therefore, I find it perfectly legitimate to ask the Greek population on the subject. One sentence from Mr. Varoufakis’s Blog puts that well:

I was even asked: “How do you expect common people to understand such complex issues?”

That is like saying: “How dare you asking your people about the impact this proposal will have on their lives?”. That alone makes me think that he is right by asking his people because as I pointed out: There are very real threats in the proposal that will make the poor poorer if it passes.