Capital Flight out of Greece; Run on the Banks Underway; Greek Unions Stage Another Strike

Seeking to avoid taxes on bank accounts and sheltered income, Wealthy Greeks Send Money Abroad.

Wealthy Greeks are pulling their money out of local banks and sending it abroad, fearing increased government scrutiny on assets and a run on the banks if Athens is forced to turn to the International Monetary Fund, according to private bankers and other people with knowledge of the situation.

Part of the government's austerity package for this year is a declaration of war on income that hasn't been taxed.

Clients of private banks also fear that Greece may be unable to raise the �54 billion it needs this year to pay back maturing bonds and will therefore have to turn to the IMF for help.

"Some of our clients are concerned about a run on the banks if the IMF gets involved," said another private banker, this one from a foreign bank. "They believe the situation in Greece will get worse before it gets better. There is also very little clarity from the government about its intentions on new tax measures."

"We estimate that �8 billion has moved out of Greece to accounts abroad since December. It's money from bank accounts, stock sales, property sales and other sources," he said, adding that that represented a substantial chunk of the �30 billion under management in Greek's private banks.

Wealthy individuals may have good reasons to be concerned, however. Finance Minister George Papaconstantinou earlier this month urged Greeks with accounts abroad to repatriate their money and said the capital will be taxed at a 5% rate. He said those who choose to keep their money abroad should declare their deposits and pay a tax of 8% for the first six months.

Thereafter he threatened that Greece will use all laws at its disposal, such as double-taxation agreements, to ask foreign banks for information on Greek account holders.

"For us this is the first step towards taxing all accounts in Greece," said the chief financial officer of a major Greek shipping company. "The line is minimum deposits here and moving all assets abroad."

Run On The Banks

�8 billion out of �30 billion is quite a chunk of change percentagewise. Is anyone in Greece tracking the capital flight?

Yet Another Strike

Proving once again that the national pastime in Greece is a public strike, Greek Unions Stage Second Strike This Month Over Budget Cuts.

Greece�s unions plan to shut down transportation, medical and educational facilities today in a second 24-hour strike aimed at resisting Prime Minister George Papandreou�s drive to cut the European Union�s biggest budget deficit.

Air-traffic controllers, customs and tax officials, bus and train drivers, doctors at state-run hospitals and school teachers are walking off the job for a one-day strike to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists are also joining the strike, creating a media blackout.

�People on the street will send a strong message to the government but mainly to the European Union, the markets and our partners in Europe that people and their needs must be above the demands of markets,� Yiannis Panagopoulos, president of the private-sector union GSEE, told NET TV yesterday. �We didn�t create the crisis.�

Almost 500 international and domestic flights have been canceled today, a spokeswoman for Athens International Airport, Greece�s biggest, said by telephone. The Athens Metro, which carries 650,000 commuters to work each morning, won�t run nor will the capital�s trolleys and trams. Urban buses will operate only until 7:30 a.m. and after 10 p.m. Passenger ferries and other vessels will remain docked until the end of the strike.

Once again, public workers everywhere think they should be immune to problems the rest of the population faces.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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