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Tags: Greece | Broke | Tax | euro

NY Times: Greece Warns of Going Broke as Tax Proceeds Vanish

By    |   Wednesday, 06 June 2012 10:45 AM EDT

Greece is quickly running out of money and may be completely broke as soon as July, according to The New York Times.

The Greek government may need to stop paying salaries and pensions, at least temporarily, as well as stop paying for fuel, food and pharmaceuticals, the Times reports.

Greece received 130 billion euros ($161.7 billion) in its last bailout but still faces a tax-collection shortfall of 1.7 billion euros. Government officials are considering using money meant to save banks, and even issuing IOUs, according to the Times.

Austerity measures that have slashed salaries and pensions have sent the country into a severe recession, reducing tax revenues. As Greeks become further impoverished, they become more motivated to evade taxes.

More businesses are accepting payments only in cash. The Times reports that tax collectors, who have had their pay cut, have a hard time paying for fuel to pursue tax dodgers.

A law enabling tax collectors to go after bank accounts of alleged tax evaders was supposed to boost revenue, but banks have resisted collection efforts by refusing to send information for months, then sending piles of confusing documents at once, according to the Times.

International and European monetary leaders are withholding 1 billion in government financing until after the June 17 election to see if the new Greek government sticks to the cost-cutting austerity plan Greece.

If the anti-austerity leftist party, Syriza, wins, many observers believe Greece will default and leave the euro.

Syriza leader Alexis Tsipra, who wants Greece to stay in the euro, says eurozone leaders are bluffing when they say the country must stick to austerity or leave the euro, Reuters reports.

Even if the pro-bailout New Democracy wins with enough votes to form a government on its own, it will soon collapse from the country's enormous fiscal problems, prompting more elections, according to Reuters.

"We are talking about postponing the inevitable for a short time," said political analyst John Loulis told Reuters. "It won't last more than a few months."

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Wednesday, 06 June 2012 10:45 AM
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