As the government and opposition argued about whether or not new measures are on the cards, Finance Ministry figures indicated that an original austerity program of tax hikes and salary cuts had failed to bring in the projected revenue. An increase in the tax on tobacco, for example, brought in an additional 250 million euros in the first six months of the year, far below the target of 1.13 billion euros. Overall increases in the tax on tobacco, fuel and alcohol are believed to have failed to hit the target due to the parallel wage cuts, which have led to a plunge in consumer spending. Experts estimate that losses to state revenue because of the slump in consumer spending will amount to 2 billion euros by the end of the year.This is an unwelcome development for the EU bureaucrats who recently announced that Greece was making excellent progress implementing financial reforms. No wonder Greece 5-Year CDS is trading at 870 bps. Greece is doomed, and everyone knows it. The only question is when it will all come crashing down. According to Intrade there is approx. 50% chance of a European country leaving the Euro by Dec 31, 2014.
Black Swan Insights