Monday, December 17, 2012

Wood, winter and wishful thinking

Greeks dress up for Carnival. by Teacher Dude's BBQ

Nowadays it's now known as fuel poverty, but to older generations it is huddling in cold, damp rooms round an inadequate fire hoping that either the weather will get better or that you'll have enough money to see out the cold spell. With temperatures in Greece dropping below zero in the mountainous northern regions, one of  the government's most hated tax measures is starting to take effect. The decision by Athens to raise heating oil taxation by 40% seems to have backfired as millions decided not to turn on their oil fired central heating and turned to other sources, most notably, wood burning stoves, leaving the government with 790 million euro shortfall.

In the northern region of Kozani heating oil whole sellers reported an 85% drop in demand in comparison  with last year, whilst businesses supplying wood, sometimes logged illegally are seeing a roaring trade as Greeks seek to heat their homes using traditional wood burning stoves known as soumbes.

Already the effects can seen in large cities with atmospheric pollution on the rise, leading many Athenian twitter users to remark on the use of wood along with heavy fog  effected the capital last night.

The government's decision to raise tax on such a basic item as heating in a country with shrinking wages and a 25% unemployment was justified on the grounds that the Greek treasury was losing billions in revenue due to more lightly taxed heating oil was being used in the place of diesel. However, the move has ended up punishing the 2/3 Greek households that till recently relied upon heating oil and lead to the drop in overall government revenues as people simply buy less oil.

However, tax hikes are just one part of the equation, and is with so many other economic issues in Greece the role of cartels and monopolies controlled by local oligarchs has to be taken into account.Like many other tax increases the use of cartels means that any increase in cost is pressed directly onto the consumer and not absorbed wholly or partially by the supplier as would normally happen in a free market with fair competition. In a recent report the IMF similarly warned that one of the reasons for Greece's inability to improve competitiveness was lack of competition in the local oil refining industry which kept prices much higher than in other EU countries.

As today's 'Reuters article on the role of oligarchs in the Greek crisis points out such closed shop policies are only possible with the connivance of the politicians in government who often pass legislation designed specifically to protect the interests of the small group of Greek tycoons who continue to exert a stranglehold on the economy and are defying all attempts to get them to take their share of the nation's tax burden.

Despite repeated claims by prime minister, Antonis Samaras that the worse is over and that Greece will return to growth in the near future the same corrupt political elite that helped create the current debt crisis now poses, to the disbelief of many inside and outside Greece as the country's saviours.

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