The Corner

Meanwhile, in Hades . . .

As the Greek economy shrinks, tax revenues fall, and the hole gets deeper, Ekathimerini reports:

Budget revenues were found to be lagging by a considerable 1 billion euros in the year’s first month, provisional January data compiled by the Finance Ministry showed on Tuesday. Revenues posted a 7 percent decline compared with January 2011, while the target that had been set in the budget provided for an 8.9 percent annual increase. Worse still, value-added tax receipts posted an 18.7 percent decrease last month from January 2011 as the economy continues to tread the path of recession: VAT receipts only amounted to 1.85 billion euros in January compared to 2.29 billion in the same month last year.

The VAT revenue data represent a particular worrying sign regarding the depth of recession for 2012, while even more painful measures are expected to lead to a reduction in salaries and therefore a further drop in consumption.

This is the vicious cycle that the government will have to tackle by way of additional fiscal measures this summer. According to the current data, the 2012 budget will certainly have to be revised soon, given that the original estimate for a contraction of 2.8 percent is now raised to 3.5-4 percent of gross domestic product.

And so the vicious circle turns. The cure may be overdue, but structured as it is now, it looks likely to suck the life out of the patient that it is meant to be rescuing.

And it sounds as if one of the doctors is warning relatives that this isn’t going to work out:

The euro zone can survive even if Greece is forced out, European Commissioner Neelie Kroes said in an newspaper interview on Tuesday as Greek leaders struggled to secure a 130-billion-euro ($170 billion) bailout and avert further crisis.

Digital Agenda Commissioner Kroes, who oversees telecoms and the Internet across the 27-country EU, told Dutch newspaper Volkskrant that if Greece quit, the euro zone would not be in trouble.

“When one member leaves it doesn’t mean ‘man overboard’,” she said in the interview.

“Maybe my choice of words is unfortunate. What is a man overboard? They always said if a country is let go or asks to get out, then the whole edifice will collapse. But that is simply not true.”

Alternatively, of course, Kroes was simply signaling to Athens that there is (finally) a limit to how much the euro zone is prepared to pay to keep Greece in the currency union.

The game of chicken continues. 

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