Greece: when the lights go out | FT Alphaville

Greece: when the lights go out

The desperate cunning scheme to get Greeks to pay property taxes by bundling them with electricity bills didn’t last long. You guessed it, people stopped paying their electricity bills and now it looks like the power company – which had to be bailed out last month – has stopped even trying to collect the levy.

From Ekathimerini, the Greek daily (emphasis ours):

Public Power Corporation (PPC) has already disengaged itself from involvement in the payment of the special property tax that had been incorporated into electricity bills.

Well-informed sources suggest that the new bills the company is issuing do not include the property levy despite the law providing for the first installment concerning 2012.

The decision, the same sources say, appears to have the acquiescence of the Finance Ministry.

Judging by the fact that unpaid bills in the first quarter of the year totaled some 1 billion euros, PPC believes it has become clear that households cannot afford to pay electricity bills that are burdened further by the extraordinary property tax in the current recession conditions.

The government had hoped to raise €1.7bn-€2bn from the levy in the fourth quarter of last year. But a massive unions-led civil disobedience movement against this “injustice” scuppered that and a ruling that it was illegal to disconnect people’s electricity supply for non-payment sent the collection rate even lower.

However, the memorandum of understanding with the IMF-EU signed in March demands that Athens collects a range of back taxes, such as the property tax from 2009 which was essentially never collected. So it will be interesting to see how the Troika reacts to these most recent developments.

Ironically, the scale of non-payment means that the PPC itself has run out of money. Last month it needed a €250m liquidity injection from the government so as to avert a nation-wide energy supply meltdown. So even less of the already-too-small pot of tax revenues is going to the government. The PPC has until end of June to find new sources of funding. It seems unlikely that people who stopped paying power bills last year are suddenly going to start now.

From a friendly trader:

When we talk about Greece “running out of money” in coming weeks/months, the combination of dire recession, plus non compliance in Revenue collection will speed the day that Civil Servants and suppliers are paid in IOU’s or “New Drachma” in the absence of any funding from the EU/IMF…

While EU-IMF funding is still forthcoming, the overwhelming support for the anti-bailout parties as Greece heads for new elections next month puts an obvious question mark over future assistance. But the PCC experience suggests we really could be moving towards the IOU stage of this crisis as liquidity issues bite.

As Lloyd said in Dumb and Dumber:

That’s as good as money, sir. Those are IOUs.

Related Links:
First Real Greek Bailout: Electricity – ZeroHedge
Athens backs down over property tax – FT