Tuesday, February 9, 2010

Markets cheer, as Greece makes baby steps. Germany to help too.

Greek bond yields are dropping significantly, as Germany and the EU agreed to "support in the broad sense of the word" of the crippled state.  Brutal times there.

Let's not get ahead of ourselves, of course.  Greece is taking California-like steps in their attempt to raise "revenues."  By that I mean cutting taxes on lower earners and shifting the burden upstream - like it or not, even California's most liberal tax redistributionsits have accepted that having the top 1% pay an out-sized piece of the budget simply leads to huge volatility down the road.  They're also raising dividend tax rates, which will certainly scare off any new capital, other than the money Germany is about to lend.  Decreases in lower income level taxes will be offset by passed-through higher taxes on offshore oil firms and excise fuel taxes.

Among the Greek fixes, reports Reuters:


The upper tax rate of 40 percent will be applied on annual
incomes above 60,000 euros ($82,250), instead of the existing
75,000 euro threshold


Incomes between 12,000 and 16,000 euros are to be taxed at
18 percent, down from the current 24 percent tax on incomes from
12,000 to 30,000 euros. This is intended to help low-income
earners.

Dividends will be added to incomes and taxed at the
applicable rates, meaning up to 40 percent. Currently, dividend
distributions are taxed at a flat 10 percent rate.

Greek public sector workers will face a wage freeze across
the board this year, extending a freeze announced late last year
on those making over 2,000 euros a month. Seniority pay rises
will apply normally.

The government announced a 10 percent cut in public sector
workers' supplemental allowances, which are added to basic
salaries and currently constitute a large part of their total
income.

Public sector employees' gross income will fall between 1
and 5.5 percent.
Copyright 2010 AlphaNinja

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