ATHENS (Reuters) - Taxes go uncollected, deficit targets are routinely missed, job cuts from the state payroll are postponed, privatizations have barely begun and pharmacies still shut in the middle of the day.
Nearly two years into Greece’s bailout, so many promises have been broken that international lenders have largely lost faith in the country’s will to reform itself and are torn between imposing stricter outside control and cutting Athens loose.
European Union partners and International Monetary Fund officials negotiating a second financial rescue for the euro zone’s most indebted state say they are tired of asking for the same measures to be agreed or implemented, again and again.
In a conference call on Saturday, euro area finance ministers vented exasperation at Greece’s failure to enact labor market and structural reforms to overhaul the economy.
“Enough is enough,” was the way one European official involved in the call described the message conveyed to Greek Finance Minister Evangelos Venizelos. “There is a great sense of frustration that they are dragging their feet.
Greece blames a deeper-than-expected recession, fuelled by the austerity required by its lenders, for its fiscal slippages. It has reduced its public deficit from over 15 percent of GDP in 2009 to 9-9.4 percent last year but the goal of getting below 3 percent by 2014 looks remote.
The country has just entered a fifth consecutive year of recession, making it harder to bring the debt and deficit ratios down. EU/IMF inspectors say failure to open up the economy and cut down a bloated public sector are largely to blame.
In a sign of deepening mistrust, France and Germany called on Monday for Athens to place the interest on its debt into a protected account to ensure creditors get paid.
“During the last two years, many promises have been made. When you look at the result there is a big disparity. This creates a lot of mistrust,” said Diego Iscaro, at IHS Global Insight. “The lack of credibility has gone worse because of the lack of progress on all the promises.”
The initial targets may have been too ambitious, Iscaro said, but missing them after having agreed to them mean Greece’s credibility keeps being hit, he said.
Athens has made little progress so far on its commitment to slash the public workforce by 150,000 by 2015, abandoning a labor reserve plan that was meant to put 30,000 state workers on the road to redundancy last year.
Failure to staunch tax evasion is one major problem. This not only leaves holes in state coffers but also inflames a sense of injustice among salaried employees and civil servants whose taxes are deducted at source.
Ambitious targets to raise state revenues and crack down on tax cheats have been pushed back. In May last year, then Finance Minister George Papaconstantinou announced a plan to collect an extra 2.5 billion euros in 2011 from fighting tax evasion and 4.4 billion euros this year.
The plan was abandoned because revenues were too weak and Greece now aims to collect 1.5 billion euros in overdue payments this year, which officials view as more realistic. Tax officials have seen their own pay cut, reducing for some the incentive to tackle reforms.
The shadow economy still accounts for more than a quarter of the 220-billion-euro official output — the highest proportion in the euro zone. Annual tax evasion stands at 40-45 billion euros, said Nikos Lekkas, the no. 2 official in Greece’s Financial and Economic Crime unit.
The government announced with great fanfare a plan to supply consumers with electronic “tax cards” for everyday shopping, to make it more difficult for shopkeepers to dodge sales tax. But just a few thousand shoppers have been using them so far.
Even when reforms are enacted, they are often not applied.
An outdated, cumbersome and expensive licensing system for truck drivers was scrapped in a 2010 law hailed as a victory over vested interests. It has yet to be implemented.
Athens has begun opening up closed professions such as taxi drivers, where operators cannot work without hard-to-obtain licenses. But EU/IMF inspectors say implementation is too slow.
Professions such as taxi drivers remain shuttered by legal restrictions. Just last month, lawmakers voted down an article meant to free up and extend pharmacy opening hours.
The government has fallen far behind on a target to raise 50 billion euros from privatization by 2015. It raised just 1.7 billion euros last year, mainly from a pre-arranged stake sale in telecoms company OTE and gaming concessions, missing an initial 5 billion euros target and a revised 4 billion target.
It had promised to raise another 9.3 billion euros this year by selling assets such as buildings and stakes in oil refinery Hellenic Petroleum (HEPr.AT) and gas companies DEPA and DESFA.
However, privatization agency chairman Ioannis Koukiadis told Reuters the target was not achievable and the agency was now aiming for 4.7 billion euros. One reason is that the market value of state-owned companies has plunged, together with most Greek stocks.
Aside from major structural reforms, it is flagrant cases of excessive spending that euro zone capitals most want to see cut - such as the fact that there are 25,000 state-supplied cars on the national budget, according to a senior Greek lawmaker.
The European Commission, European Central Bank and the IMF, together known as the troika, have put together a 10-page memo on outstanding measures Athens has to take if a second package of 130 billion euros of loans is to be agreed.
The steps include budget cuts, tax reform, central controls on health spending, improved laws on wage flexibility and easier rules for foreign investment.
The IMF’s chief inspector for Greece, Poul Thomsen, said recently that Greece’s lenders may have over-estimated the capacity of the administration to reform.
An extensive OECD review of Greece’s administration found it was inefficient and poorly organized, with the efforts of those willing to implement reforms blocked by others, and called for a “big bang” reform.
Additional reporting by Luke Baker and Robin Emmott in Brussels, Lefteris Papadimas and Renee Maltezou in Athens; Editing by Paul Taylor/Janet McBride