The fragile three-party coalition government formed after two parliamentary elections held last year failed to produce a decisive winner. And the unwillingness of some coalition lawmakers to back various elements of a harsh austerity program dictated by the EU and the IMF has reduced the government’s majority in the 300-member Parliament from 179 seats to just 164.

Although voters are clearly suffering from austerity fatigue, resent the surrender of sovereignty that has become necessary to secure bailout loans, and believe that the government is doing too little to fight official corruption, a large majority of Greeks continues to favor euro membership. Despite dissatisfaction with the government’s performance, Prime Minister Antonis Samaras’s ND has reclaimed a narrow lead over the anti-euro Syriza party in polls conducted since the government secured fresh loans from the EU and the IMF in December. This suggests voters will continue to back pro-euro parties as long as Greece’s euro-zone partners maintain the financial lifeline required to prevent the country’s forced exit from the currency union.

The willingness of Greece’s partners to do so cannot be taken for granted, and until the government in Athens proves that it is capable of meeting its deficit-reduction goals, the possibility of the so-called “Grexit” scenario cannot be ruled out. In that regard, tax evasion is a significant point of vulnerability.

Unpaid taxes amount to an estimated 25 percent of current GDP. The IMF estimates that owing to the straitened economic circumstances of many tax evaders and the statute of limitations on tax evasion, only about one-fifth of the total is still collectible.

The shadow economy accounts for at least 10 percent of current national output, and fairly well-paid professionals are among the principal culprits when it comes to tax avoidance, a situation that must change if the economy is to perform at the level required to keep Greece’s creditors on side.


The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.

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