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Greeks slide deeper into poverty

Retired teacher and volunteer Eva Agkisalaki clears tables at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis

Retired teacher and volunteer Eva Agkisalaki clears tables at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis

By Alkis Konstantinidis, Reuters
February, 2017

An elderly woman searches through donated clothes at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis             SEARCH "POVERTY GREECE" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.

An elderly woman searches through donated clothes at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis.

Greek pensioner Dimitra says she never imagined a life reduced to food handouts: some rice, two bags of pasta, a packet of chickpeas, some dates and a tin of milk for the month.

At 73, Dimitra – who herself once helped the hard-up as a Red Cross food server – is among a growing number of Greeks barely getting by. After seven years of bailouts that poured billions of euros into their country, poverty isn’t getting any better; it’s getting worse like nowhere else in the EU.

“It had never even crossed my mind,” she said, declining to give her last name because of the stigma still attached to accepting handouts in Greece. “I lived frugally. I’ve never even been on holiday. Nothing, nothing, nothing.”

Now more than half of her 332 euro ($350) monthly income goes to renting a tiny Athens apartment. The rest: bills.

The global financial crisis and its fallout forced four euro zone countries to turn to international lenders. Ireland, Portugal and Cyprus all went through rescues and are back out, their economies growing again. But Greece, the first into a bailout in 2010, has needed three.

Rescue funds from the European Union and International Monetary Fund saved Greece from bankruptcy, but the austerity and reform policies the lenders attached as conditions have helped to turn recession into a depression.

Prime Minister Alexis Tsipras, whose leftist-led government is lagging in opinion polls, has tried to make the plight of Greeks a rallying cry in the latest round of drawn-out negotiations with the lenders blocking the release of more aid.

“We must all be careful towards a country that has been pillaged and people who have made, and are continuing to make, so many sacrifices in the name of Europe,” he said this month.

People line up as they wait to enter a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis            SEARCH "POVERTY GREECE" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.

People line up as they wait to enter a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis 

Much of the vast sums in aid money has simply been in the form of new debt used to repay old borrowings. But regardless of who is to blame for the collapse in living standards, poverty figures from the EU statistics agency are startling.

Greece isn’t the poorest member of the EU; poverty rates are higher in Bulgaria and Romania. But Greece isn’t far behind in third place, with Eurostat data showing 22.2 percent of the population were “severely materially deprived” in 2015.

And whereas the figures have dropped sharply in the post-communist Balkan states – by almost a third in Romania’s case – the Greek rate has almost doubled since 2008, the year the global crisis erupted. Overall, the EU level fell from 8.5 percent to 8.1 percent over the period.

The reality of such statistics becomes clear at places like the food bank run by the Athens municipality where Dimitra collects her monthly handouts.

Here, dozens more Greeks waited solemnly with a ticket in hand to get their share. All are registered as living below the poverty line of about 370 euros a month.

“The needs are huge,” said Eleni Katsouli, a municipal official in charge of the centre.

People eat at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis            SEARCH "POVERTY GREECE" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.    TPX IMAGES OF THE DAY

People eat at a soup kitchen run by the Orthodox church in Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis 

Figures for the food bank, which serves central Athens, show a similar trend on a local scale to the wider Eurostat data. About 11,000 families – or 26,000 people – are registered there, up from just 2,500 in 2012 and 6,000 in 2014, Katsouli said. About 5,000 are children.

Many of the shelves and refrigerators in its stock room stood empty. What they give away depends on what sponsors – themselves often struggling businesses – can donate.

“We’re worried because we don’t know if we’ll be able to meet these people’s needs,” Katsouli said. “There are families with young children and on some days we haven’t even got milk to give them.”

International organisations, including the Organisation for Economic Co-operation and Development, have urged the government to prioritise tackling poverty and inequality.

Poverty stricken area of Perama is seen near Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis             SEARCH "POVERTY GREECE" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.

Poverty stricken area of Perama is seen near Athens, Greece, February 15, 2017. REUTERS/Alkis Konstantinidis 

Unemployment has slipped from a peak of 28 percent of the workforce to 23 percent but the rate remains the highest in the EU. Since the crisis began, the economy has shrunk by a quarter and thousands of businesses have closed for good.

Hopes are high the economy can pick up this year but data last week showed it contracted again from October to December after two straight quarters of growth.

Better living standards seem as far away as ever. Over 75 percent of households suffered a significant income reduction last year, a survey by business confederation GSEVEE and Marc pollsters found. A third had at least one unemployed member and 40 percent said they had to cut back on food spending.

The Greek Ombudsman says a growing number of people struggle to pay utility bills. In a no-frills Athens neighbourhood, a soup kitchen run by the Orthodox church serves 400 meals a day over four sittings in under two hours.

“Everyone is going through hard times – all of Greece is,” said Eva Agkisalaki, 61, a former teacher who volunteers there.

An elderly man sells chestnuts in front of the parliament during a demonstration to demand tax reductions and compensation in Athens, Greece, February 14, 2017. REUTERS/Alkis Konstantinidis            SEARCH "POVERTY GREECE" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.

An elderly man sells chestnuts in front of the parliament during a demonstration to demand tax reductions and compensation in Athens, Greece, February 14, 2017. REUTERS/Alkis Konstantinidis 

Agkisalaki did not qualify for a pension because her contract ended when the retirement age was lifted to 67 under the bailout programme and she could not find work, she said. Part of her husband’s pension, cut to 600 euros from 980 also under reforms demanded by the international lenders, goes to her son and daughter’s families.

In return for volunteering, Agkisalaki receives handouts from the soup kitchen which she shares among her unemployed daughter and her son.

“We’re vegetating,” she said between setting a long wooden table for the next meal of bean soup, bread, an egg, a slice of pizza and an apple. “We just exist. Most Greeks just exist.”

Evangelia Konsta, who oversees the centre and whose business supplies the meat, said the number of people eating at the soup kitchen has more than doubled in two years and the church often also helps cover people’s electricity or water bills too.

“Things are getting worse, they’re not getting better and that’s reflected in people’s needs,” Konsta said. “There are people who haven’t even got 1 euro.”

Across Athens, the number of Greeks sleeping rough is a testament to that. Volunteers drive a van with two washing machines and two dryers to neighbourhoods where the homeless gather to help them clean up.

“You see the same faces, but also new ones,” said Fanis Tsonas, co-founder of the Ithaca mobile laundry, as destitute men and women brought bags of laundry.

Few are hopeful of better days.

“I don’t think there’s one person who’s not afraid of the future,” said Dimitra, the pensioner, clutching her plastic bag of rationed goods.

Copyright Reuters 2017

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Foreign banks in Britain pay fraction of tax rate

Pedestrian pass the offices of Goldman Sachs in London April 20, 2010. REUTERS/Toby Melville

Pedestrian pass the offices of Goldman Sachs in London April 20, 2010. REUTERS/Toby Melville

By Tom Bergin
December, 2016

LONDON (Reuters) – Some of the biggest foreign investment and commercial banks operating in Britain paid an average tax rate of just 6 percent on the billions of dollars of profits they made in the country last year, a Reuters analysis of regulatory filings shows.

That is less than a third of Britain’s corporate rate of 20 percent. There is however nothing illegal about how they managed to reduce their taxes, and includes using losses built up during the financial crisis to offset current bills.

Seven of the biggest international banks operating in London – Europe’s main investment banking centre – have published profit and tax data ahead of a year-end deadline stipulated by EU law.

Five of them, all U.S. banks, reported a profit – a combined $7.5 billion – and paid corporation tax, or corporate income tax, of $452 million.

Bank of America’s two main UK investment banking subsidiaries paid no corporation tax on combined profits of $875 million. JPMorgan paid $160 million in tax on $3.3 billion in UK profits.

Goldman Sachs paid $256 million tax on $2.8 billion profit, while Morgan Stanley’s main UK unit paid $33 million tax and earned $530 million.

All the banks declined to comment on the data except San Francisco-based Wells Fargo, which reported $2.7 million tax on $34 million profit. It said its objective was to comply with all of its tax compliance requirements.

The British Bankers’ Association (BBA) said the data did not reflect the sector’s full contribution and that, including other taxes and payments, foreign banks contributed about $20 billion to the UK treasury last year.

The British tax authority, Her Majesty’s Revenue and Customs, said the Government had taken steps to ensure banks paid the correct amount of tax.

“Many complex factors contribute to the effective rate of tax paid by corporate businesses,” a spokesman added in a emailed statement.

The finance ministry was not available to comment.

The 6 percent rate is still higher than the average rate of 1 percent paid for 2014 by the 10 biggest foreign investment and commercial banks that reported UK profits and taxes.

British banks also disclose profit and tax amounts but these are largely related to domestic retail activities, so it is not possible to calculate the effective UK tax rate on their commercial and investment banking activities.

Analysts say many other companies pay tax at below the headline rate but only banks are required to disclose tax and profit figures by country, so it is not possible to calculate the rates paid by manufacturers, builders or services companies.

‘ALL-TIME HIGH’

A Citigroup office is seen at Canary Wharf  in London, Britain May 19, 2015.  REUTERS/Suzanne Plunkett

A Citigroup office is seen at Canary Wharf in London, Britain May 19, 2015. REUTERS/Suzanne Plunkett

The opposition Labour Party said the figures showed that the government was still going soft on the banks, years after saving the sector from collapse with taxpayer funds.

“These again look like alarmingly low tax rates for banks which are making eye-watering amounts of money,” said shadow finance minister John McDonnell. “This shows that this government wants to create an environment in which big firms get tax giveaways while everyone else gets spending cuts.”

The data comes as banks in Britain push back against a government decision last year to increase their corporate tax rate to 28 percent this year – a move that was offset by a cut in the levy on their assets.

The BBA criticised the change saying, the government risked making Britain a “less attractive place for banks”.

This week, it said the low corporation tax payments would likely increase in coming years. In any case, it said combining the bank levy, value added tax, payroll taxes and income taxes paid by staff foreign banks contributed 16.8 billion pounds to the UK Exchequer in 2015. “Tax contributions by the banking sector are at an all-time high,” a BBA spokeswoman said.

The levy – introduced in 2011 to help discourage risky borrowing and pay for the crisis-era banking bailouts – raised 3.4 billion pounds in 2015-16, compared with corporation tax payments by the sector of 3.2 billion pounds, the BBA said.

Only one of the foreign banks published data on their bank levy payments. Merrill Lynch International said it paid a levy of $19.2 million last year, down from $47.5 million in 2014.

LAGS AND LOSSES

A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012.  REUTERS/Dylan Martinez/File Photo

A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo

Bank of America said in a filing that its Merrill Lynch International unit paid no corporation because of “relief obtained via the utilisation of historical losses brought forward”, largely from during the global financial crisis.

Accounts for other banks’ UK subsidiaries also show that they benefited from using losses built up during the crisis to offset current tax bills.

Last year the government changed tax rules so that such losses may only offset half a bank’s income in any one year, partly explaining the increase in the banks’ effective tax rate compared with 2014.

Other banks including JPMorgan said in the filings that since tax payments often partly cover the previous year’s earnings, the rate paid in a given year may not reflect the amount eventually paid in respect of that year’s profits.

Across the UK banking sector, corporation tax payments are half what they were before the financial crisis, according to the BBA’s own tax survey, published last month.

The drop is not confined to banks, and is echoed across other businesses. The ‘100 Group’ which represents around 100 of the UK’s largest companies said corporation tax payments by its members had fallen over the past decade.

Tax campaigners say some companies also use complex inter-company transactions to ensure profits are actually reported in lower tax jurisdictions to minimise bills.

Banks filings do sometimes show disproportionate profitability in such jurisdictions.

London-based Goldman Sachs Group UK Ltd reported a $194 million profit in the Cayman Islands, which has no corporate income tax, despite employing no staff there.

Citigroup reported twice as much profit at Citigroup Europe Plc, its main subsidiary in Ireland, than at its main UK subsidiary. That’s despite the UK arm employing more people than Ireland, and more senior staff – average wages at London-based Citigroup Global Markets Ltd were $288,000 per head last year compared with $48,000 at Dublin–based Citigroup Europe Plc.

Ireland’s tax rate is 12.5 percent.

Goldman and Citigroup declined to comment.

Copyright Reuters 2016

($1 = 0.8035 pounds)

(Editing by Pravin Char)

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Desperate in Davos — policymakers struggle for answers

(L-R) Martin Wolf, Associate Editor at the Financial Times, Christine Lagarde, Managing Director of theInternational Monetary Fund (IMF), George Osborne, Britain's Chancellor of the Exchequer, Arun Jaitley, Minister of Finance of India, Haruhiko Kuroda, Governor of the Bank of Japan and Tidjane Thiam, Chief Executive Officer of Credit Suisse attend the session "The Global Economic Outlook" during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2016. REUTERS/Ruben Sprich

(L-R) Martin Wolf, Associate Editor at the Financial Times, Christine Lagarde, Managing Director of theInternational Monetary Fund (IMF), George Osborne, Britain’s Chancellor of the Exchequer, Arun Jaitley, Minister of Finance of India, Haruhiko Kuroda, Governor of the Bank of Japan and Tidjane Thiam, Chief Executive Officer of Credit Suisse attend the session “The Global Economic Outlook” during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2016. REUTERS/Ruben Sprich

By Noah Barkin
January 23, 2016

DAVOS, Switzerland (Reuters) – Angela Merkel was missing from Davos this year, but the German leader’s optimistic mantra “we can do this” echoed through the snowy resort in the Swiss Alps.

China’s economic slowdown? Manageable. Plunging financial markets? Temporary. And Europe’s refugee crisis? A big challenge, but one which will ultimately push the bloc’s members closer together, audiences were told over and over again.

Beneath the veneer of can-do optimism at the World Economic Forum, however, was a creeping concern that the politicians, diplomats and central bankers who flock each year to this gathering of the global elite are at the mercy of geopolitical and economic forces beyond their control.

At the top of the lengthy list of worries was Europe, whose policymakers remain deeply divided in their approach to the refugee crisis at a time when the bloc faces a host of other threats, from Islamic extremism and the rise of far-right populists, to a possible British exit from the European Union.

“You’ve had deadly crises in Europe from day one and we’ve overcome them. However we always had one crisis at a time. Today we have about five, from Brexit to ISIS and everything in between,” said Josef Joffe, the publisher-editor of German weekly Die Zeit.

“In the past we had leadership. Today we are facing overwhelming demands on leadership and we are delivering less of it,” he added.

Amid the reassuring messages on the refugee crisis, came stark warnings from people like IMF chief Christine Lagarde that Europe faced a “make or break” moment. Dutch Prime Minister Mark Rutte and his Swedish counterpart Stefan Lofven gave the bloc 6-8 weeks to get its act together.

And frustration boiled over after Austria became the latest country in Europe’s Schengen passport-free travel zone to unveil unilateral steps at the border to stem the tide.

“There is no way you can cope with such a massive flow of people just by closing the borders,” said the EU’s top diplomat Frederica Mogherini. “What do you do? You close the border and it’s your neighbour’s problem, who closes the border, and it’s the other neighbour’s problem?”

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(L-R) Christine Lagarde, Managing Director of the International Monetary Fund (IMF), George Osborne, Britain's Chancellor of the Exchequer, Arun Jaitley, Minister of Finance of India and Haruhiko Kuroda, Governor of the Bank of Japan talk after the session "The Global Economic Outlook" during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2016. REUTERS/Ruben Sprich

(L-R) Christine Lagarde, Managing Director of the International Monetary Fund (IMF), George Osborne, Britain’s Chancellor of the Exchequer, Arun Jaitley, Minister of Finance of India and Haruhiko Kuroda, Governor of the Bank of Japan talk after the session “The Global Economic Outlook” during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2016. REUTERS/Ruben Sprich

VERY CLEAR LIMIT

On the economic front, there was also a growing sense of policymaker impotence.

Last January, in a bold sign of policy activism, the European Central Bank unveiled its hotly anticipated stimulus, or quantitative easing (QE), programme in a bid to kick-start growth and inflation in a euro zone still reeling from financial turmoil and breakup fears.

A year later, despite Mario Draghi’s assertion that the bank still has “plenty of instruments” at its disposal, the consensus in Davos was that it has now used up all its monetary ammunition and that politicians have failed to use the time the ECB bought them to implement economic reforms at home. Meanwhile growth remains subdued and inflation close to zero.

“We understand that there may be no limit to what the ECB is willing to do but there’s a very clear limit to what the ECB can and will achieve,” chairman of Swiss bank UBS and former Bundesbank chief Axel Weber said after Draghi signalled yet more monetary easing.

The central theme of this year’s meeting was the “Fourth Industrial Revolution” — the idea that technological advances will allow ever greater levels of automation, transforming the global economy in profound ways.

But in a sobering report on the implications of these advances, UBS said they were likely to increase inequality across the globe, and the authors expressed scepticism about whether politicians could put a halt to this trend.

At a lunch entitled “The End of Political Consensus”, there was broad agreement that rising inequality, and the sense that elites were only looking out for themselves, was fuelling more and more resentment of established politicians, and giving rise to a tide of populism — in the form of politicians like Donald Trump and France’s Marine Le Pen.

However the attendees, including Harvard historian Niall Ferguson and former European Commission President Jose Manuel Barroso, had few answers about how to combat this trend beyond more responsible leadership.

“We are witnessing the decay of power,” Moises Naim of the Carnegie Endowment for International Peace told the audience. “The view is that anything is better than the people in power.”

Justin Trudeau, Prime Minister of Canada and Sheryl Sandberg, Chief Operating Officer of Facebook attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 22, 2016. REUTERS/Ruben Sprich

Justin Trudeau, Prime Minister of Canada and Sheryl Sandberg, Chief Operating Officer of Facebook attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 22, 2016. REUTERS/Ruben Sprich

OPTIMISM ON CHINA

On the positive side, there was optimism that the Chinese economy was heading for a soft rather than a hard landing, despite the struggles of policymakers there to manage the shift to lower growth rates.

And few doomsayers thought that what Credit Suisse CEO Tidjane Thiam described in the final session on Saturday as “the worst start to any year on record in financial markets ever” was a harbinger of another global financial crisis.

The optimists pointed to the climate deal struck in Paris in December as a sign of what policymakers can still do at a global level when they put their minds to it.

But building on the momentum from that deal looks tougher than ever. In her outlook for 2016, Citi’s global political analyst Tina Fordham, said geopolitical risks looked more acute than they have in decades, pointing to the refugee crisis as the challenge “where everything converges”.

“Not even Angela Merkel has the capacity to make all of this work,” she said.

Copyright Reuters 2016

(Additional reporting by Paul Taylor, Carmel Crimmins, Dmitry Zhdannikov, Martinne Geller and Sujata Rao; Writing by Noah Barkin; Editing by Alexander Smith)

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