Details of Rajiv Gandhi Equity Savings Scheme

The Union Finance Minister Shri P. Chidambaram approved a new tax saving scheme called "Rajiv Gandhi Equity Saving Scheme" (RGESS),exclusively for the first time retail investors in Securities Market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 10 lakh.

The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an 'equity culture' in India. This is also expected to widen the retail investor base in the Indian securities markets.

Salient features of the Scheme are as under:

1 . Scheme is open to new retail investors, identified on the basis of their 

     PAN numbers.This includes those who have opened the Demat Account 

     but  have not made any transaction in equity and /or in derivatives till 

     the  date of notification of this Scheme and all those account holders

     other than the first account holder who wish to open a fresh account.

2 . Those investors whose annual taxable income is ≤ Rs. 10 lakhs are 

     eligible under theScheme.

3. The maximum Investment permissible under the Scheme is Rs. 50,000 and

    the investor would get a 50% deduction of the amount invested from the

    taxable income for that year.

4. Under the Scheme, those stocks listed under the BSE 100 or CNX 100, or 

    those of Public sector undertakings which are Navratnas, Maharatnas and 

    Miniratnas would be eligible. Follow-on Public Offers (FPOs) of the above

    companies would also be eligible under the Scheme. IPOs of PSUs, which 

    are getting listed in the relevant financial year and whose annual turn

    over is not less than Rs. 4000 Crore for each of the immediate past three 

    years,  would also be eligible.

5. In addition, considering the requests from various stakeholders, Exchange 

   Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible

   securities as their underlying and are listed and traded in the stock 

   exchanges and settled through a depository mechanism have also been

   brought under RGESS.

6. To benefit the small investors, the investments are allowed to be made in 

    instalments in the year in which tax claims are made.

7. The total lock-in period for investments under the Scheme would be three

    years including an initial blanket lock-in period of one year, commencing

    from the date of last purchase of securities under RGESS.

8. After the first year, investors would be allowed to trade in the securities in

   furtherance of the goal of promoting an equity culture and as a provision to

   protect them from adverse market movements or stock specific risks as well

   as to give them avenues to realize profits.

9. Investors would, however, be required to maintain their level of investment

   during these two years at the amount for which they have claimed income

   tax benefit or at the value of the portfolio before initiating a sale

   transaction, whichever is less, for at least 270 days in a year. The

   calculation of 270 days includes those days pursuant to the day

   on which the market value of the residual shares /units has

   automatically touched the stipulated value after the date of debit.

10. The general principle under which trading is allowed is that whatever is 
     the value of stocks/units sold by the investor from the RGESS portfolio,
     RGESS compliant securities of at least the same value are credited back
     into the account subsequently.However, the investor is allowed to take  
     benefits of the appreciation of his RGESS portfolio, provided its value, as
     on the previous day of trading, remains above the investment for which
     they have claimed income tax benefit.

11. For the purpose of valuation of shares, the closing price as on the

     previous day of the date of trading will be considered so that new 

     investors are certain about their debits and credits into the account.

12. In case the investor fails to meet the conditions stipulated, the tax 
     benefit will be withdrawn.

Like all financial products which have reached out substantially to the retail investors (post office savings, life insurance policies etc) through tax benefits, this tax break for direct investment in equity is expected to substantially encourage the retail participation in securities market as well as to enhance their participation in the growth of Indian industry.

Entry of more retail investors are expected to further deepen the securities markets as they bring in long-term stable funds, which can counteract the volatility created by the liquidity providers of the market. The Scheme, thus, also furthers the goal of financial stability and promotes financial inclusion. Since Exchange Traded Funds and Mutual Funds have also been brought under the Scheme, the Scheme should provide encouragement and re-assurance

to the first time investors.

The broad provisions of the Scheme and the income tax benefits under it have already been incorporated as a new section 80CCG of the Income Tax Act, 1961, as amended by the Finance Act, 2012.

Department of Revenue will notify the Scheme and SEBI will issue the relevant circulars to operationalize the Scheme in the next two weeks.

Source: Taxman

My Personal View on how to make your child expose to money?

I often get questions from parents on how to teach their child about money? When is the right age for the child to expose to the money? What they could do to improve financial literacy?  And the list goes on.  My standard answer for this entire question is “Children of today’s age are already exposed to Money from the time He/She is born. Education and financial awareness/literacy are two critical thing which have to be nurtured regularly. But unfortunately our systems always give former the preference and the latter is neglected

If someone would have asked me the same question before starting this profession, I would be reacting like any Parent that money means discussing about banking, transaction, Investments, Money Management etc and would be in an illusion to shield child from aspects of money so that he/she focuses on his/her education, But in reality we would be shielding the child for earning, Investing and  management aspect of money. As I am writing this article, I remember the famous quote from Mr. Robert books to all the parents “Intelligence solves problem and produces money. Money without financial intelligence is money soon gone”. If People still think that money will solve the problem, I am afraid these people will have rough ride.

Today Media is playing a very big role in creating financial awareness and the Generation - Y/Children’s are exposed to those. I, as a financial planner still feel that we should also expose our next generation on the four tenants of Financial planning - Income, Expenses, assets (Investments) and Liabilities (Borrowing) in  a systematic manner. Right age to expose child to money management is from the day he/she learns to spend money. The day you give child currency to purchase a toy or chocolate, ask him / her to make a note of it. The Budget habit should begin from there

There are few things which I have been practicing with my son Ronak, who is 1.8 year old.  When he completed 1 year, my wife made him sow seed in a pot and made him to water it on daily basis.  She made it a regular practice every morning.  Over a period he saw nurtured seed converting into plant. He now waters 2 plants. Firstly this is a good habit in all aspect. From Money training Perspective it will help me to explain my child the concept of nurturing wealth.

Last week, I happened to visit my friend’s place who is practicing CFP for past 3 years, I found a Piggy bank by the name Chocolate bank. When I asked my friend, what is it all about? He replied that, every time he gives chocolate to her daughter, she deposits in her chocolate bank. From the bank she eats chocolate twice a week. She observes Chocolate Pilling Up when deposited and reducing in numbers      when withdrawn. He said this will help him to teach her daughter about the Funds Inflow and outflow in future. 

One more Interesting concept I got to learn from my Client’s driver (Mr. Ramesh) was about goal based planning. I happened to visit his place one Sunday morning. When I visited his house to collect one important document of my client. I saw one Transparent Glass bottle (to be precise Old Horlicks bottle) in the Hall with few currencies. When I asked him what it is, he said this was his Son’s collection. I did not get it at first time, when I asked him the same question for the second time; he replied that the money available in glass bottle was his son’s savings. Since he did not want to spend on buying a piggy bank, he uses to save it in transparent glass bottle. When I asked his son, how did he managed to collect the money, he said that he used to deposit money which were given on festival season and other family occasion. Next to the piggy bank there was a cycle picture. When I asked the child, what is it all about? He replied that he was saving money to buy a cycle. I was surprised with his answer. I think if we all follow this concept we would be in better position to help our child in setting financial goals easily.

If the financial literacy is properly passed on to the kids, then over a period of time it becomes a habit and they start practicing by themselves. It is like planting a tree. You water it for years and then one day it does not need you anymore. Its roots would have gone down deep enough. Then the tree provides shade for your enjoyment.

Over the past 4 years as a financial planner, I have observed that children who were exposed to money management in child hood go on to become financially responsible adults compared to children who are shielded .Don’t shield your child, empower them.  We all live in times of greater and faster change and if we empower people with right information/knowledge they would be taking informed decision and capitalize many bull and bear rally in next 25 to 30 years.

Do share your ideas on the same. It will be beneficial to the group

 - Article by Nishith.B 

Why the world has faith in gold ?

Gold as an asset class is in vogue again with prices reaching a new high in rupee terms. With rising prices, the usual pitch from so called experts too has risen as to how gold is in an “ultimate bubble” phase and is all set to go bust. Frankly, it is nothing new. In 2010, George Soros, one of world’s most accomplished investors, dumped his gold holdings at around $1,200 per ounce but interestingly, he recently surprised the markets by deciding to reinvest into gold at $1,600 per ounce. Pimco, the world’s largest bond fund manager, also added gold allocation in its commodity fund as prices dipped lower around $1,500 per ounce. They are not the only ones to have turned buyers from being sellers. Central banks across the world including Russia, China and other emerging nations have become net buyers after a long time. According to a recent report from World Gold Council, June quarter recorded official sector (central bank sector) gold purchase was more than double compared with the purchases made in the same period last year. If you consider the fact that gold represents only around 1% of total global investment assets, it seems crazy to be not invested in the asset. It is thus important to understand what is driving gold prices before drawing conclusions on the future course of prices.

To start with one has to understand that strictly speaking gold has no value as it is a non-income generating asset. With no cash flows associated with gold it is always at a disadvantage to other income generating assets including real estate. Till few years back it was not widely accepted as an asset class because either fixed income or equity alternatively used to do well. Investor perceptions have, however, undergone a change in the recent past. In this era of negative real interest rates, investors are looking out for assets to protect their investments. While Indians have been among the largest savers, the trend is fast changing as deposit rates have remained below inflation (CPI) for some time now, rendering the real interest rate negative. The combination of low capital gains and low returns in equities on account of a “stagflationary” environment has further reduced investment options. Gold thrives well in this environment, especially given its enviable track record of 11 straight years of positive returns.

Gold continues to remain in a primary bull market since the last decade. History has shown that commodity prices move in cycles of 16-17 years which might mean four-five more years of gold bull market yet to capture. One also should not forget that corrections in bull markets of around 30% are a normal occurrence and have been observed in the past. Investors need to be aware that the last leg of any bull market is often the most profitable and the most volatile. Hence, one should periodically use corrections as opportunities and gain from investing in gold.

Indian investors, however, continue to remain puzzled that though globally gold prices are almost 10% below its all-time highs, the prices in rupee terms are at all-time highs. A large part of this can be attributed to fiscal mis-management in the country, which is reflected in 20% depreciation (yearly) of rupee. The recent doubling of import duty on gold has also led to investors paying higher for gold in rupee terms.

On the positive side, Indian investors are now exposed to more efficient investment options in gold. Other than most travelled route of physical gold or jewellery, mutual funds offer exposure to gold in different fund types such as hybrid funds, exchange-traded funds and fund of funds. Though we have seen demand from India dampening this year, we believe higher inflation would help retain demand in the long run. In India, inflation has played a crucial role in gold’s popularity as an inflation hedge. In addition, globally gold has become more a proxy of the political stupidity and hence a crisis hedge.

One would still ponder on the question: how high is high enough for gold? It is very difficult to answer that question given the fact that it doesn’t have a fundamental value attached to it. We believe that it isn’t the gold prices that are moving up; it is the value of currencies that is depreciating which is pushing gold prices higher. Gold prices act as good proxy to lack of confidence in the fiat currencies. The crisis which started with companies being under financial stress has now moved on to countries. Gold acts as a hedge for investors in such times. If one believed that the future is bright, businesses will pick up and the real interest rates will turn positive, would one still buy gold? The answer would be no. But in the current market environment where the US, the world’s largest economy, is running at more than 100% debt-to-GDP ratio and Europe is struggling to keep its union up and running, we can be reasonably comfortable in believing that good times are farther than they appear. Till then, have faith in gold!

Source : Ritesh Jain - Head of Investments - Canara Rebaco AMC

Five tips to avoid wasting money

Are you finding it impossible to save every month? While it's easy to pin the blame on high inflation, perhaps it's your spending behaviour that is responsible for the higher outflow. Go through these common reasons for money wastage and the ways you can plug them

1.Don't roll over your credit card balance

Debt qualifies as one of the biggest money wasters. While good debt, such as a home loan, can help you build an asset, a bad debt like rolling over credit card balance can deplete your savings. In fact, it's one of the worst types of debt because of the high interest rate (typically 12-42% per annum) that credit card companies charge. So, if you have a Rs 15,000 balance on a card that charges 3% interest every month, you will have to pay Rs 450 a month. Over the year, it will add to a sizeable Rs 6,386 (if the interest is compounded), which translates to an effective interest of 42.58% per annum. So, pay your bill in full every month. However, credit cards can also be beneficial if you always pay your bills on time and in full, since you can build a good credit history. Besides, most cards come with enticing offers, such as cash back and reward points. Take ICICI Bank's Platinum credit card, which offers three points for every Rs 100 spent. On collecting 2,000 points, you get a gift voucher of Rs 500 of a popular retail store.

2. Keep vices at bay

An addiction can become a money-sucking black hole. If you smoke five cigarettes a day, more than Rs 10,000 of your wealth goes up in smoke every year. The gutka users, who consume five pouches a day, are chewing up almost Rs 7,000 in a year. These vices don't just affect your health and eat into your annual expenses, but also result in a higher premium when it comes to buying health or life insurance. For instance, a 30-year-old non-smoker will pay nearly Rs 4,100 a year for an online insurance cover of Rs 50 lakh for 30 years, but if he smokes, the premium will jump 40% to Rs 5,800.

3. Don't keep gadgets on standby

Of the total electricity consumed in an Indian house every year, nearly 5% is used by gadgets on standby mode, according to the data released by the Bureau of Energy Efficiency in its report, Standby Basket of Products, in 2010. The electronic items that display a clock, such as a microwave or radio, or those that operate through a remote, such as DVD players and air conditioners, are typical culprits. For instance, an air conditioner consumes 40 watts an hour on a standby mode. This means that you're adding about Rs 75 to your monthly electricity bill for no reason (read 'How to slash Rs 3,500 on your power bill', February 6-12, 2012). The obvious way to lower your electricity bill is to pull the plug on these gadgets, literally. If you are too lazy to turn off each power point individually, get a power strip where you can plug in all your gadgets. Switching off the smart strip will cut the power supply to all gadgets.

4. Save on banking transactions

In the past few months, banks have revised fees for various services that were free till now. So, if you don't keep track of these revisions, you are likely to see your money trickle out as penalty. For instance, several banks have made the maintenance of minumum balance in a savings account mandatory for each month instead of a quarter, and the penalty for non-compliance has also been raised. Similarly, the 12 free branch transactions in a quarter have been reduced to four in a month, again with a rise in penalty. Phone and Net banking are a good way to avoid some transaction fees.

5. Ask for discounts

Bargaining is your birthright, so never be embarrassed to ask for a discount, whether you're buying a laptop or a car. Every dealer is keen to make a sale, so he'll be willing to compromise a bit on his commission. Usually, you can have the price lowered by 5-10%. The trick to bargaining is to do your research well. Check online stores and visit a few brick-and-mortar shops to check the variation in prices. You can also ask for a discount if you pay by cash since this saves the store the cut it has to pay the credit card company. You should also ask for coupons at various eateries, mostly fast food joints, and supermarkets if you've spent a sizeable amount while shopping. These coupons can help you save money the next time you shop. While dining out or booking a movie, check which credit/debit card offers a good deal. For instance, if you book a movie on Bookmyshow.com using a Visa card, you could currently get 25% off on the price.

Source : ET

Don't Cut Expenses. SPEND! SPEND! SPEND!

 

A Very Interesting article , I came accross , thought of sharing it with every one . This article was written by  Kim Koyasaki . Quite Interesting and worth reading . I hope everyone will understand the importance of passive income through this article . Here it goes  

If I hear one more financial advisor tell their audience to “cut your expenses,” I may just do something I will later regret. Personally, it’s insulting to me, and it should be to you too, if a financial “expert” thinks we are so unconscious and ignorant that the only way we could possibly reach financial security was by cutting back, reduce what we spend and live a life less than what we really want.

That is LAZY advice. It’s safe advice for the so-called “advisor” because it sounds logical and it won’t cause any flack for the advisor. It’s lazy because the advisor doesn’t have to think.

Cut vs. Spend

Not only is “cut your expenses” lazy advice it is also incorrect advice if you truly want financial security for life. Consider this; you own a duplex that you rent out to two families. In any rental property, as in any business, your three key financial components are: 1) Income 2) Expenses 3) Debt.

What are the first questions you should ask when it comes to income, expenses and debt?

INCOME – Very simply, “How do I increase my income?”  Whether it’s your rental property, your business, or your personal household, often times, the solution to a financial problem is to increase your income.  In real estate, ways to accomplish this is by lowering your vacancies, introduce alternate streams of income such as laundry, and increasing rents.

EXPENSES – Most people automatically ask, “How do I cut my expenses?” Wrong question. The better question to ask is, “How do I spend my money more effectively to increase the value of my property?” “How do I spend my money more effectively to increase the value of my business?” (And yes, this is the question to ask when it comes to you personal finances as well.)

For example, you decide the water bill of the rental duplex you own is too high so you choose to cut that expense by cutting back on the amount of water you use on the property. As a result of the water cutback, your trees and shrubs start dying. Now your tenants are unhappy because the landscape is brown and ugly.

Instead of cutting expenses, the better idea can be to spend money. As with a property I owned, instead of cutting back, I spent more money on additional trees and shrubs. This expenditure increased the curb appeal and made the property more attractive to the residents and prospective tenants.

Because this property now had such a lush look and feel, more and more people wanted to live there.  This allowed me to increase the rents. Increased rents equals increased value of the property.

How do you spend money more effectively to increase the value or income, is the exact same question you should be asking of your personal finances.

“How can I spend, or use, my money to make more money?”

This is what I mean when I say don’t live below your means, instead expand your means.

Instead of focusing on reducing your expenses, focus instead on increasing your income. Increasing your income - not by you working harder, but by spending money that then works hard for you. It takes no brains to cut expenses. Anyone can do that. It takes creativity and a little bit of guts to figure out how to spend your money to make money. That’s financial intelligence.

That leaves us with the DEBT question.

The question to ask is, “How do I get the best financing terms?” Too many people focus on the price of the investment, when the deal may be found in the terms, such as the interest rate, length of the loan, interest-only versus 30-year fixed, recourse versus non-recourse.

 

More than once, I have paid full price in exchange for terms that allowed me to get more cash flow, more time if repairs were needed, or more flexibility for future usage of the property. It’s the financing terms more than the price that can make or break a deal. The beauty of debt (good debt) today is that it is cheap. The interest rate of my first rental property in 1989 was 18%. And we still made it cash flow.

What’s the difference between good debt and bad debt?

Good debt is debt you use to buy assets with. (Assets are things that put money in your pocket whether you work or not.) Bad debt is debt you use to buy liabilities. (Liabilities are things that take money from your pocket.)

IT’S TIME TO SPEND MONEY!

So,the real key to happiness? The key to having a secure and financially-healthy life is to Spend! Spend! Spend!  Just be sure to spend your money in the right places. Financial intelligence is knowing how to spend your money to acquire assets that make money for you versus spending money to acquire liabilities that take money from you. That’s the difference that every Rich person knows.

How are you going to spend your money on assets? Please comment

 

Letter from a Widow who is a Chartered Accountant

This is a must read letter for Everyone . I have not seen a better way to explain need for inculcating financial discipline and having an estate plan in place. 

Here goes the letter forwarded to me by Mr Sadique . Thank you Sadique for sharing, it’s appreciated… Nishith.B, Associate Financial Planner 

Here goes a Letter

Hello Friends,

Few things I learnt after Mithun’s death-

We always believe we will live forever. Bad things always happen to others.

Only when things hit us bang on our head do we realise… Life is so unpredictable….

My husband was an IT guy. All techie. And I am a chartered accountant. Awesome combination you may think.

Techie guy so everything is on his laptop.his to do list. his e-bill and his bank statements in his email. . He even maintained a folder which said IMPWDS. wherein he stored all login id and passwords for all his online accounts. And even his laptop had a password. Techie guy so all the passwords were alpha-numeric with a special character not an easy one to crack. Office policy said passwords needed to be changed every 30 days.So every time I accessed his laptop I would realise it’s a new password again. I would simply opt for asking him ‘What’s the latest password’ instead of taking the strain to memorise it.

You may think me being a Chartered Accountant would means everything is documented and filed properly. Alas many of my chartered accountant friends would agree that the precision we follow with our office documents and papers do not flow in to day to day home life. At office you have be epitome of Reliability / Competent / Diligent etc but. at home front there is always a tomorrow.

One fine morning my hubby expired in a bike accident on his way home from office.. He was just 33.His laptop with all his data crashed.everything on his hard disk wiped off.No folder of IMPWDS to refer back to.His mobile with all the numbers on it was smashed.But that was just the beginning. I realised I had lot to learn.

9 years married to one of the best human beings.with no kids.just the two of us to fall back on..but now I stood all alone and lost.

Being chartered accountant helped in more ways than one but it was not enough. I needed help.His saving bank accounts, his salary bank accounts had no nominee.On his insurance his mom was the nominee and it was almost 2 years back she had expired. but this was just a start.. I didn’t know the password to his email account where all his e-bill came.I didn’t know which expenses he paid by standing instructions.

His office front too was not easy. His department had changed recently.I didn’t know his reporting boss name to start with.when had he last claimed his shift allowance.his mobile reimbursement.

The house we bought with all the excitement.on a loan.thought with our joint salary we could afford the EMI.when the home loans guys suggested insurance on the loan.we decided the instead of paying the premium the difference in the EMI on account of the insurance could be used pay towards prepayment of the loan and get the tenure down.We never thought what we would do if we have to live on a single salary.So now there was huge EMI to look into .

I realised I was in for a long haul.

Road accident case. so everywhere I needed a Death certificate, FIR report, Post Mortem report. For everything there were forms running into pages.indemnity bonds.notary.surety to stand up for you.No objections certificates from your co-heirs..

I learnt other than your house, your land . your car, your bike are also your property… So what if you are the joint owner of the flat.you don’t become the owner just because your hubby is no more. So what if your hubby expired in the bike accident.and you are the nominee but if the bike is in a repairable condition .you have to get the bike transferred in your name to claim the insurance.And that was again not easy. the bike or car cannot be transferred in your name without going through a set of legal documents. Getting a Succession Certificate is another battle all together.

Then came the time you realise now you have to start changing all the bills, assets in your name.Your gas connection, electricity meter, your own house, your car, your investments and all sundries. And then change all the nominations where your own investments are concerned.And again a start of a new set of paperwork.

To say I was shaken.my whole life had just turned upside down was an understatement.You realise you don’t have time to morn and grieve for the person with whom you spend the best years of your life. because you are busy sorting all the paper work.

I realised then how much I took life for granted.I thought being a chartered accountant I am undergoing so many difficulties.what would have happened to someone who was house maker who wouldn’t understand this legal hotchpotch.

A sweet friend then told me dear this was not an end.you have no kids.your assets will be for all who stand to claim.after my hubby’s sudden death.I realised it was time I took life more seriously. I now needed to make a Will. I would have laughed if a few months back if he had asked me to make one.But now life had taken a twist.

Lessons learnt this hard way were meant to be shared.After all why should the people whom we love the most suffer after we are no more.Sorting some paperwork before we go will at least ease some of their grief.

1. Check all your nominations

It’s a usual practice to put a name (i.e in the first place if you have mentioned it) and royally forget about it. Most of us have named our parent as a nominee for investments, bank accounts opened before marriage. We have not changed the same even years after they are no longer there with us. Even your salary account usually has no nomination.. Kindly check all your Nominations.

- Bank Accounts
- Fixed Deposits, NSC
- Bank Lockers
- Demat Accounts
- Insurance (Life, Bike or Car or Property)
- Investments
- PF & Pension Forms

2. Passwords..

We have passwords for practically everything. Email accounts, Bank accounts, even for the laptop you use. What happens when your next in kin cannot access any of these simply because they do not know your password… Put it down on a paper.

3. Investments.

Every year for tax purpose we do investments. Do we maintain a excel sheet about it. If so is it on the same laptop of which the password you had not shared. Where are those physical investments hard copy.

4. Will.

Make a Will. I know you will smile even I would.had I not gone through all what I did.It would have made my life lot easier.a lot less paperwork.I wouldn’t had to provide an indemnity bond, get it notarised, ask surety to stand up, no objections certificates from others…

5. Liabilities.

When you take a loan say for your house or car.Check out on all the what ifs.what if I am not there tomorrow.what if I loose my job.Will the EMI still be within my range.If not get an insurance on the loan.The people left behind will not have to worry on something as basic as their own house.

My battles have just begun…But let us at least try and make few changes so that our loved ones would not suffer after we go.We do not know what will happen in the future.But as the Scout motto goes: “Be prepared”

Are we in better Condition

Everything Is Getting Gummed Up In Greece

Tourism, Greece’s second largest industry after the shipping industry, and already in a downdraft, is taking another hit as tour bus drivers will go on strike for four days next week; wage negotiations have deadlocked . Owners demand that drivers take a 50% cut in pay and benefits on top of the 20% cut they’ve already suffered.

The National Organization for Healthcare Provision (EOPYY), Greece’s state-owned health insurer, hasn't paid  pharmacists for months and owes them €540 million. In turn, pharmacists are refusing to sell medications to insured patients, including cancer patients, unless they’re paid in cash—and even hospitals are reporting shortages.

Greece’s ship repair and shipbuilding industry, a highly competitive activity in a global market, has collapsed . Over 90% of its union workers are jobless—though Greek shipping companies own 16% of the global merchant fleet, more than any other nation. They’re just not having their ships built and repaired in Greece anymore—whatever the reason, high cost of labor, lack of investment, changing shipping routes, strikes. A sign that there are fundamental problems related to competitiveness that a bailout, no matter how generous, won’t be able to solve.

And yet, President Barak Obama—whose reelection hinges on the US economy, which is wobbling, and on the jobs picture, which remains dismal—blamed European leaders, specifically German leaders, for refusing to bail out Greece and the rest of the tottering Eurozone at taxpayers’ expense, just so he could sail to four more years. Everything in the book, from the loss in US manufacturing jobs to cancelled IPOs, was “attributable to Europe and the cloud that’s coming over from the Atlantic,” he said at a fundraiser in Chicago.

German Chancellor Angela Merkel shrugged off the bullying and just said no to Eurobonds, again. Despised in Germany, they’re seen as an insidious transfer from bleeding German taxpayers to other countries. Instead, her government wants struggling Eurozone countries to overhaul their economies with utmost speed—and Germans are willing to dole out hundreds of billions of euros to make that possible—but it’s proving to be impossible, at least in Greece, and very painful everywhere, to unwind years of an economic gravy train fueled by cheap euro debt. .

And unpaid bills are now threatening Greece’s electricity supply. State-owned Electricity Market Operator (LAGIE), a clearing house for power transactions, hasn’t paid independent power producers for electricity it bought from them. They, in turn, haven’t paid their natural gas supplier, Public Gas Corporation (Depa), which now doesn’t have the money to pay its supplier. Payment is due on June 22. Alas, its supplier is Gazprom in Russia, and they insist on getting paid. If not, they will shut the valve, and Depa won’t get the gas to supply the independent producers, which will have to take their power plants off line, removing about a third of the country’s electricity production.

But Germany isn’t even worried about Greece’s return to the drachma anymore—a fait accompli. It’s worried about Spain and Italy. Greece simply is the model. The costs appear to be steep, but most of the actual costs have already been incurred. They’re hidden in Greece’s debt, now held largely by European institutions, such as the ECB, and in the infamous Target to balances within the European System of Central Banks. Hundreds of billions of euros. They were spent on everything: social benefits, German frigates, inflated wages, now weedy and abandoned Olympic facilities, profits, bribes, votes. What remains aren’t productive assets to service this debt, but simmering unrest and the debt itself.

International companies have long been preparing for Greece’s return to the drachma, quietly and in secret, but occasionally word seeped out. According to the latest revelation, Heineken NV has moved excess cash out of Greece, doing what the Greeks themselves have been doing. And currency traders were surprised  on Friday to see the new identifier for the drachma (XGD) on their Bloomberg terminals; a test, the company said, so that it would be ready for trading drachmas.

When Alexis Tsipras, leader of the Radical Left Coalition (Syriza)—in first place with 31.5% in the latest poll—laid out his Program, he left no doubt: his first action if he won the June 17 elections would be to annul the bailout memorandum signed by the previous government. The memorandum spelled out the structural reforms Greece would have to implement in order to receive further bailout payments. He’d stop the privatization of state-owned companies, undo wage and pension cuts, lower the Value Added Tax, offer debt relief to households, raise the minimum wage back to the original €751, raise unemployment benefits.... His program had vote-buying promises for practically everyone. And yet, he wanted to keep the euro and expected taxpayers of other countries to fund his promises. Program of “dignity and hope” he called it.

Antonis Samaras, leader of the conservative New Democracy—in second place with 25.5%—also laid out his Program. He’d renegotiate the bailout memorandum, though he stressed that Greece should stay in the euro—whose flood of cheap debt had made the Greek elite rich, and certainly he wouldn’t want to stop the gravy train. He promised to raise pensions, private-sector wages, child benefits ... undoing much of the economic restructuring already agreed to. And he threw in some new goodies: unemployment benefits for the self-employed and compensation to Greek institutions for the haircut they’d suffered on their Greek government bonds. Every item on the long list was at the expense of restive taxpayers in other countries.

Greek politicians, even the new generation, are sticking to their time-worn strategy: vote-buying with ruinous promises that can only be fulfilled with an endless flow of borrowed money. Thus, they define themselves as leaders who need a central bank that can print however much is needed to fund these promises, with periodic devaluations or defaults to get a fresh start. 
Article by Wolf Ritcher