Thread: Greece announces $6.5 billion in spending cuts, taxes

Greece announces $6.5 billion in spending cuts, taxes

By Nicholas Paphitis, Associated Press Writer

ATHENS — Greece announced painful austerity measures Wednesday worth 4.8 billion euros ($6.5 billion) to deal with a financial crisis that has hammered the euro and unsettled financial markets.
The decisions were "not taken out of choice but out of necessity," Prime Minister George Papandreou said as he briefed the country's president on the new measures, which are aimed at winning European Union support for Greece and calming financial markets.

"They were necessary for the survival of our country and our economy, and for Greece to escape the whirlwind of speculators."

The measures contain 2.4 billion euros ($3.3 billion) in new revenues such as taxes and another 2.4 billion euross in spending cuts. They include cuts in civil servants' salaries, pension freezes, increasing sales tax from 19% to 21% and raising taxes on alcohol, cigarettes, luxury cars, yachts, precious stones and leather goods among others.

The European Union had expressed support for Greece but demanded additional cuts, and Papandreou said the government was "awaiting European solidarity" regarding the new plan. "That is the other side of this agreement. So Europe faces a historic responsibility," he said.

Two senior government officials said Papandreou would not rule out the option of Greece going to the International Monetary Fund to seek help. The officials spoke on condition of anonymity to disclose discussions during a closed-door Cabinet meeting just before the austerity measures were announced.

Greece is already receiving IMF advice on how to deal with the crisis but European Union officials oppose an IMF bailout.

The government hopes endorsement of the latest measures will open the door for a possible financial backstop from other European Union countries and persuade bond investors to keep loaning the country money so it can roll over 54 billion euros in expiring debt.

Greece has come under intense pressure from the European Union to tame its finances, which include a budget deficit that stands at a staggering 12.7% of gross domestic product in 2009. Athens has promised to reduce it to 8.7% this year, but many economists consider that goal unrealistic.

The European Commission and the top economy official in the 16 nations that use the euro backed Greece's decisions, saying they would help financial stability of Europe's currency union.

EU Commission President Jose Manuel Barroso and the head of a group of eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, both said they are confident Greece could now reduce its deficit by the required four percentage points this year, and said the country's ambitious program "is now credibly on track."

Germany, which Papandreou will be visiting on Friday to meet with Chancellor Angela Merkel, welcomed the new austerity plan as an important step toward restoring market confidence but made clear it is not currently planning to pledge aid to Athens.

The new measures are "in line with the talks so far and pledges so far by Greece with its European partners," said Christoph Steegmans, a spokesman for Merkel. "The government trusts that Greece will do its homework, strengthen the credibility of the country and support the stability of the euro," he said, stressing that Merkel's meeting with Papandreou on Friday is not meant to involve "pledges of help."

German Finance Minister Wolfgang Schaeuble said the decisions "go in the right direction and deserve our respect. Our Greek partners thereby show their responsibility for Europe and the common currency. Now, it is decisive for Greece to speedily and fully implement all its decisions."

As soon as this will be done, the markets' trust should be clearly strengthened and Greece should be able to refinance its debt on the markets, he said.

"All this taken together is of high importance for the stability of our common currency," Schaeuble said.

Greece wants EU help to borrow money at lower rates, but European officials have remained tightlipped over any potential rescue plan, insisting Athens must first improve its finances. Greece's financial crisis has severely shaken confidence in the euro, the common currency used by 16 nations. It has also led to market expectations of some sort of bailout led by the German and French governments.

UniCredit analyst Tullia Bucco said in a Wednesday research note that reducing the compensation of Greek government employees represents an important area of potential savings, as could a reform of the country's pension scheme.

UniCredit said Greek pension expenditures currently absorb nearly half of the resources devoted to social payments, while the effects of population aging will become critical by the end of the decade.

"Reforms to boost potential growth, while currently not on the government agenda, won't come a moment too soon to make the fiscal adjustment more tolerable," Bucco said.

Associated Press writers Aoife White in Brussels, Juergen Baetz and Matt Moore in Berlin, George Frey in Frankfurt and Derek Gatopoulos and Elena Becatoros in Athens contributed.

http://www.usatoday.com/money/economy/2 ... isis_N.htm

Largest Unions Have Called For Rallies In The Next Several Days.

March 03, 2010 (Hamsayeh.Net) - The Greek government has finally received the cabinet’s approval for an austerity program that would help save about 6 billion euros this year. The government plans to raise 3 billion from spending cuts and another 3 billion from tax increases.

The new measures would include an increase on fuel tax, a 2 percent increase in value added tax that brings it to a total of 21 percent as well as a freeze on government pensions.

These sweeping measures come at the time when there are massive general strikes across the country. The latest group to join the strikes pensioners. According to Al Jazeera, people are extremely upset and blame the government for the current economic misery. Greece’s largest union Adedy with 300,000 members has organized some rallies during the next coming days. Other large unions also join in the demonstrations across major cities.

Greece was one the first European states that joined the neo-liberal financial restructuring plan after the collapse of former Soviet Union. It experienced a short period of high prosperity, but soon fell victim to the last great depression of 2008. Since then the country has accumulated billions of dollars in deficit, unable to repay its large debts.

Thousands plan march against Greek austerity plan
Tue Feb 23, 2010 6:24pm ESTBy Ingrid Melander and Renee Maltezou

ATHENS, Feb 24 (Reuters) - Thousands of Greek workers are expected to march to parliament on Wednesday to protest against a wage freeze and tax rises imposed as part of a government austerity plan.

A nationwide strike will close schools and hospitals and disrupt public transport as part of the mass protest during a visit by EU officials assessing whether Greece is on track to cut its double-digit deficit.

Unions in the private and public sectors, representing half of Greece's workforce of 5 million, have called the 24-hour stoppage in protest against the plan which they say will impose the biggest burden on the poor.

"We ask the government not to give in to the desires of the markets, to set people's needs as a priority and adopt a mix of economic and social policies that won't lead to recession but to jobs," said Yannis Panagopoulos, head of the private sector union GSEE.

Public transport will be disrupted, and ministries, tax offices, schools and hospitals will close. All but emergency flights to and from Greece will be grounded and ferries will be at a standstill.

Greeks are prone to take to the streets in demonstrations that can turn violent, but reaction to the austerity measures has so far been largely symbolic. Opinion polls show most Greeks want to give the government time to try to end the country's recession and severe debt crisis.

Under the scrutiny of EU policymakers and markets, the government has so far refused to give in to protesters' demands. Farmers have dismantled road blocks they erected weeks ago without winning any concessions.

The public sector union ADEDY said it would stage more demonstrations after Wednesday's walkout -- the first joint strike organised by public and private unions against the Socialist government.

"We will continue with strong workers' interventions in March," ADEDY head Spyros Papaspyros told Reuters, adding they were also planning protests for April and May.

Finance Minister George Papaconstantinou said on Tuesday the government might decide on more measures to cut the deficit after talks with the visiting EU inspectors. [ID:nLDE61M2AZ]. (Writing by Ingrid Melander; Editing by Andrew Dobbie)