By Angelika Papamiltiadou
The Greek government Sunday announced a new package of austerity
measures worth E2 billion in 2011 and E2 billion next year, in an effort
to meet fiscal targets and satisfy its European partners and the
International Monetary Fund, who have grown increasingly concerned over
Athens’ inability to execute the fiscal reforms it has promised.
Prime minister George Papandreou, speaking at his annual press
conference in the northern town of Thessaloniki, promised he “will do
whatever necessary to avoid bankruptcy,” and he reiterated that Greece
“will remain in the euro area.”
Prior to Papandreou’s remarks, Finance Minister Evangelos Venizelos
announced that the new money would come from yet another emergency tax
— a property tax to be levied over the next two years at an average of
5 euros per square meter on all real estate. The tax is to appear on the
electricity bills of all households and businesses.
The Greek government has also decided to cut one month’s salary
from all elected or appointed state officials and to bring forward the
vote on the 2011 budget law to October 31.
It is the third time this year Papandreou has been forced to
announce new tax measures, and the fourth consecutive one-off tax on
real estate, as Greece fails to meet its fiscal targets and continues to
report revenue shortfalls and unwanted increases in public spending.
The government’s credibility took a hit last week after the
so-called troika — officials from the ECB, IMF and European Commission
who inspect Greece’s progress towards meeting the conditions imposed on
it — abruptly departed from Athens after realizing that the government
had not implemented the reforms it had promised.
The government claimed Sunday that the new austerity measures come
amid threats from its international lenders to withhold the next tranche
of aid, worth about E8 billion, from last year’s E110 billion bailout
package. According to the official timetable, the next tranche was to be
disbursed in mid-September, but the troika has indicated it will
withhold payment until Greece has implemented all required reforms.
In the past few days, Greek government sources have been spreading
the word that the country is only weeks away from running out of cash,
implying that the state will not be able to pay salaries and pensions.
Within this context, Papandreou indicated that he will be cutting loose
thousands of public servants who have until now enjoyed lifetime job
guarantees under the Greek constitution.
During his press conference, Papandreou took on a dramatic tone in
the face of speculation in the foreign press that Greece would soon
default and that Germany was currently examining various scenarios in
which Greece defaulted — either staying in the Eurozone or leaving it.
The prime minister said that in order for Greece to meet its
financing needs through 2014, Eurozone national governments must approve
the details of the new E109 billion bailout package agreed by EMU
leaders at their July 21 summit. However, Greece’s inability to comply
with the fiscal targets set as a condition of aid has led countries such
as Finland and the Netherlands to question whether Athens should be
getting favorable treatment when it is not respecting its commitments.
EU officials have said that the new bailout plan is contingent on
Papandreou instituting reforms to the country’s economy, which is
staggering under a debt load equal to more than 150% of its GDP.
But the measures implemented thus far have largely backfired,
creating a deep recession. The economy contracted at a staggering pace
of 7.3% in the second quarter of the year, and it is now expected to top
5% on average for the whole of 2011, well above earlier official
estimates of 3%.
Furthermore, unemployment jumped to 16%, according to the latest
figures, and the country’s privatization plan, intended to raise E5
billion by the end of this year, remains on paper only.
Greece’s new taxation measures were announced at a time when the
government’s credibility and popularity in opinion polls is plunging, as
an overwhelming majority of voters believes the government is following
the wrong economic policy path — one they think has only plunged the
country deeper into recession and done nothing to boost growth and
competitiveness.
The opinion polls also show the increasing frustration of taxpayers
who are called on to pay one-off taxes every three months.
Papandreou’s visit to Thessaloniki was marked by demonstrations by
civil employees, pensioners, taxi drivers, doctors, tax collectors,
garbage collectors, college students and high school students who, for
the first time, went back to school without receiving their text books.
As Papandreou was delivering his speech, clashes broke out between
riot police and about 25,000 demonstrators. The protestors claimed that
the police had used excessive amounts of tear gas and other chemicals in
order to break up the demonstrations as quickly as possible.
–Athens bureau, a_papamiltiadou@hotmail.com
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