Greece begins to undertake further austerity measures
Employment Minister Andreas Loverdos has announced a zero percent raise in pensions this year for 2.7 million retirees, according to Greek press reports. The measure would apparently save the government half a billion euros this year, but the money is unlikelty to go towards holding down the deficit because of health cost overruns.
According to news reports, European Union auditors who visited the finance ministry last week found a 4.5 billion euro shortfall in the execution of the Greek stability plan, which aims to reduce the deficit by four points this year to 8.7 percent of GDP. They are reportedly asking for the equivalent amount in further public cost cuts.
Those further cuts are likely to come in the form of another cut to benefits above salary and suspension of the Christmas bonus for public servants, another fuel tax hike, a VAT hike and a social security adjustment to keep pension costs from rising as a proportion of GDP over the next two decades. The measures as likely to be finalised today following a visit by European Monetary Affairs Commissioner Olli Rehn to Athens to see Finance Minister Yiorgos Papakonstantinou and Andreas Loverdos.
The EU assistance thriller over Greece begins to move towards resolution
The Financial Times reports that European leaders are minded to extend Athens financial assistance in the form of loan guarantees or bond purchases but only in the event that Greece cannot sell its bonds on international markets. This is a big improvement on the sentiments being expressed to journalists a week ago, which were that Greece would have to tie its own shoelaces. Greece must sell a 5 billion euro bond this week, which markets see as a critical test of its creditworthiness. And it must refinance 22 billion euros' worth of debt by the end of May.
Hedge funds have made money betting on Greece's crisis, the FT reports.