Thursday, 27 September 2012

Coalition to Present Mammoth Austerity Package


Greece’s coalition government has reached basic consensus on a new, 13.5 billion euro austerity package demanded by its creditors. But it is still a long way from releasing a 31.5 billion euro instalment of its bailout loan it desperately needs to stay afloat.

Finance Minister Yannis Stournaras emerged from a four-hour meeting with coalition leaders saying, "we have agreed on the basic planks" of the package.

This means that after two months of wrangling behind closed doors, the Greek government will present its European Union partners with a massive austerity package, billed as Greece’s last, at a meeting of the eurogroup finance ministers on Monday. On the same day, it will present a draft version of the measures to parliament. 

The new measures were meant to cut about 11.5 billion euro in spending and raise about two billion dollars in new taxes, but Greek media reported that a billion euros could be shifted from the burden of cuts to the tax burden.

The money represents a 1,227 euro burden for every man, woman and child. It amounts to cutting 15 percent of this year's budget. The junior coalition partners, the Panhellenic Socialist Movement and the Democratic Left, are making it clear that they want the cuts to happen over four years rather than two. Greece has informally asked the eurozone to agree on extending Greece's balanced-budget deadline by two years to 2016.  

"It is of monumental importance that the measures be implemented not by 2014 but by 2016," socialist party leader Evangelos Venizelos said, "because spreading them out over four years will soften them and make them friendlier."

This Greek demand runs in tandem with another, the ability to replace spending cuts with unexpected income over four years. "It is very important... for some difficult cuts not to take place, because the economy will have taken off, we will have growth and much better tax revenues," Venizelos said.

Winning these two concessions from its eurozone creditors before presenting the package to parliament is a priority for the government. Stournaras said EU approval would have to come before the parliamentary vote. That might put the Greek vote well past the October 18-19 EU summit. He said the coalition leaders' broad agreement gives him a "basis for a vigorous negotiation."

Even with mitigating clauses, though, the three-party coalition will stand on precarious ground. Greece has lost a fifth of its economy during the crisis, and one in four workers is unemployed. That has led to an explosive political climate in which the fortunes of bailout supporters have suffered, to the benefit of the radical left Syriza, which has hitherto denounced the bailout and its austerity plan as a dead end.

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