Thursday, 20 September 2012

Two Billion in Cuts Remain Undecided in Countdown to Austerity

Greece's coalition leaders ended a three-hour meeting today without final agreement with the country's lenders on an 11.5 billion euro package of new austerity measures.

As the country entered the final stretch of talks, though, socialist coalition member Evangelos Venizelos revealed that a two billion euro gap remains to be settled.

"The general picture is that about 6.5 billion euro are coming from salaries, pensions and benefits, while five billion are coming from state operating costs," Venizelos said outside the prime minister's office. "This balance must be maintained."

But he also referred to two billion euro that must be separately raised in new taxes. "The two billion cannot come from pensioners and salaried employees, and those who cannot hide their income," Venizelos said. "They must come from areas where there is tax evasion and tax avoidance."

Greece's lenders have insisted that the state shed 150,000 salaried positions, and cut public health spending.

"Keeping the measures discriminatory [rather than across-the-board] is the least line of defence that must be held," Venizelos said, referring to horizontal pension and salary cuts, which have sparked protests, strikes and riots over the last two years. German Chancellor Angela Merkel struck a similar note two weeks ago, when she advised the government not to belabour the middle class and the poor with a greater burden than they were already shouldering.

The measures in dispute concerned "the modernisation of the state," Finance Minister Yannis Stournaras said earlier in the day. "That is the sticking point."

Fotis Kouvelis, leader of the Democratic Left, a coalition member, was more combative. "The troika [of lenders] has to stop attacking Greek society,"he said. "They have to understand that this society can only take so much, and the way it works has its limits."

Prime Minister Antonis Samaras has a two-day respite abroad. He is headed to Rome this evening for a two day convention of centre-right parties. He is scheduled to meet his Italian counterpart, Mario Monti, on Friday morning, and the pope on Saturday.

After that, however, the ticking of the political clock will be increasingly audible. An announcement of the measures is unlikely before next Wednesday, when a general strike is expected to vent pre-emptive anger in expectation of the cuts. But Greek finance minister Yannis Stournaras has said he expects the measures to be finalised before then, and the constitution requires him to submit them to parliament by the following Monday, October 1. The likeliest time for an announcement is therefore shortly after the general strike.

Greek media have leaked various possible austerity measures. Among the ideas floated through these leaks is a raising of the retirement age from 65 to 67. Another is the abolition of any tax-free income threshold for the self-employed, two thirds of whom claimed last year to have made too little money to be taxed. National daily Kathimerini says the plan includes introducing a flat 30 percent tax for corporations and the self-employed, meaning a rise of five percent and ten percent respectively. It also predicts a simplification of the tax scale for salaried employees and pensioners from eight brackets to four. But the greatest battle with lenders may be held over a possible further slashing of salaries in the public sector and pensions. 

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