Greece may see new painful steps
By George Georgiopoulos |
May 24, 2011, Tuesday
|
Print Edition
Print Edition
GREEK Prime Minister George Papandreou discussed new emergency measures with his cabinet yesterday to cut the deficit, keen to convince lenders Athens can deal with a debt crisis without a restructuring.
A raft of new austerity measures being studied include deeper cuts in public sector wages, more consumer tax increases, and even the taboo issue of dismissing full-time civil servants.
At stake is a 12-billion euro aid tranche under the EU/IMF bailout agreed last year, as well as additional loans needed to plug a funding gap next year as the overborrowed country is unlikely to return to bond markets in 2012.
With the tough austerity medicine to fast correct past profligacy knocking the wind out of Greece's economy, markets believe some form of debt restructuring is inevitable but this is anathema to policy makers, especially at the European Central Bank.
Instead, Frankfurt and Brussels are urging strict compliance with the bailout plan, meaning state divestments, reforms and more measures to shore up budget revenues and lower the government's wage bill.
Yesterday the European Union Economic and Monetary Affairs Commissioner Olli Rehn pressed Athens to redouble its fiscal efforts and press on with privatization.
"These are a matter of urgency," Rehn said in a speech to a conference on European integration in Vienna.
Belt-tightening to get Greece to primary surpluses is crucial to stem its ballooning debt but critics, including the conservative political opposition, say the policy mix is wrong, hindering the economy from growing out of the debt mess.
Worried about the fallout of a default, the chief executive of Europe's largest insurer, Allianz, yesterday warned governments not to push Athens toward insolvency by blocking further aid to Greece.
"We need an industrialization plan for Greece, a type of Marshall Plan. European labor and production need to be shifted to the country," CEO Michael Diekmann told German daily Bild.
Newspapers said yesterday measures the cabinet will examine include halving a current 12,000-euro income tax exemption, and cuts in other exemptions on medical expenses and interest on home loans, moves certain to squeeze take-home pay for workers and pensioners.
Papandreou has vowed to speed up reforms and do everything it takes to avoid default, setting the stage for the announcement of a tough set of measures.
"We are in the middle of an ongoing battle. We will not surrender,'' he told a gathering in the southern town of Nafplio last week.
A raft of new austerity measures being studied include deeper cuts in public sector wages, more consumer tax increases, and even the taboo issue of dismissing full-time civil servants.
At stake is a 12-billion euro aid tranche under the EU/IMF bailout agreed last year, as well as additional loans needed to plug a funding gap next year as the overborrowed country is unlikely to return to bond markets in 2012.
With the tough austerity medicine to fast correct past profligacy knocking the wind out of Greece's economy, markets believe some form of debt restructuring is inevitable but this is anathema to policy makers, especially at the European Central Bank.
Instead, Frankfurt and Brussels are urging strict compliance with the bailout plan, meaning state divestments, reforms and more measures to shore up budget revenues and lower the government's wage bill.
Yesterday the European Union Economic and Monetary Affairs Commissioner Olli Rehn pressed Athens to redouble its fiscal efforts and press on with privatization.
"These are a matter of urgency," Rehn said in a speech to a conference on European integration in Vienna.
Belt-tightening to get Greece to primary surpluses is crucial to stem its ballooning debt but critics, including the conservative political opposition, say the policy mix is wrong, hindering the economy from growing out of the debt mess.
Worried about the fallout of a default, the chief executive of Europe's largest insurer, Allianz, yesterday warned governments not to push Athens toward insolvency by blocking further aid to Greece.
"We need an industrialization plan for Greece, a type of Marshall Plan. European labor and production need to be shifted to the country," CEO Michael Diekmann told German daily Bild.
Newspapers said yesterday measures the cabinet will examine include halving a current 12,000-euro income tax exemption, and cuts in other exemptions on medical expenses and interest on home loans, moves certain to squeeze take-home pay for workers and pensioners.
Papandreou has vowed to speed up reforms and do everything it takes to avoid default, setting the stage for the announcement of a tough set of measures.
"We are in the middle of an ongoing battle. We will not surrender,'' he told a gathering in the southern town of Nafplio last week.
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