Tough austerity move cuts Greece deficit sharply
By Elena Becatoros |
August 23, 2010, Monday
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Print Edition
Print Edition
THE plan to rescue Greece from bankruptcy has kicked in with a vengeance. As the government cuts spending and hikes taxes, the deficit has fallen - but jobs are vanishing, shops are closing, and on the streets there is gloom.
The European Union likes the swift action on the deficit. But few Greeks are in a mood to celebrate. Many predict a fall of strikes and demonstrations as those who could afford a summer holiday return to a grim reality.
On paper, the turnaround is working. The finance ministry said last Friday the budget deficit has narrowed by a whopping 39.7 percent on the year, slightly better than the original target. The EU, which demanded the cuts in return for bailout loans, is positively purring.
On Thursday, the EU said Greece's efforts to slash spending were "impressive."
Less impressed are shop owners, who say consumers have tightened their purse strings, cutting down on the nonessentials. Higher taxes and cuts in civil servant pay are removing the boost of government spending from the economy.
"Civil servants used to come in and buy a double espresso and something to eat. Now they get a single espresso, and a cheaper sandwich," said Constantinos Garyfallou, who spends about 15 hours a day running a coffee shop just off Athens' central Syntagma Square and near several ministries and state-run services.
Even small changes in consumer spending - 50 cents less per customer each day - could translate to a fall in revenue for his coffee shop of about 4,000 euros (US$5,000) a month.
Struggling under a mountain of debt, Greece was forced this year to ask for rescue loans from the International Monetary Fund and other EU countries that use the euro as their currency in order to avoid defaulting on its loans.
In return, the center-left government is having to implement a strict austerity program that has seen it cut the pay of Greece's more than 700,000 civil servants, trim pensions, hike taxes and overhaul pension and employment rules.
The main target is to slash the budget deficit to 8.1 percent of gross domestic product by the end of the year, from 13.6 percent now - more than four times the limit for eurozone countries.
The first batch of loans under the three year, 110 billion euro package arrived in May. The EU has recommended approval of a second batch in September.
The European Union likes the swift action on the deficit. But few Greeks are in a mood to celebrate. Many predict a fall of strikes and demonstrations as those who could afford a summer holiday return to a grim reality.
On paper, the turnaround is working. The finance ministry said last Friday the budget deficit has narrowed by a whopping 39.7 percent on the year, slightly better than the original target. The EU, which demanded the cuts in return for bailout loans, is positively purring.
On Thursday, the EU said Greece's efforts to slash spending were "impressive."
Less impressed are shop owners, who say consumers have tightened their purse strings, cutting down on the nonessentials. Higher taxes and cuts in civil servant pay are removing the boost of government spending from the economy.
"Civil servants used to come in and buy a double espresso and something to eat. Now they get a single espresso, and a cheaper sandwich," said Constantinos Garyfallou, who spends about 15 hours a day running a coffee shop just off Athens' central Syntagma Square and near several ministries and state-run services.
Even small changes in consumer spending - 50 cents less per customer each day - could translate to a fall in revenue for his coffee shop of about 4,000 euros (US$5,000) a month.
Struggling under a mountain of debt, Greece was forced this year to ask for rescue loans from the International Monetary Fund and other EU countries that use the euro as their currency in order to avoid defaulting on its loans.
In return, the center-left government is having to implement a strict austerity program that has seen it cut the pay of Greece's more than 700,000 civil servants, trim pensions, hike taxes and overhaul pension and employment rules.
The main target is to slash the budget deficit to 8.1 percent of gross domestic product by the end of the year, from 13.6 percent now - more than four times the limit for eurozone countries.
The first batch of loans under the three year, 110 billion euro package arrived in May. The EU has recommended approval of a second batch in September.
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