New Austerity Measures: Athens Turns Screws on Civil Servants as EU Hints at Help
In response to European Union pressure, Greece on Wednesday announced a further round of savings measures worth 4.8 billion euros. The plan calls for tax hikes and a 30 percent reduction in vacation bonuses for civil servants. Berlin has welcomed the move but says no direct aid to Athens will be forthcoming.
Already reeling under deep slashes to public spending, Greeks on Wednesday have been asked to shoulder yet more austerity measures as the country seeks to shrink a massive budget deficit and ward off bankruptcy.
Athens is under considerable European Union pressure to cut its budget deficit -- which currently stands at 12.7 percent of gross domestic product -- by four percentage points this year to shore up faith in the European common currency, the euro. Earlier this week, European Commissioner for Economic and Monetary Affairs Olli Rehn asked Greece to take further measures after Brussels determined that previously announced austerity measures would not be enough.
'The Right Step'
In addition to its deep budget deficit -- which is more than four times higher than the 3 percent allowed by the treaty governing the European common currency zone -- Athens also faces some 300 billion in sovereign debt. The country must refinance 20 billion of that debt by the end of May and a total of 53 billion this year. With investors concerned about Greece's ability to continue shouldering that debt, the country has had difficulties raising sufficient funds on the bond markets. A 10-year bond issue has been twice delayed as Athens tries to wait out market turbulence in the hopes of cheaper borrowing costs.
The German government welcomed the additional Greek austerity measures on Wednesday. Berlin "is confident that they will be greeted with a clear show of confidence" said deputy government spokesman Christoph Steegmans.
German Finance Minister Wolfgang Schäuble said that the new Greek measures show Athens is on the right track. "It is now decisive that Greece implements these resolutions quickly and completely." German Chancellor Angela Merkel added that the austerity measures were "the right step."
Speculation increased on Wednesday that the European Union may be working on a package to help Greece as a way to halt the euro's slide. Speaking in Brussels, European Commission President Jose Manuel Barroso said there was "intense debate" within the euro zone over how to assist members who face bankruptcy. "The concrete instruments, we will present them in due time," he said. "We have to have solidarity in the European Union."
Barroso's comments came during the announcement of a new economic plan for the next decade in the European Union. In addition to setting goals to lower unemployment and increase funding in research and development, Barroso also called for closer economic policy coordination in the EU. He said Brussels should more closely monitor economic performance in member countries to avoid the kind of crisis that has struck Greece.
Still, with other euro-zone countries likewise facing high budget deficits and mountains of debt, more steps may be needed to prop up the euro. Any such steps are likely to be dependent on support from Berlin -- even as a wide majority of German voters are steadfastly against help for Greece. Papandreou will be in Berlin on Friday for talks with Merkel before heading to Paris on Sunday, though the German government said on Wednesday that Berlin was not planning to offer aid to Greece.
In response to the new austerity measures, Greece's 300,000 civil servants announced a 24-hour strike in protest, scheduled for March 16. "These measures will make us bleed to death financially. The measures will have an unbelievable effect on Greek society," said a union spokesperson on Greek radio.
cgh -- with wire reports
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