ATHENS – After divisive talks, Greece’s coalition government has agreed on a plan to make more deep spending cuts to stave off default, but the deal means although pensioners could be spared, the country’s already-wracked health care system will be hit, along with the once-sacred cow of defense spending, which could fall by as much as $843 million, leading some defense analysts to say the country’s security could be jeopardized. Health Minister Andreas Loverdos said pharmaceutical spending could also fall by $1.06 billion as the country desperately tries to keep from falling into an economic death spiral.
Under intense pressure from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) to reduce its already-decimated budget by another $4.39 billion this year as austerity measures have created a deep recession with new statistics showing the jobless rate near 21%, a coalition government finally agreed to demands that include lowering the minimum wage from $988 a month before taxes to $770 – and to just $671 for those under 25. The Troika said Greece had to cut wages to become more competitive and provide an incentive to hire the unemployed, but that wasn’t accepted by labor unions, who called a 48-hour general strike for Feb. 10-11.
“Our rights have disappeared,” Vangelis Moutafis, a senior member of GSEE told Vima radio.
“The painful measures that create misery for youths, unemployed and pensioners do not leave us much room. We won’t accept them. We are moving to a social uprising,” Ilias Iliopoulos, Secretary General of ADEDY told Reuters.
Finance Minister Evangelos Venizelos, who has doubled income and property taxes and assessed taxes on the poor, said Greece must meet the demands or could fail. “It will determine whether the country remains in the Eurozone or whether its place in Europe will be endangered,” he said. “There is no room for any other expediency: we must look Greeks in the eye, look at the national interest and the interest of our children,” he said, although critics said the measures he implemented have put people on the streets and left many near-destitute.
Deputy Labor Minister Yiannis Koutsoukos resigned, saying he disagreed strongly with some of the terms of Greece’s new bailout. The newspaper Kathimerini reported that Koutsoukos said that some of the measures included in the deal, which has been approved by the leaders of the three coalition parties, were unconstitutional, breached treaties and went against European norms. He also blasted the role of the IMF, saying it was “beholden to its own ideology” and “serving certain interests.” He accused the Washington-based fund of ignoring the impact that the measures would have on the deep recession in Greece.
The Troika is giving Greece $152 billion in rescue loans and offering a second loan for $169 billion to prevent bankruptcy and a default that could jeopardize the 17-member Eurozone of countries using the euro and rattle world markets, but has insisted on more of the austerity measures that have created a deep recession. Unless Greece agreed to make cuts in other areas, the Troika said it would have to cut basic and auxiliary pensions by 15 percent each, which could lower benefits to many elderly Greeks to under $400 a month.
Cutting the minimum wage was a seen as a trade-off not to cut private sector salaries, although some analysts said the drop in the minimum wage and the looming end of collective bargaining rights to let businesses set salary levels on their own would push down those wages drastically as well. The deal also will eventually eliminate collective bargaining and let employers set wages, which some analysts said could lead to a big drop in private sector salaries, which workers would have to accept or find themselves out of work. The jobless rate now means there are 1,029,587 without work, with another 500,000 reportedly having dropped off rolls altogether because their benefits had run out or they had given up looking for work.
Greece was desperate to reach a deal because it must make an $18.9 billion loan installment on March 20 and wouldn’t be able to pay workers and pensioners without international aid as the country is broke and depending on the loans. Under the agreement, Greece must cut a further $4.4 billion in spending this year. Some 15,000 public workers could also be fired and another 135,000 let go over the next few years, putting an end to guaranteed lifetime jobs, one of the reasons the Troika said Greece is in crisis, the practice of hiring hundreds of thousands of unneeded workers in return for votes. Collective labor contracts will be restricted to three years and there will be no automatic pay hikes until unemployment falls below 10 percent. There will be an end to permanent jobs for employees in public enterprises and state-controlled banks.
Interim Prime Minister Lucas Papademos had convince his shaky coalition made up of holdover ministers from the former ruling PASOK Socialists, their bitter rival New Democracy conservatives and the far Right-Wing LAOS party to accept the Troika demands, but they battled furiously over the pension issue, with all the sides insisting they were protecting the elderly.
Greece also agreed to pick up the pace of privatizing state-owned enterprises such as Hellenic Petroleum and its OPAP gambling operation, along with water and sewage divisions, and is looking to sell off state-owned properties, including land on Corfu and Rhodes. In a furious scramble to raise cash, Greece is also planning to let developers build on the former Hellinikon airport site along the city’s rich southern coast, which was supposed to be turned into Europe’s biggest park but now could be given up on the auction block.
Papademos and Venizelos are also negotiating to write down as much as 70 percent of Greece’s debt with private lenders and pushing the European Central Bank to accept losses as well, a tough sell as its funds come from European governments whose peoples aren’t anxious to keep bailing out Greece, a country one EU official called “a bottomless pit,” into which money is being thrown with little effect.
Greece’s New Austerity Measures
* A reduction of 22% to the minimum wage, currently at $988 a month before taxes and a further 10% cut for those under 25
* A freeze on all salary raises until the unemployment level is reduced from its current 19.2% to below 10%
* Cuts in pensions for employees of state companies OTE telecoms and Public Power Corporation by 15% and 7% for sailors
* Laying off 15,000 public workers by the end of the year and another 135,000 by the end of 2015
* Reducing from six to three months the period in which labor agreements will be in effect after they expire, although benefits will remain for years of service, job hazard, children and education
* Limiting labor agreement to three years while existing contracts will be eliminated in a year
* Reductions in Social Security contributions by 2% immediately and 3% more next year
* A review of the special salary status of judicial employees, state doctors, diplomats, and police and military personnel
* The sale by end-June of shares in the following state-owned companies: Public Gas Corporation, gas distributor DESFA, Hellenic Petroleum, betting agency OPAP, the Attica and Thessaloniki water and sewerage companies, and the International Broadcasting Center
* The end of permanent jobs for workers at state-owned companies and banks
* The restriction of tax exemptions, simplification of the Value Added Tax and property tax structure
* The closing of 200 tax offices by the end of the year
* The hiring of 1,000 more tax auditors by the end of April
* Eliminating the extension of payment terms for overdue taxes and social security contributions
* A further reduction in military spending by 0.15 percent of GDP.
* The recapitalization of Greek banks, which could see the government giving them as much as $40 billion