Austerity Budget Done, Greece Waits on EU

Having done its job – approving a $17.45 billion spending cut and tax hike plan and an austerity budget, Greece is now waiting for its international lenders to hand over a long-delayed $38.8 billion installment in return as promised. It won’t happen quickly.
Prime Minister Antonis Samaras succeeded in getting more austerity measures and a budget that is hard on workers, pensioners and the poor, through the Parliament after warning that it was a condition from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) for the next installment, and that Greece would run out of money on Nov. 16 otherwise.
But Eurozone finance ministers meeting on Nov. 12  Brussels are not expected to approve release of the first installment in a second bailout of $172 billion because they are awaiting a report from Troika inspectors on the progress of reforms in Greece and whether further loans can save an economy that is still floundering.
Samaras said he now expected the funds to be forthcoming, but said he’s not worried that it won’t be approved. Greece is preparing to issue 5 billion euros, ($6.35 billion) in short-term bonds in the meantime to repay an outstanding loan payment and bridge the gap until the money is released.
He persuaded Parliament to pass the 2013 austerity budget after telling lawmakers: “The sacrifices included in that law and in the budget we are voting today are the last. We will start rectifying the injustices included in them once we get out of the deficits … but the reforms we passed will be permanent and will boost the economy.”
His critics don’t believe him and social unrest is rising. GSEE, which represents public sector workers, announced a three-hour work stoppage for Nov. 14, starting at noon, to coincide with pan-European protests against austerity policies. Judges have also said they will be extending their protest action to Nov. 21 and lawyers to Nov. 16, while pharmacists announced that they will be walking off the job on November 26 and 27 because they don’t want their profession open to competition, a key element of Troika demands.
Many Greeks fear more austerity won’t work, noting that more than 2 ½ years of pay cuts, tax hikes and slashed pensions have done nothing to help the economy, and hurt them, with unemployment at a record 25.4 percent. “All those measures throw us back 50 years,” Thymios Marvitsas, 75, told Reuters during a Nov. 11 protest as Parliament debated the budget. “Our pensions and wages are cut. My life is getting harder and harder.”
The government, formed after a tumultuous election in June, has ignored sliding poll numbers and occasionally violent street protests in pursuit of favor with its creditors, a move the opposition says is a mistake. “Greece’s debt is not sustainable,” said the leader of the leftist SYRIZA party Alexis Tsipras, as he attacked German Chancellor Angela Merkel.
“Everybody knows that, apart from Merkel, who has her own plan for a German Europe and wants to turn Greece into a debt colony and the European South into a low-labor cost special economic zone.” According to the budget draft, Greece’s economy will shrink for its sixth year running, by 4.5 percent.
The budget deficit is expected to be 5.2 percent of Gross Domestic Product (GDP,) down from 6.6 percent expected this year. But once the cost of paying interest on its huge debt is removed, Greece will show a tiny surplus for the first time in decades. The deficit figures assume Athens’s lenders will extend a deadline for it to narrow its fiscal shortfall by two years in exchange for the new belt-tightening package,  Reuters noted.
The biggest cost-reductions next year are pension cuts of up to 15 percent for almost half the total 9.4 billion euros ($11.95 billion) in budget savings and public wages cuts of 1.2 billion, some $1.52 billion. The budget foresees debt rising to 346 billion euros, ($439.5 billion) or almost 190 percent of GDP, from 175 percent this year. EU and ECB officials say that means that Athens will not be able to reduce its debt to 120 percent of GDP by 2020, the level the IMF has said is the ceiling for debts to be sustainable in the long term.
That has triggered a debate on how to reduce the debt, which include discussions on cutting interest rates on Greece’s official loans, letting the ECB give profits from Greek bonds it holds back to Athens, helping bail out Greek banks with the EU’s EFSF rescue fund, and other measures.