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IMF Says Greeks Taxed-Out; 150,000 Will Lose Their Jobs

The writing's on the wall - and windows - for Greeks who will lose their jobs

ATHENS – Buried under waves of austerity measures, beleaguered Greeks shouldn’t have to suffer any more tax hikes, one of its principal international lenders, the International Monetary Fund, said, but the government is still proceeding with plans to reduce the public workforce by 150,000 over the next four years.  The IMF, along with the European Union and European Central  Bank (ECB,) known as The Troika, is giving Greece $152 billion rescue loans and proposing another $157 bailout, but both have come with conditions of deep pay cuts, tax hikes, slashed pensions as well as layoffs, but said the crushing burden has to cease.
The austerity measures, designed to keep Greece from defaulting on its $460 billion debt and avoid bankruptcy, have largely backfired though, creating a deep recession of 17.5 percent unemployment, the closing of more than 100,000 businesses, left 500,000 people without any income and sent another 500,000 fleeing for other countries, although the country’s rich elite continues to prosper and tax evaders costing the country more than $60 billion have largely escaped the suffering, apart from a recent crackdown that rounded up a handful of company owners and a fashion designer.
Greece is in its fourth year of recession with no signs of recovering and the IMF warning indicated that any further measures could create possibly irrecoverable damage. More than 18 months of protests, riots and strikes forced former Prime Minister George Papandreou to resign and an interim coalition government led by former ECB Vice President Lucas Papademos and comprised of leftover ministers from his PASOK Socialists, their bitter rival New Democracy Conservatives and the far Right-Wing LAOS party is trying to secure the next bailout and a 50 percent write-down of much of the debt, but has been immobilized by infighting and positioning for elections that were supposed to be held Feb. 19 but now seem certain to be delayed as the government has been stuck in neutral.
Finance Minister Evangelos Venizelos has imposed waves of tax hikes on Greeks, including on the poor and pensioners, but the IMF signaled it’s time to stop. Troika officials are in Athens again to look over the economic figures that show tax revenues have fallen far short of expectations despite the tax hikes because Greeks have slowed or stopped spending.  “I think one of the things we have seen in 2011 is that we have reached the limit of what can be achieved through increasing taxes,”  Poul Thomsen, the IMF mission chief in Greece, told reporters in a conference call. Thomsen, speaking about the IMF’s latest report on Greece’s progress, said the country’s structural reforms have fallen “well short” of expectations. But he said it was too early to say whether new austerity measures would have to be taken next year.
Greece’s austerity program “has relied, in our view, too much on taxes,” Thomsen said, although the iMF insisted on them. “Any further measures, if needed, should be on the expenditure side.” That’s ominous news for Greek workers, some 30,000 of which will be placed in labor reserve pools at 60 percent pay and then likely fired in a year. Generations of packing public payrolls with political hires as created hundreds of thousands of unneeded workers and crippled the country’s productivity.
Greece has consistently missed deficit reduction targets, and it quickly became clear that the initial bailout would not be enough to prevent a potentially catastrophic default that could drag down other countries in the 17 members of the Eurozone who use the euro as a currency and affect the entire global economy.
Thomsen said the IMF has not been asked yet to join in the second rescue package. He would not comment on the bond-swap negotiations still under way, except to say the IMF was hopeful banks would have a “high participation” in the voluntary deal, although many investors are reluctant to offer Greece a write down on what is owed. In its 161-page report, the IMF said successful efforts to reduce Greece’s national debt to sustainable levels now hinged on “near-universal participation” in that bond swap deal, but that has failed to materialize.
If the bond swap deal goes according to plan, it aims to reduce Greece’s debt to 120 percent of gross domestic product by 2020. However, if there is low participation by banks and other private creditors, the IMF warned, Greece’s debt could stick above 145 percent of Gross Domestic Product in 2020, from which no country has recovered without defaulting. Greece’s reforms have also been troubled by a lack of broad political support for the bailout program, Thomsen said, noting frequent strikes and demonstrations, some of which have turned into riots.
Thomsen and other international debt inspectors will meet with the Ministers of Transport, Development and Labor on Dec. 14, Venizelos on Dec. 15, and Papademos  on Dec. 16. Venizelos said the deficit from January through November widened by 5.1 percent compared to the same period in 2010, reaching $27 billion. Administrative Reform Minister Dimitris Reppas met with Troika officials and outlined the measures the government has already taken such as scrapping empty places in the public sector so they cannot be filled in the future, introducing a disciplinary code for civil servants and beginning the labor reserve scheme, which should see 30,000 workers leave their positions over the next few weeks.
However, there is speculation that the program, which largely involves employees close to the retirement age receiving 60 percent of their salary for 12 months, is moving too slowly to be effective and that the government will have to start sacking civil servants. Finance Ministry Ilias Plaskovitis told Skai TV on Tuesday that there was no such need. “What interests our partners is for there to be reduction in the number of people being paid from public coffers and we are achieving this through the labor reserve scheme,” he said. He said that the scheme would not apply to employees in the “narrow” public sector as this would cause staff shortages.
(Sources: Kathimerini, Associated Press)

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