Greek Deficit Worsens, More Austerity and Pain Looms in the Future

ATHENS – Interim Prime Minister Lucas Papademos’ pledge that his coalition government will not hit weary Greeks with more austerity measures may fall by the wayside after a Finance Ministry report that showed the country’s deficit is not falling despite an avalanche of pay cuts, tax hikes, slashed pensions and layoffs, and that more may be needed, including the outright immediate firing of public workers, instead of putting them in a labor reserve pool at 60 percent pay for a year before they are dismissed.
The deficit, which the government had hoped to bring down to 9 percent by the end of 2011, instead will be between 9.5-10.7 percent, more than three times the ceiling allowed by the 17-member euro-using countries. The deficit has shown no signs of improving despite the austerity measures that have backfired and created a deep recession. Desperate, Finance Minister Evangelos Venizelos last year resorted to doubling income and property taxes and taxing the poor, although he has not met his own promise to release the names of 6,000 tax evaders costing the country more than $60 billion in revenues while the country drowns in $460 billion in debt.
The report means that the government, made up of holdover ministers from the former ruling PASOK Socialists, including Venizelos, along with their bitter rival New Democracy conservatives and the far Right-Wing LAOS party, may now have to slash the lifeline of auxiliary pensions for the elderly – which New Democracy has opposed – and make more deep cuts to social and welfare benefits for the blind, crippled, disabled and poor, reduce spending for drugs and medical care, end tax exemptions and even go after defense spending, an area that had been protected, to lessen overall government spending by $17.8 billion a year.
Papademos, a former European Central Bank (ECB) Vice-President, is negotiating with the Troika of the European Union-International Monetary Fund-ECB for a second bailout of $169 billion after a first round of $152 billion failed to arrest the country’s slide toward default. The government also hopes to be able to write off 50-65 percent of its loan debt but talks with banks have stagnated as investors are balking at giving the government free money.
The sixth installment of the first bailout, for $6.35 billion, was pushed back from last month to March because there has no progress in talks between the government and the Troika, and the seventh installment, for $12.7 billion, has been moved back from March to June. Without the money, Greece will not be able to pay its workers and pensioners and the country effectively will have to shut down.
To compensate, the Troika also wants Greece to force cuts to private sector spending, end the already drastically-reduced two month annual bonuses public workers had been getting for generations as spending skyrocketed out of control in a bloated public sector, and end the minimum wage, which means companies could pay workers as little as they wanted to at a time when unemployment is at 17.5 percent and Greeks are desperate for any work. The government has threatened that unless it keeps getting loans, it will leave the Eurozone, a move that could topple the economic region, a tactic critics called blackmail to keep the money coming.
Greece is entering its fifth year of recession and all the signs are worsening. Registrations of new and used vehicles fell 30 percent in 2011 after falling 37 percent the year before as Greeks, crushed under pay cuts and tax hikes, have slowed or ceased spending. Only 107,737 vehicles were registered in 2011, the lowest level in more than 20 years, and scores of thousands of Greeks turned in their license plates, unable to afford huge increases in circulation passes required for vehicles to be on the roads.