More Greek Austerity Ruled Out – Maybe

Euro Working Group President Thomas Wieser (Photo/Council of European Union)
Euro Working Group President Thomas Wieser (Photo/Council of European Union)

Greek Prime Minister Antonis Samaras, who has assured Greeks that a $17.45 billion spending cut and tax hike plan that’s being implemented will be the last time they face austerity measures is getting backing from an economist who heads negotiations for the Eurozone.

Euro Working Group President Thomas Wieser, has told the newspaper Kathimerini that Greece will not need another major austerity package unless – as Finance Minister Yiannis Stournaras fears could happen – that more protests, strikes and riots undermine Greece’s deals with its international lenders and bring down the uneasy coalition government.

Samaras, the New Democracy Conservative leader, has the PASOK Socialists and tiny Democratic Left as his partners, but PASOK leader Evangelos Venizelos is facing a challenge to his leadership with some of the members demanding the party – which is disappearing in the polls – leave the government.

Wieser, who heads the group of technical experts that advise finance ministers and leaders, believes that the spending cuts and tax hikes next year will represent the last consolidation package of such size. “Greece will not need another big austerity package because the bulk of the consolidation measures needed have already been taken,” he said.

But he wouldn’t guarantee it. He said that if budget targets are not met next year due to slippage on the government’s part, rather than a deeper-than-expected recession, then the automatic mechanism Greece has agreed with its lenders will apply and more cuts will be made, which would force Samaras to break yet another promise.

Wieser said that Greece’s Eurozone partners and the International Monetary Fund have ensured that the country will be fully funded until the end of 2014 and that if there is a need for more financing to be found, that will be discussed next year.

He said there would also not be another debt write-down despite pessimism that Greece can meet a target to reduce its debt-to-Gross Domestic Product (GDP) ratio to 124 percent by 2020, already revised from 120 percent.

He said that vested interest groups in Greece might also try to undercut the deal so they can continue profiting and escape taxes, one of the biggest unresolved problems the government faces and about which it has done almost nothing.