See Search Box
lower down this column for searches of Finfacts news pages. Where there may be
the odd special character missing from an older page, it's a problem that
developed when Interactive Tools upgraded to a new content management system.
Welcome
Finfacts is Ireland's leading business information site and
you are in its business news section.
We
provide access to live business television and business
related videos from: Bloomberg TV; The Wall Street Journal;
CNBC and the Financial Times. Click image:
Greek Prime Minister George Papandreou (l) with European Commissioner for Economic and Monetary Affairs Olli Rehn, in Athens on Monday, March 01, 2010.
Greece today announced a €4.8bn austerity plan of pension freezes and tax hikes to tackle the country's big budget deficit.
Greek Prime Minister George Papandreou announced a plan to cut by 30% three bonus-salary payments to civil servants. Public workers already had their wages frozen and benefits cuts, and unions have called for new strikes over today’s initiative. Hundreds of pensioners protested as the plan also targets public and private sector retirement plans. The measures amount to 2% of GDP (gross domestic product) and the Greek government has committed to cut the budget deficit from 12.75% in 2009 to 8.75% by December this year.
Papandreou said the cuts were needed "so that Greece can exit the vortex of speculators and defamation, so that we can breathe and keep on fighting". The prime minister, who has warned Greece risks bankruptcy if it did not come up with credible measures, said he expected "solidarity" from Europe as he prepared to visit Germany and France on Friday and Sunday next.
The yield on the benchmark 10-year bond dipped 13 basis points to 6.02%, the lowest since Feb. 11th.
Luxembourg prime minister and finance minister, Jean-Claude Juncker, head of the Eurogroup of Eurozonefinance ministers, hailed the plan and said Europe was ready to offer financial aid if needed.
He said the measures announced in Athens offered "a strong signal of the readiness of the Greek government to proceed with courageous decisions".
Juncker added: "Greece's ambitious programme to correct its fiscal imbalances is now credibly on track."
German Finance Minister Wolfgang Schäuble said the measures“are going in the right direction and deserve our respect.”
Greece must implement the measures quickly and fully, the minister said. Greece should be able to refinance in capital markets after the implementation of the measures, he added.
Greek workers get three additional wage payments for holidays -- a full month for Christmas and additional payouts of half a month at Easter and again in summer. Those payments will be slashed by 30% each for civil servants. The government also raised to 12% from 10% the cuts to other benefit payments public workers can receive as increments such as seniority or an advanced degree.
"These governments are in denial. This is the third austerity plan that Greece has put in,"Geoff Tresman from Punter Southall Financial Management told CNBC Wednesday. "Why didn't they do this with the first opportunity," he added:
The prime minister said in a speech to his PASOK parliamentry group on Tuesday: "For many years, Greek politicians buried their head in the sand and avoided dealing with difficult structural and social problems. We are tackling those problems head-on.
The guiding principle of our government is transparency -- to overcome our budget deficit but also to address our credibility deficit we inherited from the previous government, whose creative accounting has even called the credibility of the EU Commission into question.
In five months since taking office, our government has launched a raft of far-reaching reforms, regardless of the political cost of those decisions. To restore confidence among our EU partners, we have decided that further measures are essential.
Many people rightly wonder whether more taxes and less revenue will deepen the recession. But the immediate problem we face is not dealing with the recession, but an inability to borrow more money to service our debt.
A few years ago, Greece borrowed at almost the same rates of interest as Germany. Today, when we borrow €5 billion we must pay about €750 million more interest than Germany. If Greece cannot borrow on the same terms as our European partners, the consequences will be catastrophic. It is our responsibility to avert that catastrophe. Some of the decisions we have to take might seem unfair. But we have no choice.
Greece is being held hostage by creditors and speculators. Unless both Greece and the EU take courageous decisions, the future of the European economy is at stake. Europe needs to show its solidarity with Greece: That alone will stop speculative attacks on the Greek economy and the Euro. But our European partners have to persuade their own citizens that Greece is a credible, responsible partner.
Greece can and must do everything we can to put our house in order. 2010 will be a year of drastic reforms across all levels of government: changes to our budget, our tax system, our social security system, our public administration, our development model. All these changes will have a dramatic impact in addressing chronic problems and entrenched mindsets.
I wish we had more time to demonstrate the impact of the reforms we have already implemented. To prove to our European partners and the markets that we mean business. Unfortunately, we cannot afford to wait for these policies to bear fruit because our creditors won’t give us time. The global recession – which has caused ballooning deficits in many countries – has put further pressure on Greece’s borrowing needs.
Greece’s national debt now stands at €300 billion. The GDP is €240 billion. This year, the Treasury needs €100 billion to cover operational costs, pay pensions and public sector wages, and service the national debt. We will have to borrow about half that amount.
Between 2004-2009, revenues increased by €10 billion, while basic state expenditure increased by €23 billion. Today, 52% of government revenue goes to public sector wages and pensions. In 2004, that figure was 45%. In 2004, €6 billion was allocated to supplementary payments to social security. Today that figure is €12 billion. The EU has lost faith in Greece’s promises to cut wasteful public spending because between 2006 and 2009 basic budget expenditure (before interest) increased by 50% - - or €20 billion.
Clearly, this is not sustainable. The history of the last five years cannot be unwritten. Our European partners will not forget that history until we can prove that we can make difficult but essential decisions to pull our country out of this crisis.
The loss of revenue these new measures will bring must be counter-balanced by cutbacks in government expenditure so that we do not waste a single euro. We will kick-start productivity through structural reforms, public investments and incentives to stimulate growth. These measures are essential to ensure that unemployment does not rise as a result of our austerity measures. With wage earners paying a high price, we will be aggressive in cracking down on tax evaders and ensuring that the tax system does not favour the rich.
This crisis is an opportunity not only to break old habits, but to fundamentally change our country. Rebuilding Greece’s public administration is a matter of national survival. Greece’s problems are not just economic: the underlying political and social causes must be tackled so that these problems do not resurface. People are angry and want to see fundamental changes to our governance model and our public services. The majority of Greeks are not lazy, crooked, or corrupt. They work hard, pay their taxes, and respect the law. And they have said loud and clear: 'enough is enough'"
