|From left to right: Enda Kenny, Irish taoiseach, Jean-Claude Juncker, Luxembourg prime minister, and Dalia Grybauskaitė, Lithuanian president, Brussels, June 23, 2011.|
Greece has to plug an additional
€5.5bn 'black hole' as it has been discovered that the €28bn new austerity
package agreed last month is no longer sufficient to meet targets set by the
A team sent to Athens this week to
review the four-year fiscal and reform measures which are the basis of a planned
second bailout package, discovered a €5.5bn financing gap in the program. As a
result, an additional €600m in cuts or tax increases will have to be found this
Speaking to reporters on his
arrival in Brussels for an EU summit on Thursday, George Papandreou, Greek prime
minister, said Greece was intent on seeing through its austerity program but he
stressed that Athens expected solidarity from the EU in return. “Greece is
strongly committed to continue a very difficult but important program for major
changes, radical changes to make our economy viable,” Papandreou said. But
he added, “We expect that the European Union also will create the efficient
framework to deal with this crisis and also to deal with the number of systemic
problems we’ve been seeing over the past months in the Eurozone.”
Olli Rehn, European economic and monetary affairs commissioner said the EU was
prepared to help Greece save its economy “but the first
thing is that Greece must help itself, so that the other Europeans can help
Greece. That’s the bottom line.”
Antonis Samaras, the leader of the
conservative New Democracy party, was also in Brussels yesterday for a meeting
of the European People’s Party, a group of centre-right political parties
including Ireland's Fine Gael. Samaras is reported to have been urged by the
other party leaders to support the austerity package.
“The current policy mix...
calls for more taxes in an economy in unprecedented recession,”
Samaras told reporters as he headed into the meeting. “We need corrected
policy measures to ensure that the economy recovers and that we can pay back our
debt,” he said, reiterating his calls for a renegotiation of the terms of
Greece’s agreement with its creditors.
In Athens, Evangelos Venizelos, the
Greek finance minister, outlined measures at a press conference to plug the
Venizelos said that talks were still
ongoing with an EU-IMF delegation to finalise a new plan but the government had
agreed to several steps to increase revenues. These included:
A one-off solidarity tax ranging
between 1% and 5% depending on income;
Lowering the minimum threshold
for income tax to €8,000 a year from its current level of €12,000;
Higher taxes on heating fuel;
A minimum tax on the
self-employed, who are seen as engaging on tax evasion on a massive scale.
Venizelos said he hoped to raise an
extra €400m this year through further cuts in government operating expenses but
he warned that the additional measures would have to be approved both by the
Cabinet and parliamentarians of the governing PASOK party.
"All conditions must be met. When you want all conditions to be
met, you can't let anyone believe there is a Plan B. And there isn't a Plan B,"
said Jean-Claude Juncker, Luxembourg prime minister and chairman of the
Eurogroup of Eurozone finance ministers, who was attending the EU summit in
The Greek parliament is expected to
be asked to approve the new measures next week.
Greece needs to get a €12bn tranche
of the existing bailout program in the next two weeks to prevent a default.