Brussels, 23/05/2011 (Agence Europe) - Greece's international financiers are exerting maximum pressure to get the country to introduce new austerity measures as soon as possible to meet its 2011 budget targets as set out in the existing austerity programme. On Monday 23 May, the Greek government discussed new measures to raise €6 billion this year. A new batch of aid of some €12 billion is at stake.
On Monday 23 May a spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn said the most important thing for the Commission was for the Greek government to set out measures in the next few days that it is planning to take to meet its 2011 budget targets and, secondly, to actually launch a privatisation programme. The spokesperson said that once that has been done, it would be possible to see how the Greek government's current adjustment plans could be supported. Commenting on the fact-finding mission by the European Commission, the European Central Bank and the International Monetary Fund, examining progress in the Greek austerity programme and whether the country will be able to pay back its debts, the spokesperson said that the mission would take as long as necessary, stressing the importance of agreement on the main austerity programme targets among political parties in Greece. The chair of the Eurogroup, Jean-Claude Juncker, warned that solidarity had its limits.
Among the new measures being examined, the Greek media report on shrinking the civil service, cutting public sector pay, increasing taxes (cutting income tax exemptions and medical spending and introducing a uniform 18% or 19% VAT system). The actual measures will be announced at the end of the fact-finding mission. The Greek authorities have also announced the removal in July 2011 of unjustified restrictions preventing people from exercising more than one profession (restrictions on the number and location of service providers, the setting of minimum prices and the obligation to have a licence from the public authorities). This move would cover insurance brokers, electricians, water-borne taxis, dockers, physiotherapists and tobacconists...
Commenting on the Greek public debt on Monday in Vienna, Olli Rehn said that a process to ensure the exposure of private investors, banks and institutional investors might be considered, according to Reuters (see EUROPE 10381). Such a process could be based on the “Vienna initiative” of 2009 whereby banks with subsidiaries in central Europe promised the ECB and the EBRD to keep their investment in the countries in question. It is reported that France would now agree to voluntary moves by private investors holding Greek bonds.
The economic outlook for Greece is bleak and Fitch Ratings has again downgraded its long-term debt (from BB+ to B+), to which Greece responded that the decision ignored the additional commitments made by the Greek government to reach the 2011 budget targets and speed up the privatisation programme. If Greece were to roll over its debt over 10 years, the interest rate demanded by the money markets is at a record high (nearly 17%). Although Athens has pledged to cut its public deficit to 7.5% of GDP this year, the European Commission is counting on 9.5% this year (from 10.5% in 2010). Greece's debt stood at 143% of GDP in 2010 and is expected to approach 158% this year. (M.B./transl.fl)