Greece’s 2013 Budget Screams Austerity

on Oct 2, 2012
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On Monday 1 October the Greek deputy finance minister Christos Staikouras presented a draconian 2013 draft budget meant to prove to the European Commission, the European Central Bank and the International Monetary Fund that the country is prepared to meet the requirements for further monetary help.

The budget includes around €7.8 billion (£6.23 billion) of austerity measures, which are in no doubt substantial but still well below the €11.5 billion (£9.19 billion) previously agreed on with the Troika. Some €1.1 billion (£879 million) of savings will come from cuts in defence, local authority budgets and healthcare while €4.8 billion (£3.84 billion) will be reduced from pensions and public workers’ salaries. There is also a proposition of increasing the retirement age from 65 years to 67, which would yield an insignificant net benefit of €5 million (£4 million).

!m[](/uploads/story/500/thumbs/pic1_inline.png)”The general government debt at the end of 2012 is estimated to amount to 340.6 billion euros or 169.5% of GDP, compared to EUR355.6 billion or 165.3% of GDP in 2011, resulting in an increase of 4.2% of GDP, because of the recession,” was said in a statement accompanying the budget draft as quoted by the Wall Street Journal. This year’s deficit is expected to stand at 6.6 percent of GDP and to improve slightly to 4.2 percent next year, while the economy will shrink by 6.5 percent in 2012 and 3.8 percent in 2013. There will be a slight rise in the unemployment from an average of 23.5 percent in 2012 to 24.7 percent in 2013. Greece maintains a primary deficit – before interest rate payments – of 1.4 percent of GDP despite earlier forecasts for a surplus. Predictions for 2013 show a small primary surplus of 1.1 percent of GDP.

According to the Financial Times the austere measures presented by Mr Staikouras in front of the parliament’s budget committee are meant to convince creditors to disburse €31.2 billion (£25 billion) from its current bailout funding, which are badly needed to recapitalise liquidity-starved banks and prevent the government from running out of cash in November.

Reports from Tuesday show that the Troika hasn’t fully accepted Greece’s 2013 draft budget and is insisting on further cuts in the public sector in the form of laying off of civil servants. The coalition government, which includes the conservative New Democracy, the Socialists and the smaller Democratic Left party, is resisting the request because of the growing social unrest in the country. The opposition in the face of the leftist Syriza party has taken a firm position against the austerity measures and has stated that overturning the government has become “a battle of life or death for society.” As a response to the new budget draft, labour unions announced there will soon be another general strike as a follow-up to the 24-hour protest last Wednesday.

Prime Minister Antonio Samaras commented for a weekend newspaper that his country is willing to take the necessary steps to convince lenders it is serious about implementing reforms. “Our partners can see that changes are now happening. The first thing we must do is win back our damaged credibility …
Without credibility, you can’t negotiate.” Mr Samaras told the Sunday To Vima newspaper. The Greek parliament is expected to vote on the 2013 budget in December.

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