Euro Crisis: A Big, Maybe Bad, Week For Greece
Things are getting even more challenging for Greece and not only because wildfires have been burning for three days on the eastern Aegean island of Chios, razing almost 13,000 hectares of arable land and forests.
Greek Prime Minister Antonis Samaras is preparing to travel to Berlin to meet German Chancellor Angela Merkel on Thursday. Greece’s coalition government is presenting a plan to cut 13.5 billion euros over the next two years, 2 billion more than those demanded by the troika of the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission, for Greece to receive a very much needed next installment of bailout funds.
According to the daily Ekatherimini, the additional 2 billion in cuts is the result of calculations by the Finance Ministry, which says that “once the pension and salary cuts are implemented along with the reductions to spending, tax revenues and social security contributions will fall by about 2 billion euros, leading to a new shortfall.”
Part of the plan, as laid out by Greek Finance Minister Yannis Stournaras, calls for 30,000 to 40,000 public sector employees to be removed from their posts; they will be given up to 75 percent of their salaries for one to three years. People will also have to work for more years before qualifying to receive the minimum pensions of 485 euros.
No gain without pain, as they say.
Stournaras has said that “We have to stay alive and remain under the umbrella of the euro, because that is the only choice that can protect us from a poverty that we have not experienced” — a dire comment suggesting the pressures under which he has been working to produce an extra 2 billion euros of cuts.
European politicians have been addressing the topic of a “Grexit,” of Greece leaving the euro zone.
Over the weekend, Luxembourg prime minister Jean-Claude Juncker (who is also the chair of the eurogroup of European finance ministers) said that there is no change of Greece having to leave the euro zone “unless Greece were to violate all requirements and not to stick to any agreement.”
In Germany, Volker Kauder, the parliamentary leader of Merkel’s conservative bloc, underscored that no changes to the bailout (like the two-year extension Greece is seeking) can be made: “There is no more latitude, either on the timeframe or the matter itself, because that would again be a breach of agreements. It is just that which led to this crisis.” Germany’s deputy finance minister, Steffen Kampeter, echoed these sentiments: “If, as we all assume, there are any deviations then the Greece side will compensate for them.”
More tough words from Finland too. Said Alexander Stubb, Finland’s minister for European affairs and foreign trade: “There will be no third package [for Greece] if it does not make structural reforms.”
Loud and clear, that.
The clock is ticking: Greece is hoping to receive approval from the troika for its spending cuts program by September 14, less than a month away.
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Photo of wildfires in Chios taken on August 19, 2012, by va_sfak