Greece Agrees EUR3.3bn Savings Plan

by Ulrika Lomas, Tax-News.com, Brussels

21 February 2012

Just ahead of a planned meeting of eurozone finance ministers in Brussels, the Greek cabinet has unanimously approved a final series of austerity measures totalling EUR325m (USD429m) to secure the EUR130bn bailout agreement from international lenders including the European Union (EU) and the International Monetary Fund (IMF), vital to avoiding bankruptcy.

During a special sitting, the cabinet of Greek Prime Minister Lucas Papademos adopted a set of bills designed to implement the EUR3.3bn savings package, providing notably for additional cuts in top pensions, for a lowering of the minimum wage, for significant public sector job cuts and for a liberalization of the country’s labour laws.

The government also agreed to complete by March 11 a debt write-off with private creditors such as banks and insurance companies aimed at reducing Greek debt by around EUR100bn.

While regretting the need to introduce further unavoidable pension cuts, Prime Minister Papademos insisted that the impact on individuals would be limited as it would only concern monthly pensions in excess of EUR1,300.

Luxembourg’s Prime Minister and President of the Eurogroup Jean-Claude Juncker recently underlined his confidence that the Eurogroup will indeed be able to implement all the necessary decisions regarding Greece’s second adjustment programme during its forthcoming meeting on February 20.

Following a Eurogroup conference call to discuss the outstanding issues regarding the EUR130bn bailout agreement, Juncker underscored that “substantial further progress” had been made.

He explained that: “First, we received the strong assurances provided by the leaders of the two coalition parties in Greece's government. Second, the Troika finalized and presented its analysis on the sustainability of Greece's public debt. Third, further technical work between Greece and the Troika has led to the identification of the required additional consolidation measures of EUR325m and the establishment of a detailed list of prior actions together with a timeline for their implementation.”

Juncker added: “Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing. This will strengthen debt sustainability further.”

The Eurogroup President ended: “On the basis of the elements that are currently on the table and the above-mentioned additional input, I am confident that the Eurogroup will be able to take all the necessary decisions on February 20.”

Eurozone finance ministers are due to convene shortly.

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