Greece Approves New Austerity Package

by Ulrika Lomas, Tax-News.com, Brussels

14 February 2012

Amid violent street protests in Athens and other towns and cities, the Greek parliament approved an additional package of austerity measures on Sunday designed to ensure that a vital tranche of outside funding is released to enable Greece to meet its ongoing debt obligations.

During the latest meeting in Brussels, eurozone finance ministers issued a series of ultimatums to Greece to ensure release of the EUR130bn (USD170bn) bailout fund, insisting notably that Athens must identify additional savings of around EUR325m in the 2012 budget.

Outlining the tough conditions set by the eurozone ministers, Luxembourg’s Prime Minister and president of the Eurogroup Jean-Claude Juncker underscored that parliamentary ratification of the austerity package, agreed with the EU back in October, was required by February 12.

Juncker underlined the need for Greece’s coalition government to identify a further EUR325m in spending reductions and to provide “strong political assurances” from the leaders of all ruling parties of their commitment to implementing the reforms, before the next meeting.

The Eurogroup president insisted that these three elements must be in place before any decisions can be taken.

At the eleventh hour, just ahead of the Brussels meeting, Greece’s fragile ruling coalition finally united on plans to lower the minimum wage, to significantly cut public sector jobs, to liberalize the country’s labour laws, and to negotiate a debt write-off with banks.

The government is also said to be considering spending cuts and tax increases of around EUR13bn from 2012 to 2015, instead of the EUR7bn initially planned.

Greek taxpayers have already suffered a number of tax increases, including a new property tax, a 'solidarity' tax on incomes and the erosion of personal allowances, in addition to an increasingly intensive crackdown against tax evasion.

Time is of the essence for a country that has been mired in deep recession and crushed by painful austerity measures for the last five years. Vital international aid is needed by mid-March to enable Athens to service its debt and to avoid a default.

Eurozone ministers are due to meet again on February 15.

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