Troika kicks budget back to Greece

04/10/2012

Greece is racing the clock for Troika approval to release more loans.

By Andy Dabilis for Southeast European Times in Athens -- 04/10/12

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The EU-IMF-ECB Troika says that Prime Minister Antonis Samaras (centre) is making unrealistic projections of savings from health, defense and public sector cuts. [Reuters]

Greece's international lenders rejected government estimates of 2.5 billion to 3.5 billion euros in savings under a proposed plan to combine 13.5 billion euros in budget cuts and tax hikes. The move sets back the country's hopes of soon getting the release of more aid needed to keep paying workers and pensioners.

Envoys from the Troika of the EU-IMF-ECB told Prime Minister Antonis Samaras and Finance Minister Yiannis Stournaras that projected savings through cuts in health, defense and public sector spending were too rosy.

Samaras, the New Democracy Conservative leader, convinced his coalition partners, the PASOK Socialists and Democratic Left, to renege on their campaign pledges earlier this year to hold the line on more austerity so he could present a united front.

The Troika's stance means it's unlikely that parliament can act before the October 8th meeting of Eurozone finance ministers. Stournaras said he still believed a deal could be struck in time, but acknowledged the differences were "quite big."

The stalled negotiations are taking place against a backdrop of growing social unrest following a massive general strike on September 26th, as evidence showed the austerity measures demanded by the Troika have largely backfired, creating 24.1 percent unemployment and shuttering 68,000 businesses.

The government said the country's five-year recession is getting worse as the economy seems to be collapsing quicker than plans to prevent it, and forecast a 3.8 percent decline in GDP next year. The Troika put the figure at 5 percent.

Greece is awaiting a 31.1-billion euro installment, the last in a first series of 152 billion euros in rescue monies. A second bailout of 172 billion euros is on hold until the budget plan for 2013-2014 is approved by the Troika and parliament.

Takis Pappas, an associate professor of Comparative Politics at the University of Macedonia in Greece, said Samaras' government could hinge on whether he can get Greeks to accept more austerity and convince the Troika he's on the right path.

"He either stands firm, which is what he will try to do, or falls, which depends on his political stamina and his opponents’ force. If he falls, things will be very, very bad," Pappas told SETimes.

Samaras has promised this round of austerity would be the last and that the alternative is being forced out of the Eurozone, back to the drachma, and catastrophe.

Greeks have been pushed to the wall with more than two and a half years of pay cuts, tax hikes and slashed pensions. Suicides and bankruptcies have risen and civil servants, doctors, pharmacists, police, uniformed military officers, garbage collectors and other sectors of society have either held strikes or protests, with another wave looming.

"Greece is not doomed. There is a simple solution proposed by the vast majority of economic economists, but [it has not been] implemented because of the 'political cost'," Nicholas Economides, a professor of economics at the Stern School of Business at NYU, told SETimes.

He said the plan for success would be to collect taxes, reduce tax evasion -- which costs about 11 billion euros a year in lost revenues, fire 50,000 civil servants, jail bribe-takers and spend 2 billion to 5 billion euros in infrastructure investment.

The Troika is demanding that Greece reduce its public workforce by 150,000 over the next three years, but Samaras' partners are still resisting the suspension of 15,000 workers in the budget blueprint to which they have agreed.

Aggelos Tsakanikas, research director at the Athens-based Foundation for Economic and Industrial Research, said that he believes there will be a compromise solution.

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"The Troika is exaggerating on expectations taken into consideration of the current economic standings," he told SETimes. Greece needs growth fast, not just austerity, he said. "If we do not do something to rebound soon, additional measures will be necessary."

The cuts are again mostly aimed at workers, pensioners and the poor, along with another 2 billion euros in tax cuts as part of a package that would raise the retirement age to 67, extend the work week to six days, eliminate what's left of holiday bonuses that fueled businesses, and make big cuts in severance packages for fired private sector workers.

"Greek policymakers share the view that the IMF will decide to leave the fiscal consolidation programme of the Greek economy if there [is not] a further haircut," forcing losses on the ECB as a previous government did on private investors and banks, Pantelis Kammas, a lecturer in economics at the University of Ioannina in northern Greece, told SETimes

George Housakos, 22, a guitar teacher, said most everyone has been hurt, apart from the rich. "These measures are very bad. They've affected me and my family and friends and people are just worn out," he told SETimes.

This content was commissioned for SETimes.com.
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