Worldwide record of austerity with 14.5 bn worth of measures

“This probably has no historical precedent”, as is recognized by an financial staff member this year of the fiscal adjustment effort required for this year, the third consecutive one, by Greek citizens.

Within just one year,  with Memoranda I and II, the austerity “bill” will reach 14.5 bn euros! This means that 6.7%-7% of the Greek GDP will “evaporate” in 2012 and will be missed by businesses and households, since the spending cuts and taxes will “swallow” it in order to serve the public debt.

To reduce public deficit to 6.3% of the GDP this year from 9.3% in 2011, the government offers sacrifices on the altar of the debt:

- Cuts of 3.3bn in wages, pensions allowances and medication
- Tax measures to increase government revenue by 2bn euros.
- Other measures amounting to 9.2 bn already decided since last October with the medium-term program and the 2012 budget.

This project exceeds in size even the expectations of creditors who openly question Greece’s ability to manage the problem. For this reason, there is consideration about a permanent representative to be appointed to Athens by the EC (like the IMF’s Bob Traa) to assist the Task Force leader, Horst Reichenbach.

To convince lenders, the government is proceeding with the submission of a bill of law for implementing the measures included in the second Memorandum, which reach 3.3bn. These will be:

- 400 million by reducing main and supplementary pensions
- 50 million by reducing NAT pensions by 7%
- 1.1 bn from pharmaceutical spending
- 50 million from doctors’ overtime
- 600 million from defense spending
- 30 million by making 550 deputy mayors redundant
- 270 million from consumer spending and electoral spending
- 190 million in cuts of allowances and grants to remote areas
- 400 million from the Public Investment Program.

After the submission of the bill, a new supplementary budget will be submitted  in Parliament, which will encompass all 2012 measures.

The aim is to increase revenue by 2 billion euros in 2012 (at 52.2 billion from 50.2 billion in 2011), and reduce government spending by 3.3 billion euros, as the 72.8 billion originally envisaged in the budget is 69.5 billion with the new austerity program.