Petros Giannakouris, Associated Press
ATHENS, Greece — Greece will have to take fresh austerity measures, the debt-ridden country's finance minister said Wednesday, a day after Athens moved a step closer to getting the vital bailout funds it needs to avoid a disastrous default next month.
The prospect of more tax increases and spending cuts are likely to be met with mounting concern in a country mired in a deep recession and the number of unemployed rising to around one in seven.
"We have to take supplementary measures ... because of the recession, because of the difficult task, and the weakness of the central administration have not produced the required results," Evangelos Venizelos said in Parliament ahead of a Cabinet meeting.
He did not specify what the measures might be. Those taken so far include pension and salary cuts in the public sector, and a series of tax hikes on everything from food and fuel to property and income.
Greece has been under pressure from its international lenders to meet fiscal targets and slash the size of its bloated public sector, which has more than 750,000 staff in the country of 11 million people. It has already pledged to suspend up to 20,000 civil servants on reduced pay as part of a plan to shed 150,000 public jobs through 2015.
It also recently announced a new property tax, to be paid through electricity bills to make it easier and faster for the state to collect. However that plan has met with resistance — state electricity company unionists have threatened not to collect the tax and not to cut off the electricity supply to those who refuse to pay.
A public reeling from repeated rounds of spending cuts and tax hikes is showing waning patience with measures that appear not to have the necessary effect on the state budget. Many warn that with the country facing a fourth year of recession in 2012 and unemployment at more than 16 percent, yet more austerity could sink the economy.
Yannis Varoufakis, an economics professor at Athens University, said the government's actions appear increasingly desperate and likened its strategy to "the last stages" of the Vietnam war.
"The more obvious it was that the war was lost, the more desperate the attempts of the United States army and air force to bomb Vietnamese villages in order to save them," Varoufakis said.
Even though the prevailing view in the markets now is that Greece will receive the next batch of bailout funds, many analysts think the recent game of brinkmanship played out between the country and its creditors will be repeated at the end of the year.
Varoufakis said a "real default will be on the cards" in December when Greece will be looking to get the next installment of bailout cash.
"We will have to wait to find out what the state of the credit crunch on the European banking sector will be because that is what will determine whether Greece defaults in December or later," Varoufakis said.
For now Venizelos is pressing ahead with the strategy and argues that Greece will emerge a stronger economy once it's got a grip on its public finances and rebalanced the economy more towards the private sector and away from the state.
Venizelos said that without the supervision of debt inspectors from the European Central Bank, the International Monetary Fund and the European Commission, collectively known as the troika, Greece would have "slipped off the fiscal track."
The troika has been pressing the Greek government hard to adhere to the reforms it agreed to in return for bailout money. In particular, the inspectors want it to move faster in reducing the size of the public sector.
Their quarterly reviews of the country's progress is essential to the country's international creditors releasing funds from a €110 billion ($151 billion) bailout loan that has been keeping Greece afloat since last year.
- LDS missionaries developing strategies to...
- 50 things you might not know about 15 of your...
- Judge orders Colo. cake-maker to serve gay...
- Pearl Harbor ceremony marks bombing...
- Space and religion: How believers view latest...
- Nelson Mandela's faith made him a worldwide...
- Utah remembers Pearl Harbor namesake ship,...
- Snow, ice, deep-freeze hit large swath of US
- Obama: Income inequality a defining... 106
- Judge orders Colo. cake-maker to serve... 63
- LDS missionaries developing strategies... 44
- Fast-food strikes return amid push for... 31
- Colorado court hears discrimination... 30
- Utahns react to death of Nelson Mandela 26
- Research: Native American genes have... 23
- Obama declares health care law is... 21