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Greece Unveils Sweeping New Austerity Program
Published: Wednesday, 3 Mar 2010 * 7:28 AM ET Text Size By: Reuters Greece's cabinet approved a sweeping new austerity program on Wednesday, the third in as many months, intended to rein in a bulging budget deficit and secure European financial support. A government spokesman said the package of public sector pay cuts and tax increases would save an extra 4.8 billion euros ($6.5 billion), equivalent to 2 percent of gross domestic product. "We are now justifiably expecting EU solidarity," Prime Minister George Papandreou said in a televised conversation with President Karolos Papoulias, adding that the additional steps were necessary for the country's survival. The measures included an increase of value added tax by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent, increases in tax on fuel, tobacco and alcohol, as well as freezing state-funded pensions this year. Greece is under pressure from the European Union and financial markets to fulfill a promise to cut the budget deficit to 8.7 percent of GDP this year from 12.7 percent in 2009. But EU inspectors estimated the austerity plans announced so far would only go half-way due to a deeper than forecast recession. RELATED LINKS Current DateTime: 06:24:30 03 Mar 2010 LinksList Documentid: 35681084 Poll: Should EU Bail Out Greece?EU Backs Greek StepsGreece Must Make More Cuts: EUGreece Must Convince EU, Market It's ThriftyGermany Moves to Out Greek Speculators Papandreou told the cabinet that if the EU did not provide financial support now, Greece had the option of turning to the International Monetary Fund, a minister said after the meeting. Speaking to members of his PASOK party on Tuesday, Papandreou compared his country's fiscal crisis to a war and said he would have to take harsh and possibly unfair measures. All of Europe would be threatened, he said, if Greece failed to take brave decisions to cut a 300 billion euro debt mountain, equivalent to 125 percent of the country's annual output. The euro rose on foreign exchange markets on the news and Greece's borrowing costs fell further, with the risk premium on Greek 10-year bonds over benchmark German bunds at 289 basis points, the lowest since early February. "The relief was evident in the money markets once Greece announced its additional austerity measures. This ... increases their chance of navigating through these troubles," said Peter Chatwell, rate strategist at Credit Agricole CIB. 'Social Explosion' The main public sector trade union, which has called another one-day strike for March 16, vowed to fight the new measures. "We will be on the streets with all our might. I am afraid there will be a social explosion," its general secretary, Ilias Iliopoulos, told Reuters. "People will start going hungry soon." About 500 pensioners rallied in central Athens and marched to the finance ministry in a first protest against the new measures. Civil servants also planned an anti-austerity demonstration outside the ministry. Opinion polls suggest the government retains majority support for its austerity plans. Papandreou is due to travel to Berlin on Friday to meet German Chancellor Angela Merkel, who had demanded additional fiscal steps from Greece before considering any European financial safety net for the euro zone's weakest economy. In a first reaction, Germany's economy minister, who has accused Greece of endangering the euro, welcomed the latest measures, adding it was essential that they be implemented. Greece needs to borrow or refinance some 53 billion euros this year, including 20 billion between April 20 and end May. European government sources have said Germany and France are working on contingency plans under which state-owned financial institutions would directly purchase billions of euros in Greek bonds or offer guarantees to commercial banks that bought them. Two of the three major credit ratings agencies, Standard & Poor's and Fitch, have downgraded Greece's public debt to below A grade. If Moody's follows suit, Greek government bonds would no longer be eligible as collateral for European Central Bank lending from the end of this year. 'Unacceptable' ECB governing council member Ewald Nowotny challenged that situation on Tuesday, without saying how it could be changed. "The fate of Greece, and if you are going to be more dramatic, the fate of Europe, depends on the judgment of one rating agency. That is an unacceptable situation," the Austrian central banker said at a panel discussion in Vienna. In his speech on Tuesday, Papandreou said Greeks should not be lulled into thinking a government default was a "remote nightmare scenario," saying new holes in the budget deficit were appearing on a daily basis. Although market pressure on Greece has eased in recent days, a Reuters poll of economists showed on Tuesday that skepticism about the government's ability to meet a goal to slash its deficit by four percentage points this year still runs deep. Only 18 of 47 respondents said they believed Athens would meet that target, with most predicting a "slow burn" scenario through 2010 in which the government makes only limited progress in reducing the deficit. Slideshow: Government Debt Issuers Most Likely to Default
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Herb's a gift from the earth And what's from the earth Is of Jah's greatest worth So before you knock it Try it first And you'll see it's a blessing And it's not a curse |
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#2
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21% sales tax, 30% cut in some salaries, freezing pensions. LOL nobody is going to pick this up as a socialist club right.
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Herb's a gift from the earth And what's from the earth Is of Jah's greatest worth So before you knock it Try it first And you'll see it's a blessing And it's not a curse |
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#3
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that salary cut, i'm guessing that it won't apply to high level political positions. just a guess.
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#4
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30% cut in salary bonuses. I know Americans are used to 30% cuts left and right, but the rest of the world doesn't have to deal with that because they didn't participate in the conservatastrohpe.
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#5
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here's a clue waterstain, conservative policies didn't get Greece in this hole.
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Herb's a gift from the earth And what's from the earth Is of Jah's greatest worth So before you knock it Try it first And you'll see it's a blessing And it's not a curse |
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#6
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Yes they did. Conservatives are the greatest natural disaster in American history. Probably half of Americas potential wealth has been annihilated by conservatism.
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#7
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Why is it GMAC (GMs lending branch) is giving a bonus to its CEO that is as large as any of the ones that Obama complained about, but it is happening in silence? FYI - GMAC has failed to produce profits for a very long time...
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Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but rather we have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit. - -- Aristotle Do not make light of your failings saying, "What are they to me?" A jug fills drop by drop, so the fool becomes brimful of folly. Do not make light of your virtues saying, "What are they to me?" A jug fills drop by drop, so the wise man becomes full of virtue. - -- The Dhammapada The Sayings of the Buddha A dog is not considered a good dog because he is a good barker. A man is not considered a good man because he is a good talker. - The Buddha |
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#8
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because the bailout boy's take care of each other. I sit on your board you sit on mine we approve each other's bonus. We like wind farms just not near our sailing grounds. Shareholders; bhahahah who cares
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Herb's a gift from the earth And what's from the earth Is of Jah's greatest worth So before you knock it Try it first And you'll see it's a blessing And it's not a curse |
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#9
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why is it when spinster says conservative policies didn't get greece into trouble, bittermark immediately responds about how conservative policies harmed america....
so watertrough, what specific conservative policies harmed "greece"...we are talking about greece, not america
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2 hours later
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#10
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I can remember when tax increases weren't an "austerity program".....
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#11
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Here's what happens when you try to downsize Big Gubmint:
http://www.guardian.co.uk/world/2010...s-protest-euro Try it here, and the OJ riots will look like a Sunday School picnic.
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#12
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Quote:
__________________
Herb's a gift from the earth And what's from the earth Is of Jah's greatest worth So before you knock it Try it first And you'll see it's a blessing And it's not a curse |
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