World and Nation

Greek government proposes deep cuts to foreign lenders

ATHENS, Greece — Greece’s government submitted its 2013 draft budget Monday, outlining enormous spending cuts as the country’s foreign lenders returned to resume talks over a broader austerity package in exchange for the rescue money the country needs to meet expenses.

The draft budget spells out about $10 billion in spending cuts and savings for 2013. About one-quarter of that would come through reductions in civil servants’ salaries and social welfare benefits, and about 15 percent through cuts in spending on health, defense and local authorities, the government said. It also stipulates raising the retirement age to 67 from 65, but that is not expected to alter the bottom line in 2013.

The draft budget is expected to be revised significantly because it must be approved by the country’s troika of foreign lenders — the European Commission, the European Central Bank and the International Monetary Fund — before it can be submitted for a parliamentary vote.

The troika is insisting on further cuts in the public sector — including laying off public servants, a political third rail in Greece and other European countries — while the coalition government has been pushing back. The coalition, which consists of the conservative New Democracy, the Socialists and the smaller Democratic Left party, is asking Greece’s lenders for more time, saying such cuts are not politically or socially sustainable in the face of growing social unrest.

Labor unions said Monday that they would plan new protests as a follow-up to a 24-hour general strike Wednesday, while the leftist Syriza opposition party said that overturning the conservative-led coalition government had become “a battle of life or death for society.”

The negotiations are taking place against a backdrop of unrelenting depression-level conditions in the Greek economy, which the draft budget predicted would contract by 6.5 percent this year and by 3.8 percent in 2013 — far more than the troika’s earlier estimates and about 25 percent below its peak before the crisis struck. The budget says unemployment is expected to rise to 24.7 percent from 23.5 percent this year.

But the blueprint also predicts that the country will post a primary surplus of 1.1 percent of gross domestic product next year after consecutive deficits since 2002.

Deputy Finance Minister Christos Staikouras, of New Democracy, said Monday that the government would be in a position to pay off debts to third parties, estimated at some $9 billion, using money from rescue loans for 2012 and 2013. That would be a significant development because many private businesses are on the brink of bankruptcy as a result of the state being unable to pay them.

Earlier in the day, Finance Minister Yannis Stournaras resumed talks with visiting troika officials on a broader package of $17.4 billion in austerity measures that Greece must put in place in exchange for a $40.6 billion rescue loan. Stournaras said the troika had asked for clarifications on the measures proposed by the government. “They asked for details, and we’re providing them,” he said.

1 Comment
AmandaG about 11 years ago

The IMF wants Greece to cut its debt further to make up for going hugely off-track from the terms of its bailout, while Europe is resisting the option of a new debt restructuring and instead prefers to give Athens more time to get back on track.