New 29-billion-euro austerity by the "Czar"

In a report released on Thursday, the European Commission reviewed the 2011 deficit of 18.807 billion euro that had previously been estimated at 17.035 billion, thus requiring additional measures of 1.8 billion this year (“Additional measures are necessary in order to ensure the objectives of 2011”, as mentioned in the 19th page of the report).

To make the numbers work in the updated Memorandum, and to reduce the deficit to 6 billion (or 2.5% of GDP), in 2014, and to 3 billion (1% of GDP) in 2015, the government should take comprehensive measures of over 29 billion by 2015.

The Finance Minister announced that by mid-March, a vote will have been taken in Parliament in order to decide on the Medium Term Plan for Economic Policy 2012-14, which will cover measures of 8% of the GDP (19.2 billion euro) in order to reduce the GDP deficit by 6%.

Moreover, in order to save another 3 billion in 2015, 9 billion worth of measures will be required. All measures required between 2012 and 2015 will be equivalent to 27.5 billion.

In addition to the 1.8 billion that will be collected this year under the new Memorandum, the saving measures will end up being more than 29 billion euros. The government will, in any case, require additional “security measures” in order to cover the error margin, since only in January this year, revenues lagged behind this year’s targets by 900 million.

However, if a rate cut or an increase in GDP is noted, the fiscal effort required will be slightly less. Besides all these calculations, Mr. Papakonstantinou has ruled that 2/3 of everything must come from spending savings.
Mr. Papakonstantinou made a special mention of the banking sector, noting that although there is no explicit ruling on mergers in the Memorandum, the government’s position is clear, stating that the sector must be strengthened in order to shield itself against the challenges ahead.

Pessimistic about debt while speaking in Parliament.

Earlier today, speaking in Parliament as well as during the Finance Committee meeting, Mr. Papaconstantinou raised the limit to four years, in order to bring the deficit closer to 3%, without being optimistic about the country’s debt situation, about which he stated that it “requires several years of effort”

The Minister who attended Parliament in order to inform Committee members about the “tax bill”, made special mention of a “long and difficult journey” while he also explained that the debt will increase as long as deficits exist, meaning that something has not gone wrong necessarily, but that efforts must  be kept up.

At the same time, he appeared to be adamant on all that concerns tax reforms, and used harsh language on the phenomena of tax evasion, stating that “The tax offenses are a bomb in the social foundations of the country and threaten the stability and existence of the whole tax system”.

In addition, Mr. Papakonstantinou spoke of the next steps of the economic team, tax system reform, the reorganization of the tax system itself, the restructuring of tax administration and the Ministry of Finance, as well as the abolition of code books and records.

“With the completion of all the aforementioned changes, we will have a fairer tax system that will not force a Greek citizen to pay while others appear untouchable”, the Finance Minister stated.

However, the opposition voted against the bill, with Mr. John Vroutsis (New Democracy) stating that “this is an improvised, half-thought-through bill of law”, while Mr. Nikos Karathanasopoulos (Communist Party of Greece), argued that the new tax bill will be “a torn flag against tax evasion, since it achieves nothing on the issue of big business tax fraud”.

In addition, the President of LAOS, Mr. George Karatzaferis, referred to the problems faced by Greek companies and accused the government’s approach to the issue of being purely fiscal and not within the scope of growth, while Dimitris Papadimoulis of SYRIZA supported that the bill in question unfairly allocates the tax burdens and gives yet another bonus to those in power.