The Greek government has announced a fresh austerity package worth about 2% of GDP. It is the third to be announced since the government came to power in October.
The Greek government has announced a fresh austerity package. It’s worth about 2% of GDP and should help achieve the target of cutting the budget deficit by 4% to 8.7% of GDP this year.
The package is the third to be announced since the government came to power in October, thanks to EU insistence that previous efforts relied too heavily on raising extra revenue rather than cutting spending.
The measures, which aim to raise an additional €4.8bn, include a 2% rise in the top rate of VAT and a 30% cut in annual Christmas and Easter bonuses for civil servants. Unions threatened a new wave of strikes.
What the commentators said
Greece has “gone through phases of anger and denial” since last October, said Ralph Atkins on FT.com. “Now, apparently, it has moved into acceptance.” Investors agreed: the ten-year yield is now back under 6%, from 7% in late January. This package “dramatically” boosts Greece’s credibility, said Luigi Speranza of BNP Paribas.
However, Greece has €20bn of debt maturing in April and May, noted Capital Economics. To roll that over, it is still likely to need “firmer pledges of support” from other eurozone countries, notably Germany.
And the medium-term danger, said Atkins, is a vicious circle: austerity exacerbates recession, worsening the finances and prompting even more austerity, and so on. “Greece is still far from receiving the all-clear.”