Econintersect: The several factions of the Greek government have agreed to additional spending cuts of €11.5 billion ($14.1 billion over the next two years. These will come from reduced pensions, public sector wages and government provided services. The cuts will be a per capita equivalent of $410 billion for the U.S. The new cuts are in addition to cuts of €3.3 billion that were made in February for the already reduced current year’s budget.
The government is also seeking to make inroads on reaching a reduction of the national debt through privatization of government assets. In other words, reduce the debt by selling off the country’s assets.
An article by Kerin Hope in the Financial Times says that several major offerings are:
- Hellenic Postal Savings Bank,
- The profitable state gaming company OPAP,
- The state lottery, and
- Valuable coastal land on the island of Rhodes, a tourist area.
Greece is now in its fifth year of recession, which Bloomberg says has been worsened by the austerity programs forced on the country by the EU and the IMF. Opposition to the size of the budget cuts had argued for extending the time for implementing them to soften the blow to the economy which is likely to shrink further. This can cause further reduction in government revenues and make still more cuts necessary.
The process is called a spiral.
- Greece agrees to €11.5bn spending cuts (Kerin Hope, Financial Times, 02 August 2012)
- Greece Passes Austerity Budget (GEI News, 13 February 2012)
- Samaras Secures Greek Budget Plan As Coalition Discord Grows (Maria Petrakis and Marcus Bensasson, Bloomberg, 01 August 2012)