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Brussels requires VAT increase and freezing of salaries

16 February 2010 / 10:02:09  GRReporter
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Increasing the VAT by two percentage points (currently from 19% to 21%), termination of payments of the fourteenth salary and pension, as well as freezing the wages updates in the public sector until 2012 -these are just some of the additional measures to curb the financial crisis, which Brussels requires to be introduced by the government of PASOK. The main topic of a two-day meeting of EUROGROUP and ECOFIN (respectively February 15-16), is not whether Greece should introduce these extra measures, but exactly when they should come into effect. Brussels is strongly pressuring Athens for the immediate implementation of the new "recommendations". For its part, the Greek socialist government is trying to postpone further cuts in the budget to mid-March this year. "If necessary, we will introduce the additional measures, but no earlier than March," said Minister of Finance Giorgios Papakonstantinou minutes before the start of a meeting of ministers from EUROGROUP. Papakonstantinou stressed that strong countries in the eurozone must give a hand to countries in crisis, because "the Greek problem has grown into a European problem. Today, Greece is in crisis, tomorrow another country may be in its position." 

According to European experts the present economic recovery plan of the Greek government cannot meet the set targets for 2010. At the end of this year the government’s deficit must be reduced to 8.7 percent of GDP from the nearly 13 per cent, which were recorded at the end of 2009. The measures planned by the Greek government could reduce its value with 2.75% from the expected 4 percent of GDP. The reason lies in the difference of expectations and the actual rate of contraction of the Greek economy – forecasts of Greek economists were that by the end of 2009, negative growth will be -0.3%, but actually it came out to be 2%. 

The eurozone is ready to provide "specific and coordinated" support for Greece, says EUROGROUP President Jean-Claude Juncker, so that to ensure the stability of the currency bloc. But the Greek side should devote all possible resources for recovery. During the first quarter of 2010 Greece must prove that the stability and development program can be applied specifically and is giving results. Otherwise, the government of Giorgos Papandreou will be forced to introduce draconian measures, which will be even more stringent than the ones recommended so far by the commissioners. In a written statement by the new economic affairs commissioner Olli Rehn states that member countries in the eurozone are jointly responsible for the stability of the single European currency, and stresses that improving the financial situation in Europe is of general interest.

Tags: EUROGROUP ECOFIN Papandreou Jean Claude Juncker Economy Greece
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