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Maria Spassova

We must say that Giorgos Papandreou keeps his word. During his pre-election he promised he will take money from the rich and give it to the poor and he did it. The Greek PM obviously believes this will save the economy of the country, which is suffering from the big public sector, because he presented his plan for economic reforms in Zappio Hall in the presence of his whole cabinet, union leaders and representatives from the private and public sectors. The audience often applauded and interrupted the PM – a scene, which reminds the party forums of the communist era. The ones, who were reserved towards the socialist leader’s words, were few.

Giorgos Papandreou announced that in 2010 the budget deficit of Greece will drop with 4%, in the following years it will fall with another 2% and in 2012 it will finally reach the cherished 3%. Lowering the national debt will start from 2012. How will this be done? The Greek PM said he will drastically lower military expenses in 2011 and in 2012. In 2010 there will be moratorium on appointments in the public sector. After that the rule will be – one hired state worker for every 5 retired. The only exception will be in the healthcare and education sectors and in the police. Salary increases will be possible only for the ones receiving up to €2000 per month. The ones over €2000 will not be increased. The additional expenses in the public sector will be decreased with 10%.

PM Papandreou said that he is cutting 1/3 of the offices of the Greek tourism organization abroad, as well as all press services, which will become part of the embassies of the country. The salaries of top managers working in the public sector, will be decreased, as well as their number. They will not receive any bonuses. Bonuses in the private sector will be taxed with 90% tax. Giorgos Papandreou also said he is starting to deal with economic criminality and he is starting the creation of a new department in the Ministry of Civil Defense, which will deal with it. According to him, the sole eradication of fuel speculation will bring €5 billion to the state treasury per year. Urgently pressing but extremely painful social security reform, Papandreou postponed for the first half of 2010.

The first reactions from the market-watchers and the business sector to this spectacular economic speech, are quite reticent. Analyzers admit the Greek PM was more specific than they expected but at the same time they note they are convinced these exact measures will solve Greece’s biggest problem. And this big problem is – the giant public sector. Financial Times, which after the elections in October advised the new government to cut three ministries, wrote on its front page “Disappointed market-watchers”. “Trade unionists and business groups will receive real wage rises next year in spite of Greece's deteriorating public finances,” notes the publication.

New York Times expects “more coherent and coordinated role of financiers and investors to pressure the government to reduce the budget deficit, which also negatively affected the Greek economy.” Greek economy is also of interest to analyzers from the Wall Street Journal, who note that after the decision of Abu Dhabi to help Dubai, the attention of investors is turned to another country, which destroys itself from its national debt – Greece.