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The recession is deepening, political games are continuing

07 September 2012 / 18:09:03  GRReporter
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The recession reached 6.3% of GDP in the second quarter of the year with basic prices from 2005, according to the National Statistics Institute in Greece. At the same time, household consumption fell by 7.2% in the same period compared to the 2011 level, and gross investment decreased by 19.4%. The only positive effect of the crisis is that the trade deficit is decreasing slowly and gradually and by the end of June this year it had fallen by almost 40%. Exports have also suffered to some extent and the reduction is a little more than 4%, and losses in import of raw materials are reaching 12.3%.

On Friday this week heads of the supervisory Troika, the International Monetary Fund, the European Central Bank and the European Commission are coming to Athens. Job cuts and the reduction of costs in the public sector are the two main topics which will be discussed with the government. According to the action plan, by the end of the year around 30-35 thousand employees in public administration have to be exempted from work. These are mainly employees close to retirement age. They need to leave voluntarily, as they will gain some additional incentives for early retirement. So far, the government remains hostile to the plan, but it seems that lenders are not ready to retreat. This measure should save about 167 million euro to the budget. By 2015 the public sector in Greece has to operate more efficiently with 150,000 civil servants less, according to the agreement for financial aid.

The other major problem the government has to overcome is the cutting of wages in all areas of public administration. There the government is facing serious opposition from all groups affected. The meeting of Finance Minister Yiannis Stournaras with representatives of customs employees and tax officials ended without a consensus. They are demanding to be excluded from the lay-off plan. The demands of policemen, firemen, doctors, coast guard officials, prosecutors, judges and teachers in public educational institutions at all levels are the same. Trade unions say they are ready for all lawful protest actions in order to thwart the implementation of the redundancy measures, and Prime Minister Antonis Samaras (New Democracy) is giving a clear signal that this time the government will not make any compromises.

Meanwhile, the other two parties involved in the tripartite coalition government are starting to retreat. An official letter from PASOK to the government reads: "The proposed measures for cuts of pensions and salaries are horizontal, which is particularly unfair and is affecting people with the lowest pensions and salaries. It is important to note that the reductions affecting pensioners insured by agricultural funds and also by other pension funds are reaching 14%". PASOK's remarks seem particularly hypocritical bearing in mind that the socialists were in the last two governments and were first to initiate the wage cuts in the private sector, without taking serious measures to reduce the bloated government spending. In the fifth year of the crisis in Greece and in a deepening recession, budget cuts have to be more drastic in order to reduce the gap between revenue and expenditure in the state balance, say local analysts.

Fotis Kouvelis's Democratic Left, in turn, is trying to play both sides of the field. On the one hand, they are supporting the idea that the measures the government is preparing to introduce are socially unjust and harsh, but they do not omit to note that the country cannot continue to function without the next instalment of 31 billion euro from the European financial assistance. "Democratic Left will continue to fight inside and outside the government to renegotiate the Memorandum and the package of 11.6 billion euro. This includes antisocial and unjust measures, but we want our lenders to allocate time and resources in order for the current measures to be compensated by means of the fight against corruption and tax evasion, and so as to get out of the vicious circle of recurring recession. "Democratic Left does not oppose categorically the government, but states that we would take part in the protest of the Syndicate of private sector employees for the return of collective labour contracts.

On Sunday, Prime Minister Antonis Samaras is convening a meeting of political leaders who support the government at which it is expected that who is defending what will be clarified. Meanwhile on Friday, the Athens Stock Exchange ended with fireworks and a growth of 2.14%. The main index reached 693.49 points, while turnover reached 49.5 million euro. The banking sector (+5.6%), utilities (10.5%) and raw materials (6.7%) proved profitable. The largest losses were recorded by the shares of companies in the food industry (-3.4%).

 

Tags: Economics Markets Politics Troika recession crisis Greece
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