Greece unveils more austerity measures

Greek Finance Minister Evangelos Venizelos and Prime Minister George Papandreou at a news conference in the northern city of Thessaloniki. "We know that these measures are unbearable," Venizelos said. "But once more, we all have to rally together in a national effort." (Aris Messinis / AFP/Getty Images / September 12, 2011)
Greece unveils more austerity measures

Reporting from Athens—

Under intense pressure from international lenders, Greece on Sunday announced a new set of austerity measures to meet deficit reduction targets and stamp out speculation that it would be forced out of the European single-currency zone.

The measures, which include a two-year property tax, are intended to make up for revenue shortfalls that come to about $3 billion this year alone.

Though designed to target mainly high earners, the new tariff could further anger the crisis-weary middle class and pose political risks for the socialist government, which repeatedly has pledged to protect Greek households from being hurt by further austerity measures.

“We know that these measures are unbearable,” Finance Minister Evangelos Venizelos said after a heated six-hour Cabinet meeting in the northern city of Thessaloniki. “But once more, we all have to rally together in a national effort.”

That could prove tricky.

Over the weekend, thousands poured onto the streets of Thessaloniki, the country’s second-largest city, to protest austerity policies. In Athens, the Greek capital, youths firebombed a police bus in retaliation for the detention of more than 30 of the protesters in Thessaloniki.

Outside Greece, there are new worries that Athens is dragging its feet on measures it agreed to undertake in exchange for a $159-billion financial lifeline.

This month, the government’s talks with inspectors from the European Commission, European Central Bank and International Monetary Fund were abruptly suspended because of differences over Greece’s gaping budget shortfalls, its lagging plans to sell off state assets, and its ailing fiscal performance.

It is unclear whether the new measures will ease creditors’ concerns.

If not, the next $11-billion tranche of loan aid due this week could be in danger.

Officials predict that Greece’s economy will shrink 5.3% this year. With recession biting deeply into the economy and fears about the prospects of the euro currency growing, yields on Greek bonds jumped Friday.

The euro slid to a six-month low against the dollar, and markets fell on reports that Germany, the main bankroller of Athens’ multibillion bailouts, was preparing for Greece to default or leave the 17-nation single-currency zone.

“We face a difficult predicament,” Venizelos said. “We must silence this speculation and can come out clean with a new and radical drive to implement reforms down to the T.”

As part of the new cost-saving measures, Venizelos said, the government would also move to slash the salaries of elected officials, including the president’s by 7%, and tap into the deep pockets of wealthy shipowners.

Even so, critics warn, it’s unlikely Greece’s lenders and markets will breathe easier.

“These new measures are a total disgrace,” said former conservative Finance Minister Stefanos Manos, who now leads a political action group. “Rather than go after the bloated public sector, the government has saddled homeowners with more property taxes, for the umpteenth time.”

Greece’s lenders, he said, “should reject the plan and the government should resign.”

Recent polls showed the ruling Socialist party falling further behind conservatives. Nearly 8 in 10 Greeks say they are unable to pay the emergency levies imposed by the government in the last year.

Carassava is a special correspondent.