Breakdown Of Greek Austerity Measures

Tyler Durden's picture

For those asking, here is a full breakdown of the actual proposed fiscal measures to be implemented if the mid-term austerity vote passes tomorrow, courtesy of the BBC.

The Greek parliament is debating the latest set of austerity measures, which it needs to pass to qualify for another payment under the bail-out from the European Union and the International Monetary Fund. The five-year plan was changed last week to allow for more money to be raised through tax increases and less money to be saved through spending cuts. The plan involves cutting 14.32bn euros ($20.50bn; £12.82bn) of public spending, while raising 14.09bn euros in taxes over five years.

These are some of the austerity measures planned.

TAXATION

  •     Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
  •     A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
  •     The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
  •     There will be higher property taxes
  •     VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
  •     The VAT rate for restaurants and bars will rise to 23% from 13%.
  •     Luxury levies will be introduced on yachts, pools and cars.
  •     Some tax exemptions will be scrapped
  •     Excise taxes on fuel, cigarettes and alcohol will rise by one third.
  •     Special levies on profitable firms, high-value properties and people with high incomes will be introduced.

PUBLIC SECTOR CUTS

  • The public sector wage bill will be cut by 770m euros in 2011, 600m euros in 2012, 448m euros in 2013, 300m euros in 2014 and 71m euros in 2015.
  • Nominal public sector wages will be cut by 15%.
  • Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
  • All temporary contracts for public sector workers will be terminated.
  • Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.

SPENDING CUTS

  • Defence spending will be cut by 200m euros in 2012, and by 333m euros each year from 2013 to 2015.
  • Health spending will be cut by 310m euros this year and a further 1.81bn euros in 2012-2015, mainly by lowering regulated prices for drugs.
  • Public investment will be cut by 850m euros this year.
  • Subsidies for local government will be reduced.
  • Education spending will be cut by closing or merging 1,976 schools.

CUTTING BENEFITS

  • Social security will be cut by 1.09bn euros this year, 1.28bn euros in 2012, 1.03bn euros in 2013, 1.01bn euros in 2014 and 700m euros in 2015.
  • There will be more means-testing and some benefits will be cut.
  • The government hopes to collect more social security contributions by cracking down on evasion and undeclared work.
  • The statutory retirement age will be raised to 65, 40 years of work will be needed for a full pension and benefits will be linked more closely to lifetime contributions.

PRIVATISATION

  • The government aims to raise 50bn euros from privatisations by 2015, including:
  • Selling stakes this year in the betting monopoly OPAP, the lender Hellenic Postbank, port operators Piraeus Port and Thessaloniki Port as well as Thessaloniki Water.
  • It has agreed to sell 10% of Hellenic Telecom to Deutsche Telekom for about 400m euros.
  • Next year, the government plans to sell stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATEbank as well as ports, airports, motorway concessions, state land and mining rights.
  • It plans further sales to raise 7bn euros in 2013, 13bn euros in 2014 and 15bn euros in 2015.

h/t Ran Squawk

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Bindar Dundat's picture

Like this is ever going to happen!

oogs66's picture

the vote for it happening, or it actually happening? 

monkeyshine's picture

I am hoping they vote against it. But they will probably vote for it, then, vote again later against it, to quote a famous american politican campaign.

They will probably pass the bill, then over the course of the next several years unwind it.

Personally, I can't see how this plan is workable.  The primary goal of raising taxes is to increase revenues to the treasury, but these are so onerous and vast that they will result in the opposite; First, they raise the income tax on everyone, leaving fewer discretionary income. Then they raise the VAT "sales" tax which means of the money you can spend in any store or restaurant, more of your discretionary income has to go towards the tax, ultimately resulting in you spending less in that store or restaurant, which means lower income for the owner and workers, which means less discretionary income, which means lower incomet tax revenues and less spending. 

I cannot see this happening, either. They may vote for it (though I hope they do not), but tthey will have to change their minds pretty soon afterward. 

A Man without Qualities's picture

These measures aren't particularly onerous, it's the fact that current tax collection is so weak.  Only 5,000 people in the country declare earnings above 100k Euros, and having stated income at 15k has become an art form.  The biggest industry in Greece is tax exempt for fuck's sake, how is this supposed to work.  What the Euro leaders would like to see is the government taking steps to stop rampant tax evasion, but they cannot step across this boundary without being called Nazi.  So, what will happen is even more will move underground, or under the table, in the "spirit of resistance".

So, they'll vote for it and then immediately get back to what they do best.

 

 

 

 

 

Jonas Parker's picture

Looking at the percentages involved, it appears that the Greeks will be legislating themselves into an economic crash if they go with these numbers. They'd probably be better off to default and start over.

caconhma's picture

There will be a terrible ending for Greek people but it will be a beginning of the end for the criminal bankster cartel.

Jack Sheet's picture

They will agree to anything to get the next suck of the teat - 12 billion €. Then they will proceed as hitherto - compliance D-

SheepDog-One's picture

And its all for 12 billion Euro's....thats not even 2 days of Bernank POMO. Imagine whats coming here right after this big fat Greek debaucle!

masterinchancery's picture

No it won't, since these massive tax increases would kill the Greek economy stone dead.  But the Greeks may SAY they are going to do it, to get their hands on the cash, which will promptly disappear.

slow_roast's picture

Basically they'll aim to cripple the economy, which will somehow help the country to grow at a rate which allows them to pay off their newly added debt; yeah...okay. 

This may be the best part: " Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014."

Doode's picture

Called shock therapy - at first it hurts A LOT, but then once the socialism sickness is shed the healthy body starts to grow very rapidly. The same happened in Russia in the 90's.

richard in norway's picture

yes but ordinary Russians are still 10 years away from the standard of living they had in 1991, assuming that the rate of growth remains as high as today

Doode's picture

"yes but ordinary Russians are still 10 years away from the standard of living they had in 1991"

Ehhh? Where did you get that from? Per Capita went up a lot.

richard in norway's picture

per capita is not the same as ordinary, or maybe you can't count

Doode's picture

Ordinary is up as well - it crossed USSR threshold a few years back. It was a big deal in the news.

laomei's picture

then do please explain how former soviet states are full of people who are much worse off now? Capitalism only served to enrichen a handful at the expense of millions who (previously had job security, food security, housing security) are now living in abject poverty?  Capitalism is a con game and the sooner it is destroyed the better off everyone will be.

Medea's picture

Yeah, Russia is a dream come true.

TheTmfreak's picture

Perfect for kleptocrats.

CrashisOptimistic's picture

Russia has 10 million barrels per day of oil production.  Greece has jack.

A.W.E.S.O.M.-O 4000's picture

That, combined with their secret weapons of Alcoholism and Despair, makes Russia unstoppable!

Doode's picture

What are you talking about - they got plenty of oil!!! Just a bit different kind - the olive kind :)

slow_roast's picture

Russia is a bastion of freedom and equality.  Of course Russia also had a currency that they couldn't manipulate and almost no natural resources to exploit eh...oh wait....

monkeyshine's picture

What economy?  The export of Baklava, Gyros and Olives?

Reptil's picture

I just had some fresh italian pasta, greek feta cheeze and spanish olives for dinner.
In the coming food shortage period (peak-food?) unspoilt cultivated land that hasn't been drenched in Glyphosate yet, is a truly valuable asset.
That's why the idiots in Brussels should be shot, like rabid dogs, for destroying an economic unity in the making, with their obsession to control everything and everyone, by sneaking in unlawful (un-constitutional) treaties, and for nearly 2 decades throwing money at corrupt elites all around. They're not state builders, they're power hungry fools, and should be disposed of.

Yeah I'm pissed, and disappointed.
Over here the proponents of this failed "strategy" that they kept, and are keeping secret are trying to calm the population, seeing the massive incompetentcy in everything they've ever done. "Please stay calm, nothing to see here" is mostly a sign they're either going to enslave their kin by brute force while steadily repeating the same mistakes (beating down a peaceful protest march of artists yesterday here in the capital, unheard of in all of the Netherlands' history! does NOT appear in most of the leading papers), or are about to throw their hands in the air call their peers and try to "move forward" by staging some sort of a "coup".

http://www.telegraaf.nl/binnenland/10104524/__Verhagen__onbehagen_begrij...

One definition of insanity is repeating an action over and over, and expecting different results.

:-/

WakeUpPeeeeeople's picture

coming soon to a Greek restaurant in Athens.

 

Sir,

 Would you like some cat food with your olive oil?

Reptil's picture

Or in Haïti. Doode, would you like some mudpie?

Your idea is terrible from an ethical POV, but worse; it's completely wrong. Comparing Russia of the late nineties (before Putin planted his false flag) with Greece is totally off the mark. (a vast resource-rich former leninistic (not socialistic) world power with nuclear capabillity and virtually unconquerable with OTOH a smallish sunbaked balkan country (bordering on Macedonia, and Albania) supporting a marginal tourism based economy, derived from (but not abandoned by) a former militairy dictatorship, with the only resource of value being it's (overall stubborn) people, strategic and arable land, and a few ships and old stones? yeah right! :-S)

Then to expect "austerity" measures, in a country that already was robbed blind by it's corrupt elite, in effect "raising taxes" on the productive part of society (workers and farmers) as a "cure against socialism" is ridiculous. It's more "repair payments" alike of a country that just lost a war, like post WW1 Germany, despite the spoiled and utterly worthless elite of Greece that despite the proposed "cure" will stay out of the bullseye.

Also, the "austerity" is presented as a means to balance a budget, while the cause of the imbalance was and will not be mended. Basically the average, illiterate, hardworking peasant will bleed EVEN MORE, while the elite will continue to siphon off wealth. Don't you get that with accepting this, and the ECB package, the very same people that lived like kings on EU money, will continue to do so, on more EU money. Of course they don't give a DAMN about their country, their own people, or anything. They see the world as a playground for the most vile, the most shrewd. Sounds familiar? It's a common state of mind. If you want to call anything a "sickness", psychopatic delusion of grandeur is a good candidate.

As all kleptocracies show, this is a losing strategy in the longer run. More organised, andvanced and disciplined countries, where a well informed and economically powerful middle class is the balancing weight to prevent megalomaniac imbalance, will overrun the disorganised, hollowed out countries. Something you can see happening everywhere, if you'd care to look.

But alas, like you, there are many; blinded by the generalising propaganda of "the greek being lazy" as if a nationality of a person also determines his or her character, and nature, you spout nonsensical "theories" of "socialism sickness" without really knowing what "socialism" is.

Please, get a clue?

Tenma13's picture

that was a verbal ass-kicking of the first order. Think you KO'd him half way through and were beating on a corpse after that. Nice one. 

dark pools of soros's picture

wait, but my social conditioning playbook says:

 

Greeks are lazy

Russians are drunk

Africans are untamed

Asians are gamblers

Brits are sickly

Germans are psychos

Italians are smelly

Spainards are confusing

Mexicans still have knives

Canadians are forgotten

French are rude

Americans are stupid

and Jews are fair with money and power

Re-Discovery's picture

The country had exactly 10 tax filers last year who claimed over $1 million Euro in income.  Yeah, this will work.

SheepDog-One's picture

This cant be real, HAS to be an Onion piece slipped in.

Re-Discovery's picture

heard on CNBS from inteviewee so I will grant that it could be wrong.  Clearly a huge issue.  50% of country's workers belong to a union.  Also, shipping probably the only real local business and the ability to shift income around to other countries in the region is legendary. 

CORRECTION UPDATE:  10 people in entire country prosecuted for tax evasion last year.  Not sure which tidbit is worse.

Sorry for misinformation.

SheepDog-One's picture

No, I mean this entire story of their 'plan'.

Re-Discovery's picture

The market is acting like a rat in a maze.  Trichet comes out with some bullshit 'vigilance' buzzword today to appease Merkel's political desires and everyone thinks that they'll be hiking rates.  They won't.  The Greek bailout is the ECB's form of QE/money printing, plain and simple.  The Euro is trash (Eurotrash?) and when the market wakes up to this the S&P will be back to 1000.

Re-Discovery's picture

The market is acting like a rat in a maze.  Trichet comes out with some bullshit 'vigilance' buzzword today to appease Merkel's political desires and everyone thinks that they'll be hiking rates.  They won't.  The Greek bailout is the ECB's form of QE/money printing, plain and simple.  The Euro is trash (Eurotrash?) and when the market wakes up to this the S&P will be back to 1000.

TheTmfreak's picture

The tax increases are ridiculous. Its funny how they think that raising all those taxes they think they're going to bring in more money. All this is going to do is shrink their economy further and make people save even more money. Its ludicrious to think raising taxes raises revenue in a country with a shit economy. All it says that the people should fear uncertainty even more. (justifiably)

Everybodys All American's picture

That is crazy difficult to see implemented all at once.

Corn1945's picture

They are asset-stripping the entire country.

Greater Fool's picture

Yep, this is how Greece becomes Scotland with better weather.

flyr1710's picture

sounds similar to ideas being floating around the US..interesting

kridkrid's picture

Outside of our printing press, the gravity of the situation is not much different.  Americans won't fight the privatization of all things public as we churn through our austerity measures yet to implemented.  Here's to hoping that the rest of the world makes our option less likely by showing the way.

WakeyWakey's picture

I cant wait to see them try and force Austerity measures in the US. Somehow I think the largest nation of armed citizens in the world won't just stick to stones and molotov cocktails.

SheepDog-One's picture

OMFG LMAO! 'Uh yea, you Greek peoples just hand over all your property and money and income, and we're all fixed....for a little while anyway. OK ready, set, VOTE!'

Doode's picture

It is like watching a bulldozer running over socialism! Very exciting!

I do not want this to happen here though so those debt talks better get some cuts done soon. If they do not cut it now then the sheer scale of unrest in this country in a decade with all the guns out there will be epic.

SheepDog-One's picture

Max Keiser says after Greece, USA's turn next. 

Doode's picture

I think we are like a deer in the headlights right now starring down at an incoming truck of debt. If we move now then many problems can and will be averted - the question is will we. Technically, we have another decade before things will get completely out of control so there is time, but it also leads to a false sense of security that we have time to act.

SheepDog-One's picture

But they wont act, they never act, they only react and hide and point fingers after the fact. These congress critters have had 30 years to deal with this crap and its far too late! Adjusting the brake pads on the speeding freight train 10 feet from the edge of the cliff is far too little too late.

centerline's picture

LOL.  Serial junker again.  Ha, ha, ha.

Yeah, the sequences of loosening, decoupling, and deregulation over the last few decades clearly shows the desperate need for increased leverage in order to keep the current fiat ponzi scheme from coming off the rails.  It was just a matter of time and human nature that we reach the end of it with a bang.  History moves in cycles and some people just dont see that.  Funny.  I guess when it comes to timeframes longer than an epsiode of American Idol, people just assume linearity (aka normalcy bias).

Junk away idiots.

centerline's picture

First, we wont move.  That has been made clear over and over again.  The only question is how the system fails... the series of "currency" and political events that will lead up to a physical reality.

Second, "another decade?"  back off on the crack pipe man.  Take virtually any chart and crayon-in a reasonable asymptote for the parabolic moves.  Yeah - this could draw out a little more - but we are talking months to years, not a decade.