Eurozone finance ministers are withholding the latest Greek bailout funds but are giving Greece two more years to cut its budget deficit to 2 percent of GDP. On November 20 the ministers will meet again to discuss releasing the bailout funds. Although the Greek government recently passed a controversial budget and austerity measures there are a few reforms that still need to be implemented before bailout funds can be released.
So far the Greek government has passed unpopular austerity measures that include:
- Retirement age up from 65 to 67
- A further round of pension cuts, of 5-15%
- Salary cuts, notably for police officers, soldiers, firefighters, professors, judges, justice officials; minimum wage also reduced
- Holiday benefits cut
- 35% cut to severance pay
Unsurprisingly, these measures have not gone down well. Although some politicians and policy makers have been reassured by the austerity measures and the 2013 budget the opponents of Greek austerity have been enjoying a surge of support. In Greece the anti-bailout advocates are not just those from some left-leaning parties, they also include xenophobes from Golden Dawn. How soon the austerity measures and the new budget will inflict political damage on the incumbent government remains to be seen. Any serious changes in direction now would prompt a drastic change in attitude and policy from international lenders.
The goal had been for Greece to bring down its debt to GDP to 120 percent by 2020, and the International Monetary Fund has been arguing that his goal should remain. However, some eurozone finance ministers have been pushing for the deadline to be extended to 2022. When Prime Minister of Luxembourg Jean-Claude Juncker told journalists that the deadline would be extended to 2022 some reacted with laughter. Sometimes all you can do is laugh.