Greek government calls up for the increase of revenue and restrain of expenditure, knowing that it would be forced to reopen the case of cutting wages, pensions and benefits, if its initial plan fails.
The medium-term package of budget measures, which will be finalized by the end of March, is valued at €22bn but it could rise significantly if the differences in budget execution do not reverse.
Sources note that the government has two options in order to reduce the state deficit to € 1bn in the period 2011-2015:
-to restrain spending and increase revenue from tax evasion, even with a year of delay.
-to proceed with further firing and cutting of wages and benefits.
The first draft plan should be approved by the cabinet and be sent in Brussels for approval by the end of the month. The government has committed to place the draft under public consultation before submitting it for voting in the House at the beginning of May.
Government officials note that there will be an attempt to convince IMF/ECB/EU that the draft measures will have the structure of the Memorandum of Understanding, but this won’t be easy because of troika’s disbelief of Greece’s ability to recover from the decreased revenues revealed in budget execution. IMF/ECB/EU representatives are expected to arrive in Athens in March to review Greek government‘s progress.
According to this scenario, the government sets numeric targets for the entire period, but focus more for 2011-2012. An amount of € 2.5-5bn is expected to be drawn through social benefits, while the imposition of income criteria will increase state revenue by € 150mn in 2011 and by € 500mn in 2012. However, this may require further cutting if the cost of insurance funds is not restrained by € 8bn.
Regarding healthcare costs, a decrease of € 2bn is expected in 2011 and € 2.5bn over the following years, while medical expenditure will be cut by €0.5-1bn and payments to medical centers by €500mn. If these targets are not met, troika will exert pressure for greater involvement of the insured in the public care system.
Greek government targets to save up to € 5bn from public wage cuts. With the €1.7bn coming from the “1 recruit to 5 retirement” regulation, the remaining amount will come from changes in payroll.
The medium-term package of budget measures, which will be finalized by the end of March, is valued at €22bn but it could rise significantly if the differences in budget execution do not reverse.
Sources note that the government has two options in order to reduce the state deficit to € 1bn in the period 2011-2015:
-to restrain spending and increase revenue from tax evasion, even with a year of delay.
-to proceed with further firing and cutting of wages and benefits.
The first draft plan should be approved by the cabinet and be sent in Brussels for approval by the end of the month. The government has committed to place the draft under public consultation before submitting it for voting in the House at the beginning of May.
Government officials note that there will be an attempt to convince IMF/ECB/EU that the draft measures will have the structure of the Memorandum of Understanding, but this won’t be easy because of troika’s disbelief of Greece’s ability to recover from the decreased revenues revealed in budget execution. IMF/ECB/EU representatives are expected to arrive in Athens in March to review Greek government‘s progress.
According to this scenario, the government sets numeric targets for the entire period, but focus more for 2011-2012. An amount of € 2.5-5bn is expected to be drawn through social benefits, while the imposition of income criteria will increase state revenue by € 150mn in 2011 and by € 500mn in 2012. However, this may require further cutting if the cost of insurance funds is not restrained by € 8bn.
Regarding healthcare costs, a decrease of € 2bn is expected in 2011 and € 2.5bn over the following years, while medical expenditure will be cut by €0.5-1bn and payments to medical centers by €500mn. If these targets are not met, troika will exert pressure for greater involvement of the insured in the public care system.
Greek government targets to save up to € 5bn from public wage cuts. With the €1.7bn coming from the “1 recruit to 5 retirement” regulation, the remaining amount will come from changes in payroll.
