May 10, 2010
The economic crisis is hitting Greece especially hard. A few years ago the biggest Wall Street banks convinced the Greek government to buy exotic financial products, which allowed it to hide the amount of debt they took on. At first the government seemed to come out ahead, but when the worldwide economic crisis hit, most of these exotic financial instruments not only proved worthless, they ended up costing the Greek government many times more than what Greece had borrowed, thanks to tricky bankers’ language. Not much different from the famous sub-prime mortgage scam run in this country – except this time, run on whole countries.
When Goldman Sachs, the architect of these deals, spread false rumors about Greece, other speculators drove up the interest rate on Greek government bonds. Future Greek borrowing from the “markets” will be at loan-shark rates.
In the face of this outrage, squeezed by the International Monetary Fund (IMF) and bankers threatening to push Greece into bankruptcy, Greek Prime Minister George Papandreou told “his fellow citizens” the choice was “great sacrifices or catastrophe.” He announced a three-year plan of new austerity measures. This will mean a real catastrophe for the entire population, in particular active workers and retirees.
Taxes and prices are going up again. The national sales tax goes up to 23% on many goods, and up to 11% on others. There will be a 10% increase in the price of gasoline, tobacco and drinks. There will be taxes on luxury goods, but also on real estate and on “illegal construction,” which hits the developers a lot less than the many small property owners, who knowingly or unknowingly “illegally” construct a modest house and then have to pay to regularize their situation.
Some government workers will suffer a 14% pay cut, while the lowest paid will suffer a smaller one. Those receiving Social Security retirement payments will have their benefits cut. Wages and pensions are frozen for three years. A Greek newspaper To Vima (The Tribune) estimates that every year a million public employees will lose from $2,100 to $4,000 each. The government will replace only one out of every five public workers who leave the job.
Workers will have to retire at an older age. By 2015 they will need 40 years of service rather than 37. Future pensions will be limited. Women in the public sector who now can get a full pension at age 60 will next year have to wait until age 65, like men. The government is grouping together numerous public pension plans into three, reducing the pensions for workers who labored in difficult and unhealthy occupations.
The Minister of Finance announced that there will be more layoffs and that severance pay will be reduced.
This plan set off a wave of protests and demonstrations, even on the part of small shopkeepers and artisans. But the richest are reassured: the Minister of Finance renewed his support to the banks.