Reuters reports that the Greek Parliament has just approved a five year austerity plan, a crucial step for the country in moving forward towards financial reform. The plan was “a condition to receive more EU-IMF funding,” and its early approval will be subject to further scrutiny as it is reviewed by legislators in the nation’s parliament over the next month before a voting deadline shortly thereafter.
The austerity measures will force the Greek Government to raise 50 billion euros through privatization of state assets and further cutbacks in public spending. More details on the provisions of the austerity plan can be found here.
The Greek Prime Minister said of the reforms, “The medium term framework includes interventions to achieve a deficit of 7.5 percent of GDP (gross domestic product) in 2011, and broader interventions to reduce the deficit below 3 percent of GDP by 2014, and around 1 percent for 2015. It also advances the broader privatization program.”
More on the plans’ details from Yahoo news, “The new plans include a remedial euro 6.4 billion ($9.4 billion) package of cuts and tax hikes for this year, a renewed euro 22 billion ($32.15 billion) austerity drive for 2012-2015 and the privatization program. Officials said all Greeks earning more than euro 8,000-10,000 annually will be charged an extra tax worth up to 3 percent of their income every year for the next four years, while the sales tax on restaurants and bars will increase to 23 percent from the current 13 percent. Civil servants and pensioners will suffer more income cuts, while health, education, defense and social spending will be further curtailed.”
Protests and civil unrest continue to rage in the Mediterranean nation as citizens, especially workers in the public sector, are outraged with the planned cutbacks. Greek unemployment is currently over 16%, as the nation’s GDP shrank by 5.5% this year and the national debt stands at a level of %138 of GDP (even with the new measures added into calculations). All in all Greece is still in for a rough ride, though the achievement today should serve as a landmark for the Greek people, and concerned investors, that progress is coming.