ECONOMY

Spending cuts to add up to nearly 40 bln euros in 2009-14

Greece’s fiscal streamlining is dependent on unprecedented expenditure cuts, as, following the 27-billion-euro reduction from 2009 to 2012, another 12 billion will be cut by 2014, bringing the total amount cut to almost 40 billion euros within five years.

At the same time, despite successive tax measures applied from 2009, revenues are expected to show a contraction of some 9 billion euros by end-2014.

These figures reveal why Greece’s creditors are adamant there should be no additional tax measures, with all avenues being explored on the expenditure side instead. Yet given that there is no margin for further cuts in salaries, pensions and social benefits, the troika – as the representatives of the European Commission, the European Central Bank and the International Monetary Fund are collectively known – has focused its attention on the closure of state agencies and the abolition of various structures that will lead to a reduction in the number of civil servants.

Eurostat data show that from late 2009 up to last year, the sum dedicated to public sector salaries has gone down by 7.3 billion euros, while the reduction amounts to just 3.9 billion euros for pensions, social benefits and health.

In the next two years, up until the end of 2014, the trend will be reversed: Expenditure on salaries will be reduced by an additional 2 billion euros, while spending on social benefits etc will go down by 6.6 billion euros. In total, salaries, pensions and benefits will shrink by 19.8 billion euros from 2009 to 2014, out of which 10.8 billion will affect social benefits and 9.3 billion salaries. Operating and consumer expenditure will decrease by a total of 11.2 billion euros, while the reduction in investment amounts to 4.9 billion euros, dropping to just 40 percent of the amount invested in 2009.

As a result, the spending cuts will add up to 38.6 billion euros at the end of 2014 as total expenditure will amount to 86.1 billion euros, down from 124.7 billion at end-2009.

On the other hand, the dramatic downward course of revenues (from tax and social contributions) highlights the negative consequences of the economic recession. In the 2009-14 period revenues from direct taxes will shrink by 1 billion euros, from indirect taxation by 2.3 billion and from social contributions by 5.8 billion euros for a total of 9.1 billion.