A set of austerity measures to be applied straight away were announced by the government on Wednesday evening as it tries to convince the International Monetary Fund, the European Central Bank and the European Commission, known collectively as the troika, that it is serious about meeting its fiscal targets and should receive its next loan tranche.
After a cabinet meeting lasting some seven hours, government spokesman Ilias Mossialos set out in a written statement the steps to be taken, pending Parliament?s approval in the next few days, to reduce Greece?s deficit. ?These choices send the message to our partners and the markets that Greece wants and is able to fulfill its obligations, always remaining in the central core of the euro and the European Union.?
The Cabinet decided the tax-free threshold on income should drop from 8,000 to 5,000 euros. It also approved a unified pay structure for the public sector, whose details were not announced.
The government will not touch state pensions below 1,200 euros but anybody in retirement earning above that threshold will see the extra amount reduced by 20 percent. Any pensioners under 55 will have anything they earn above 1,000 euros reduced by 40 percent.
Some 30,000 public sector workers will be placed in a labor reserve by the end of the year, according to the plans announced. This means they will earn a reduced salary for a limited period before the government has the right to sack them or re-employ them.
In his statement, Mossialos also said the Cabinet had approved several structural reforms and privatizations but did not give any details. He said a new tax code would be presented to Parliament next month in a bid to rectify ?inequalities and injustices that have existed for decades.?
The government hopes these measures will be enough to convince top troika officials, who will be back in Athens next week, that Greece should receive its next loan installment of 8 billion euros. Without it, the state will run out of money by the middle of October.
Speaking in Parliament before the cabinet meeting, Finance Minister Evangelos Venizelos admitted that a series of failures and the worsening recession made it necessary for the government to go on a new austerity drive.
?Do we have to take additional measures? Yes we have to take supplementary measures… because of the recession, because of the difficult task, and the weakness of the central administration have not produced the required results,? he said, while adding that the troika?s presence in Greece was necessary if the country wants to improve its public finances.
?If we did not have the supervision of the troika… we would have again unfortunately slipped off the fiscal track,? he said. ?It?s not a question of intent. It?s a matter of mentality, lack of ability, management structure, methods, habits and inertia.?