April 19, 2024

Beleaguered Greek Government Presents Austerity Steps to Parliament

ATHENS — Greece provided details on Friday of a four-year economic plan designed to extract the country from its deepening debt hole, including new taxes as well as additional cuts to public spending and a winnowing of the civil service.

The plan, submitted in Parliament late Thursday, aims to raise 6.4 billion euros, or $9.2 billion, this year alone, Finance Minister George Papaconstantinou said at a news conference on Friday.

“Efforts will be based chiefly on reducing spending, not on increasing revenue,” he said. He promised a vote on the measures by the end of the month even as protests by opposition parties, unions and the public mount.

“We have to continue this difficult course of fiscal adjustment until we emerge on the other side,” Mr. Papaconstantinou said. Adoption of the new measures is “a prerequisite for further emergency funding,” he added.

Although Greece succeeded in cutting its budget deficit by 12 billion euros last year, an upward revision of the deficit to 10.5 percent of gross domestic product, from 9.5 percent, and a deeper-than-expected recession has made new measures unavoidable if Athens is to meet its deficit-reduction goals this year.

The European Union and the International Monetary Fund promised Greece 110 billion euros in loans last year and are now discussing an additional bailout to save Greece from default and avert a crisis in the euro zone.

But an impasse over the next phase of aid for Greece deepened on Friday after German lawmakers endorsed plans to require private investors to share the cost and the European Central Bank hardened its opposition to that.

Jürgen Stark, a member of the bank’s executive board, offered no indication Friday that it was open to compromise with political leaders on the issue of granting Greece easier terms. “We don’t participate in any negotiations,” he said in Frankfurt.

The debate has put the European Central Bank on the defensive over criticism that its opposition to a restructuring of Greek debt is colored by its own holdings of the country’s bonds and the losses it would suffer from any restructuring.

Responding to such critics, Mr. Stark said that some outside estimates of the E.C.B.’s exposure to questionable assets were greatly exaggerated. “These risks are manageable,” he said, but declined to say how big the risks were. The bank has purchased Greek bonds on open markets and also accepts them as collateral for low-interest loans to commercial banks.

The German Bundestag on Friday authorized the government to take part in a new aid plan for Greece, but only after Wolfgang Schäuble, the finance minister, promised that taxpayers would not bear the burden alone. “We must insist on participation by the private sector,” Mr. Schäuble said during the debate in the Bundestag, the lower house of Parliament.

German taxpayers resent having to pay to rescue Greece, while Greek citizens are angry at the hardships created by the austerity program that was a condition of aid. The tensions have shaken support for the European Union.

In what seemed an attempt to defuse that tension, Mr. Schäuble took pains to praise Greece’s efforts to modernize its economy while enduring an economic slump. “The extraordinary consolidation effort that Greece has undertaken is often overlooked in the public debate,” he said.

Details of that effort disclosed on Friday included more cutbacks and tax increases.

Over the next few years, the civil service, which employs about 700,000, will be reduced by a quarter, Mr. Papaconstantinou said, adding that the ratio of one new hire for every five departures would become one for 10.

The minister also heralded cuts in Greece’s spending in the military sector, which accounts for about 4 percent of gross domestic product.

The new taxes outlined by the minister include a graded “solidarity tax,” ranging from 1 to 4 percent according to income, with an additional 3 percent tax on the income of civil servants. That money is to go toward an emergency fund for the swelling ranks of the unemployed, currently at 16 percent.

The incomes of civil servants have already been reduced up to 20 percent over the last year, but the fact that their jobs are permanent puts them in a privileged position, the minister said.

“They don’t face the same risk of unemployment as those in the private sector,” he said.

An emergency tax will also be imposed on the owners of large properties, yachts and swimming pools, the minister added.

Niki Kitsantonis reported from Athens and Jack Ewing from Frankfurt.

This article has been revised to reflect the following correction:

Correction: June 10, 2011

An earlier version of this article incorrectly referred to the four-year plan as a three-year plan.

Article source: http://feeds.nytimes.com/click.phdo?i=6e490cb5e94d8b1e5257d4bfbff4f994