December 8, 2023

Greece Hit by General Strike to Protest Austerity

The nationwide walkout, called by the country’s two main labor unions, which represent some 2.5 million workers, shut tax offices and other government services, reduced hospitals to emergency staff and disrupted travel. Trains remained in depots and international flights were to be suspended between noon and 4 p.m. as air traffic controllers joined the action. Public transport workers were running a reduced service to allow Greeks to join protest rallies planned for Athens and other major cities.

The upheaval came ahead of a vote scheduled for Wednesday night in Parliament on legislation bundling together a new barrage of economic reforms — including a contentious streamlining of the Greek Civil Service. The bill must be passed if Athens is to secure the first installment of $10 billion in rescue loans approved last week by euro zone finance ministers.

Greece’s troika of foreign lenders — the European Commission, the European Central Bank and the International Monetary Fund — have pledged the country two bailouts worth a little more than $300 billion since the spring of 2010 but are dispensing the aid in tranches to keep the pressure on authorities to adhere to commitments to change.

The reforms that have most angered the unions are plans to put 25,000 civil servants, including teachers and municipal police officers, into a so-called mobility plan by the end of the year, docking their wages ahead of forced transfers or dismissals. Another 15,000 workers are to be laid off by the end of 2014.

Local government employees have been occupying city buildings this week to protest the changes which, the unions say, will aggravate a deepening recession and add to the ranks of the unemployed who already account for more than 27 percent of the population.

“We will resist all those whose wrongheaded and dead-end choices have led the Greek people into poverty and wretchedness,” said the main private sector labor union, Gsee, which called the action with the civil servants’ union, Adedy.

A unilateral decision last month by Prime Minister Antonis Samaras to shut the state broadcaster ERT, putting some 2,700 employees out of work, nearly brought down his shaky coalition after the junior partner quit in protest. The debacle illustrated the difficulties the administration would have in honoring pledges to creditors to slash a Civil Service that has been cosseted for decades.

Despite the vehement opposition of unions and workers, Greece’s lenders, prodded by Germany, have pressed authorities to stay the course of reform. Public anger at austerity is expected to peak on Thursday when Germany’s finance minister, Wolfgang Schäuble, is to visit Athens.

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Economix: Imagining the End of the Bush Tax Cuts

My column this week examines the political challenge at the center of the deficit debate: the mismatch between the government services that voters want and the taxes that they are willing to pay. I suggest that a deadlock over the Bush tax cuts – expiring on Dec. 31, 2012, as prescribed by current law — may be one of the most plausible medium-term solutions.

Two notes about the column:

First, the Congressional Budget Office projects that not only would the short-term deficit come under control if Congress let current law stand, but the long-term deficit would, too. Austin Frakt has reproduced the chart on the Incidental Economist blog.

But these calculations assume that the Alternative Minimum Tax affects more and more families over time because Congress stops passing exemptions. The calculations also assume that Congress ignores something called real bracket creep, in which more families are hit with higher tax rates as incomes rise over time.

Both of these situations seem pretty unlikely. It’s just hard to imagine a world in which the United States government collects taxes equal to 30 percent of gross domestic product, up from an estimated 14.4 percent this year.

Second, a fair question to ask is, But won’t President Obama worry about taking the blame, just as he did when the tax cuts expired last year? Yes and no. Here’s Jonathan Chait at The New Republic, who has done some of the best writing on this subject (subscription required):

… what happens at the end of 2012? Well, the economy should be two years further along into a recovery. And Obama’s re-election will be behind him. At that point, his choice is easy. All he has to do is refuse to extend the tax cuts on income over $250,000 a year. He can say he favors a tax cut for income under that level, but he won’t have to follow through on that pledge, because Republicans will never agree to pass a tax cut only on income under $250,000. In a hostage standoff where one party secretly hates the hostage and the other party is at best indifferent to the hostage, then the hostage is probably going to die. End result: All the Bush tax cuts disappear starting in 2013.

Mr. Obama could blame Republicans for letting taxes go up on the hard-working middle class. (Hey, he wanted to extend them!) But their expiration would be a huge policy boon. It would slice $3.9 trillion off the national debt by 2020. How much is that? It would reduce the budget deficit to about 2.5 percent of gross domestic product, which means it would be out of the danger zone where the debt is growing faster than the economy.

I don’t want to suggest this chain of events is very likely. (And I don’t know that Mr. Chait does either.) But no single solution to the deficit seems likely. This one seems more plausible than many others.

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