Tags: EU | Greece | Financial | Crisis

Greeks Optimistic on Slashing Budget Deficit to Bone

Thursday, 24 Jun 2010 03:48 PM

Greece's finance minister on Thursday voiced confidence that the country, despite its crippling debt and gaping budget deficit, will meet or even surpass its ambitious targets to slash spending and boost revenues by the end of the year.

"Have we won the bet? No," George Papaconstantinou said. "But we have well-founded hopes and are optimistic that, for the first time in many years, at the end of the year the state budget will achieve or even exceed the targets we have set."

Papaconstantinou said his optimism was based on figures showing a 40 percent deficit reduction during the first five months of the year, as well an expected revenue boost from increased consumer taxes.

Greece narrowly avoided bankruptcy in May, using the first installment of a 110 billion euros ($135 billion) bailout from the International Monetary Fund and the European Union — which saw its common currency, the euro, hammered by the Greek debt crisis.

In return, the center-left government agreed to slash its budget deficit from 13.6 percent of Gross Domestic Product in 2009 to under 3 percent in 2014 — through a painful combination of tax hikes and cuts in pensions and civil servant pay. For this year, the deficit target is 8.1 percent of GDP.

On Friday the cabinet is set to approve a key draft law on pension and labor reforms that has further angered already hostile unions, which have held a string of strikes over the past few months.

Prime Minister George Papandreou said Thursday he had abandoned plans to pass the labor reforms — which will make it cheaper for companies to fire workers — separately, by presidential decree, which does not require approval in parliament.

"These changes will be discussed in parliament ... because our government has nothing to fear," he said. Papandreou's Socialist party holds a 7-seat majority in the 300-member house, but several Socialist lawmakers have expressed strong reservations at the proposed reforms. Papandreou has already expelled three deputies who failed to support the austerity package in a crucial vote last month.

The government says the current pension system is not viable, and if left unchanged would come to absorb 24 percent of GDP in 2050, from the current 12 percent.

"It is our duty to ensure that the state will be able to pay pensions in the long term," Papandreou said.

"I don't want to trick anybody," he added. "We face hard years of intense effort. But the most painful measures are now at the start."

Meanwhile, the French and German ministers for European affairs stressed during a joint visit to Athens on Thursday the importance of ensuring the continent maintains its common currency.

German Deputy Foreign Minister Werner Hoyer and French Minister for European Affairs Pierre Lellouche said their visit was a show of solidarity with debt-burdened Greece, and a message of "European determination."

Germany and France are the two largest contributors to the EU and IMF rescue package. Germany had been reluctant to extend the loans, with Chancellor Angela Merkel facing opposition by a German public that largely considered Greece responsible for its predicament through years of overspending and bad fiscal management.

Solidarity with Greece was "about defending our currency, our economy against speculation," Lellouche said.

Hoyer praised Greece's austerity measures.

"It is very reassuring for us to see that this government is very clearly on a steady European and euro course and that it is ready to take measures which are very difficult for the people to accept but obviously are considered necessary," he said in statements to the media with Lellouche.

"We must not leave any doubt about the continuation of the European integration process, including the process of organizing our economies together with a common currency," the German minister said, adding that Greece was "an indispensable part of this exercise."

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Greece's finance minister on Thursday voiced confidence that the country, despite its crippling debt and gaping budget deficit, will meet or even surpass its ambitious targets to slash spending and boost revenues by the end of the year. Have we won the bet? No, George...
EU,Greece,Financial,Crisis
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2010-48-24
 

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