Austerity and loan agreement
On 5 March 2010, the Greek parliament passed the Economy Protection Bill, expected to save €4.8 billion[38] through a number of measures including public sector wage reductions. On 23 April 2010, the Greek government requested that the EU/International Monetary Fund (IMF) bailout package be activated.[39] The IMF had said it was "prepared to move expeditiously on this request".[40] Greece needed money before 19 May, or it would face a debt roll over of $11.3bn.[41][42][43]
The European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan. The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners. On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate €45 billion in loans to be provided in 2010, with more funds available later. A total of €110 billion has been agreed.[44][45] The interest for the eurozone loans is 5%, considered to be a rather high level for any bailout loan. According to EU officials, France and Germany[46] demanded that their military dealings with Greece be a condition of their participation in the financial rescue.[47] The government of Greece agreed to impose a fourth and final round of austerity measures. These include:[48]
- Public sector limit of €1,000 introduced to bi-annual bonus, abolished entirely for those earning over €3,000 a month.
- An 8% cut on public sector allowances and a 3% pay cut for DEKO (public sector utilities) employees.
- Limit of €800 per month to 13th and 14th month pension installments; abolished for pensioners receiving over €2,500 a month.
- Return of a special tax on high pensions.
- Changes were planned to the laws governing lay-offs and overtime pay.
- Extraordinary taxes imposed on company profits.
- Increases in VAT to 23% (from 19%), 11% (from 9%) and 5.5% (from 4%).
- 10% rise in luxury taxes and taxes on alcohol, cigarettes, and fuel.
- Equalization of men's and women's pension age limits.
- General pension age has not changed, but a mechanism has been introduced to scale them to life expectancy changes.
- A financial stability fund has been created.
- Average retirement age for public sector workers has increased from 61 to 65.[49]
- Public-owned companies to be reduced from 6,000 to 2,000.[49]
On 5 May 2010, a nationwide general strike was held in Athens to protest to the planned spending cuts and tax increases. Three people were killed, dozens injured, and 107 arrested.[50]
According to research published on 5 May 2010, by Citibank, the European Monetary Union (EMU) loans will be pari passu and not senior like those of the IMF. In fact the seniority of the IMF loans themselves has no legal basis but is respected nonetheless. The loans should cover Greece's funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012). Citibank finds the fiscal tightening "unexpectedly tough". It will amount to a total of €30 billion (i.e. 12.5% of 2009 Greek GDP) and consist of 5% of GDP tightening in 2010 and a further 4% tightening in 2011.[51]
