greek government unveils austerity budget
News Posted On: 18 November 2010
The long awaited budget of Greek austerity budget has been unveiled to the world. The budget ambitiously aims to cut the country's public deficit to 7.4% of GDP, which is a cut of approximately 5 billion euros off the estimated 9.4% deficit for 2010.
Sales tax is to be increased from 11% to 14% on most items, alongside cuts on health and defence spending. None of this will go down well with the already irate population.
How well it goes down is both irrelevant and very relevant depending on which way you look at it.
It is very relevant to the government's success in meeting the budget's aim, because a national revolt could make doing anything very difficult, and would inevitably cut growth and scupper any reduction in the deficit from the other end.
On the other hand the reception of the budget is irrelevant, because the Greek government, which was forced to accept a 110bn euro bail-out from the EU and IMF in May must be seen to be doing everything it can to reduce the deficit, not least because payments of the bail-out were staged and contingent on such efforts.
When desperately in need of the bail-out, Greece agreed that in return for the much-needed cash it would enforce substantial spending cuts, in order to reduce the deficit and government debt.
Not that the budget is merely an exercise in appearance, it seems they are determined to bring down the deficit for obvious reasons. For example it is selling shares in government-owned companies, such as rail operator Trainose, mining firm Larko, gas operator DEPA, and defence group Hellenic, and also 4 airbus jets that it owns.
It will all help, considering that the finance ministry now expects a 3% contraction in the economy next year, up from the 2.6% previously forecast.
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