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June 24, 2011

Summary of New Fiscal Plan - Called "The Midterm" or "Troika Plan"

This plan agreement between Greece and the eurozone/IMF and was voted through the Greek Parliament on June 29, 2011.

A revision of the existing "5-year fiscal plan' has been agreed to by Greece and the EU/IMF/eurozone 'troika' to manage the ongoing Greek debt crisis and to avoid default.

The plan has to be approved, and is expected to go to a vote in the Greek parliament next week. To help 'sell' the deal to the roiling Greek street and political scene (which just weathered a confidence vote over Papandreou's leadership) the 'troika' plan contains an additional €15 billion euro loan for support of growth and jobs, plus options for negotiating a new/revised deal later.

The original May 2011 deal contained 14.32 billion euros of spending cuts, €490 million euros more than what is going to be given the the Greek parliament.

The 'new' version also has a total of €14.09 billion of tax measures, which is €649 million more than in the May version.

Some of the highlights of the new austerity package are:

  • The new deal amounts to €78 billion euros, the money coming from a combination of eurozone countries and private lenders.
  • The plan is intended to patch up Greek shortfalls through 2014. A first payment of €12 billion euros would be delivered to Greece in mid-July, 2011.
  • The plan is a revised version of the May 2011 proposal. The new plan contains an additional €155 million euros
  • The fiscal measures call for a tax increase of €2.32 billion in 2011. The plan requires €3.38 billion in 2012, €152 million in 2013, and €699 million in 2014. Inside theses numbers is a so-called "solidarity levy" of €1.38 billion that are charges of 1 to 5 percent of individual Greek incomes.
  • The 'tax free' income level in Greece will drop from €12,000 to €8,000.
  • Property taxes will be increased.
  • Unauthorized buildings (endemic in Greece) will be processed to legitimacy, along with the application of the appropriate fees.
  • The VAT tax at restaurants and bars will go from 13% to 23%.
  • 'Luxury levys' on yachts, swimming pools, automobiles will be introduced.
  • A list of existing tax exemptions will be nullified.
  • Public sector salary costs:
    • Temporary contracts will be phased out
    • Major hiring reduction, i.e., only 1 in 10retiring workers will be replaced in 2011, and 1 in 5 in coming years under the plan
    • Wage reductions of €770 million in 2011, €600 million in 2012, €448 million in 2013, and €700 million in 2015
  • Entitlement reductions through means testing:
    • €1.09 billion in 201
    • €1.28 billion in 2012
    • €1.03 billion in 2013
    • €1.01 billion in 2014
    • €700 million in 2015.
  • Increased contribution fees on entitlements (i.e., 'social benefits'):
    • €629 million euros in 2011
    • €259 million in 2012
    • €714 million in 2013
    • €1.14 billion in 2014
    • €504 million in 2015
    • additional savings through rooting out fraud and fee evasion
  • Losing or merging public entities / subsidies
    • €490 million in 2011
    • €700 million euros spread out over 2012-2015
  • Stopping tax evasion
    • €878 million in 2013,
    • €975 million in 2014
    • €1.15 billion in 2015
  • Reduction in public investment spending:
    • €850 million 2011 (an increase of €150 million over the original May 2011 plan)
  • Reduction in military spending:
    • €200 million in 2012,
    • €333 million spread out over 2013-2015
  • Health Care Cuts mainly through opening up cost competitions through of regulated drugs
    • €310 million in 2011
    • €1.81 billion spread out over 2012-2015

Major privatization effort meant to realize €50 billion by 2015

  • 2011 projected sale items: OPAP betting monopoly, Hellenic Postbank, Piraeus Port operators, Thessaloniki Port operations and Thessaloniki Water
  • 2012 - 2015: Selling portions of Athens Water, Hellenic Petroleum, PPC electric utility, ATE Bank, various airports, motorway concessions, land and mining rights
  • 2013-2015: €7 billion to be reaised

More about the Troika in Greece:

The June 2011 Troika Loan Plan

"Midterm" Troika plan passes Greek Parliament - June 2011

Troika primary requirement: Reduce the size of the Greek state - Sept 2011

Questions about Troika Powers in Greece - June 2011

Epicurus Greece Travel

Travels with Epicurus: A Journey to a Greek Island in Search of a Fulfilled Life

Rick Steves Athens and Peloponnese Guide Book

Rick Steves Greece: Athens & the Peloponnese

Amazon 2016 Lonely Planet Guide Greece

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