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:
"Midterm" Troika plan passes Greek Parliament - June 2011
Questions about Troika Powers in Greece - June 2011