In May 2010 Greece agreed to receive a €110bn bailout from the International Monetary Fund and the European Union. Under the terms of that loan program, Greece must cut its budget deficit by 5.5% of gross domestic product in 2010 and aim for a deficit of 8.1% of GDP, but the latter is expected to be higher. To continue to receive the loan disbursements in 2011 Greece must narrow its budget gap further, to 7.6% of GDP.
General information and figures
In May 2010 Greece agreed to receive a €110bn bailout from the International Monetary Fund and the European Union. Under the terms of that loan program, Greece must cut its budget deficit by 5.5% of gross domestic product in 2010 and aim for a deficit of 8.1% of GDP, but the latter is expected to be higher. To continue to receive the loan disbursements in 2011 Greece must narrow its budget gap further, to 7.6% of GDP.
Unemployment rate (June 2010): 12.2%
GDP (bn euro – 2010): 232.77
General Government Debt (2009 - % GDP): 126.8
Public deficit (2009 - % GDP): 15.4
Source: Eurostat
Public Employees
Pay freeze for all civil servants until 2014.
Pay cut of 15% (average).
Abolition of Christmas bonus and fourteenth month salary for workers earning above €3,000 a month and will be capped at €1,000 for those earning less. These bonus salaries had already been cut by 30% under a previous set of austerity measures in March 2010.
Cuts in social benefits
Proposal to cut unemployment benefits in 2011.
Pension reforms
Pay cut and freeze in pension (average -7%).
The minimum number of years worked in order to be entitled to a full pension is increased from 37 to 40.
The retirement age, currently 65 years for men and 60 years for women, will be linked to average life expectancy.
Early retirement will be curtailed, with a view to banning any retirement below 60.
Pensions will be cut, to reflect a pensioner's average pay over the entire working life rather than his or her final salary level.
Cuts in public services, transfers and public investments
Education cuts.
Funds for state hospitals and municipalities are decreased.
The government is to sell 4 Airbus A340 airplanes.
The health ministry foresees cuts of €840m.
Defense ministry budget is decreased.
Collective bargaining and labour market reform
The maximum number of workers companies can lay off each month is doubled from 2% to 4%.
Minimum wages for young people (up to 25 years of age) and long term unemployed have been cut to a lower level (85%).
Abolishment of the ‘favorability’ principle in collective bargaining so that lower level wage agreements can undercut higher level national/sectoral agreements. At the same time, it becomes much more difficult for trade unions to appeal to labour judges in case of social conflict since the employer now also has to agree to go to the labour court. In practice, this means that the coverage of sector level bargaining agreements is being weakened.
Tax changes
General VAT is increased from 21% to 23%, it had already been raised to 21 percent from 19 percent in March. During 2011 some selected products will have a higher value-added tax. Lower VAT rates will be increased in 2011 to 13% from 11% and to 6.5% from 5.5%.
Indirect taxes, such as tobacco, alcohol and fuel, have seen a 10% increase in 2010. Due to the new austerity package, tobacco and alcohol will be further taxed in 2011.