One Year Ago, Italy, Greece, Spain and UK Governments Announced Austerity Measures

Flashback: Greek Government Announces Major Pension Cuts

The Greek middle class has completely abandoned the working class. There are calls now from the billionaire owned papers to suspend the constitution in order to deal with the popular dissent in Greece. The Greek government in collusion with the IMF and the EU are calling for a pension freeze, massive tax increases on that frozen pension, and stripping holiday bonus pay. Factor all that in with the huge tax increases, pay rate reductions, and privatizations and what you end up with is the standard of living of the working and poor classes being attacked right out in the open, with the “liberal elites” arguing they need to suspend the constitution to deal with the slave uprising.

May 13, 2010

American Everyman - On Tuesday, the Greek government announced a massive cut in pension benefits. The bill was prepared in consultation with International Monetary Fund (IMF) and European Union (EU) officials in a cabinet meeting the night before.

The measure is the latest in a series of cuts carried out by Prime Minister George Papandreou’s social democratic government, following the outbreak of the Greek debt crisis. It comes on the heels of a nationally televised May 2 announcement of a €30 billion austerity plan, including massive wage cuts, sales tax increases and privatisations in exchange for a joint IMF-European bailout.

Editor's Note: When you hear about privatization of government services, remember that this is a code word for private equity and public-private partnerships. The invisible money power behind private equity firms are the same international bankers that engineered this worldwide banking crisis, with the goal of consolidating the world's wealth into their hands.

The law raises women’s retirement age from 60 to 65, to match the age for men, and raises the required pay-in period to receive a full pension from 35 to 40 years. It institutes a 6 percent pension cut penalty for every missing year. The government aims to raise the effective average retirement age from 61.4 currently to 63.5 by 2015, while still allowing the government to assess penalties for early retirement.

The basic state monthly pension is to be cut 10 percent, from €400 to €360 (roughly US$450 at current exchange rates). Retirees often supplement the state pension with savings organised through their workplaces, though several of these pension funds have gone bankrupt and have been taken over by the state. The 13 pension funds now run by the state will be merged into 3 by 2018 to “generate savings,” that is, cut pensions.

Pension benefits will also be reduced by basing them on pensioners’ average pay over their working life, as opposed to their final pay at retirement—which is typically much higher.

Starting in 2014, pension benefits are to be indexed to Gross Domestic Product (GDP)—that is, the country’s economic growth. With Greece’s economy in a profound slump, and facing the impact of huge wage and job cuts, this is a recipe for further massive cuts.

Other measures include limiting the list of “arduous” professions that allow early retirement and toughening guidelines for disability pensions. Unmarried or divorced daughters of deceased civil servants, bank employees and military staff will lose their pensions at the age of 18—a measure affecting 40,000 women.

The government plans to save a further €3 billion through the existing pension freeze, by increasing taxes on pensions of more than €1,400 a month by 5-10 percent, and by cutting holiday bonuses.

As the law was announced, Papandreou spoke at an event of the Hellenic Federation of Enterprises (SEV) in Athens, defending his government’s collaboration with the IMF and EU. He said,

“A basic precondition for Greece to exit the crisis is for all of us to work together. We all have the opportunity to leave behind the Greece of yesterday, of parasitism, underdevelopment and of social injustice.”

Papandreou addressed the business leaders just 24 hours after he attended an all-party “national council” on the economic crisis. The meeting was also attended by the New Democracy opposition and the right-wing Popular Orthodox Rally.

As social discontent increases in opposition to the brutal austerity measures imposed by the Papandreou government, sections of the Greek media are becoming more vocal in their calls for more authoritarian forms of rule. Writing in the Eleftherotypia newspaper on Wednesday, commentator Tassos Telloglou proposed a new government that would suspend the constitution and basic democratic rights.

He wrote,

“This government has to have emergency powers. To put it more simply, the country would be in a state of emergency without dictatorship, but certain articles of the constitution would have to be taken out or interpreted appropriately. The ability must be there for demonstrations such as those of [Communist Party-linked trade union] PAME in Peiraeus to be declared illegal straight away through court proceedings, the right to strike must be curtailed but also the right for protests that cut across sensitive areas…. Papandreou is inappropriate to lead such a government.”

In Kathemerini, Stavros Lygeros doubted that the conservative opposition New Democracy represented a reliable alternative to PASOK. Lygeros wrote:

“Popular discontent is continually intensifying, threatening to sweep away the political system. New Democracy does not constitute an alternative solution.” However, he added, “there is the possibility of initiative outside the political system. For a long time, business magnate Andreas Vgenopoulos has been expressing his political views. Even though he denies it, there are many who say that he is preparing the ground for his entrance into the political arena.”

Vgenopoulos is the chairman of the Marfin Investment Group. On May 5, three employees were killed in an unexplained firebombing of a Marfin Egnatia bank in Athens. Vgenopoulos is also a major shareholder of the Panathinaikos football club and the chairman of Olympic Air. He is estimated to have a net wealth of €800 million. He recently made a statement to the effect that “politicians” are “responsible for country’s bankruptcy.”

At the same time, the various middle class organisations in Greece are carrying out a historic betrayal of the working class by cementing their support for Papandreou as he slashes the living standards of the working class. Their main concern is to prevent any independent political mobilisation of the working class against the cuts.

Renewal Wing, a faction of SYRIZA (the Coalition of the Radical Left), is calling for the party to enter into a partnership with the Papandreou government. A report in SYRIZA’s newspaper, Avghi, stated that the leadership of SYRIZA had discussed the proposals of the Renewal Wing at a recent meeting. Spyros Lykoudis said that SYRIZA would not oppose the line of the Renewal Wing, stating, “We refuse to go back to being a monolithic party.” Avghi commented that the consensus at the meeting was also that there should be no public statements made on the issue.

Sections of ANTARSYA (Anticapitalist Left Cooperation for the Overthrow) are also spreading claims that various establishment politicians will support workers’ interests. In a Tuesday interview with the British Socialist Workers Party newspaper Socialist Worker, Panos Garganas—a leader of the Greek Socialist Workers Party and editor of the Greek paper Workers’ Solidarity—said the political establishment was “cracking.”

He said that elements within PASOK had taken up a struggle against the cuts and called on workers to support them. He added,

“A political crisis is developing. Two of the PASOK MPs that were expelled are left-wing and popular—Yiannis Dimaras and Sofia Sakorafa.”

Not content with sowing illusions in PASOK, Garganas maintained that there were also forces within the right-wing opposition party New Democracy, in whom the working class could also put their faith:

“Most people believe there are many other MPs who feel the same way. And there is also a split in the right-wing New Democracy Party, which opposes the measures. Dora Bakoyannis, a leading figure and former foreign minister, voted for them and was expelled”.

Flashback: Italy, Greece and Spain Begin to Freeze Wages in the Public Sector

Eurozone economic problems are growing with each passing day. In brief: The European economy is stagnating; three countries from the euro area has ceased to pay salaries.

June 17, 2010

Ukrainian Globalist - On the streets of the Old World is hot, but Europe freezes. Greece, Italy and Spain have started to freeze wages in the public sector. The race on the road to strict financial savings kicked off when the markets began agitation against the background of the financial situation in several European countries, starting with Greece.

The situations in all countries are different. However, the measures taken to reduce the budget are very similar. Particular attention is paid wages in the public sector, social security benefits, pension plans and tax returns of the population. Changes will not easy – given the many protests in some countries.

Many believe that the time came, and now the austerity measures threaten to undo, and so a slight economic recovery. Only time will tell who is right. Meanwhile, your attention is invited to a brief overview of the main measures to be taken according to the International Monetary Fund and published reports.

Greece: Greece’s goal – to reduce the current annual deficit of 13.6% of GDP to 2.6%. Greece is the least competitive member of the European Union, while the country’s most “generous” salaries and pensions. According to the IMF, salaries and social allowances account for 75% of public expenditure, the rate of increase outpaced the growth of productivity. Therefore, in addition to reducing discretionary spending, Greece expects to reduce jobs in the public sector wage freeze and cancel the additional two months’ salary, traditionally paid for most state workers. Greece also intends to increase the period of retirement, which varies depending on the profession and seniority. It is proposed to raise this threshold to five or ten years, with a minimum retirement age for all of 60 years. There will also be reduced pension payments to a percentage of retirement income, resulting in a higher-income retirees will apply an additional 10% load. In Greece, may be increased value-added taxes and taxes on fuel, cigarettes and tobacco.

Hungary: Introduction to financial constraints was the main condition of the transaction between Hungary and the IMF in 2008. However, the public (and, many believe, exaggerated) comparison of the new prime minister in the country of the financial situation with the situation in Greece, led Hungary to expand the range of restrictions … and accelerate their implementation. So in addition to obtaining assistance from the IMF, the government promised to reduce the cost of salaries in the public sector by 15%, to introduce a new three-year tax on bank profits and freeze government spending.

Ireland: The Emerald Isle is going to reduce the annual deficit to about 5%, compared with the current deficit of more than 12%. In Ireland, the campaign for austerity was launched over a year ago. The measures provided for in this campaign include raising taxes, reducing benefits in the public sector by 5-15%, reduction of social benefits and the volume of health services, as well as other cost reductions.

Italy: The immediate challenge facing Italy – to reduce the budget for 2011-12g. at 24 billion euros. The IMF stated that “the planned consolidation is not of sufficient magnitude.” They are going to a three-year wage freeze in the public sector, to replace only 20% of the number of retiring public sector workers, to reduce the municipal and regional budgets, and to strengthen measures to combat tax evasion taxes. There will also be increased retirement age, about 6 months, but the average age will continue to be 61 years old.

Portugal: The Portuguese Government intends to reduce the annual deficit to 4.6% of GDP from the current 7%. The country plans to raise value added tax, income tax and profit tax at 1-2.5%. Also at 5% will be reduced by payments to senior staff of the public sector and politicians. There will also be frozen payments to employees of public service.

Spain: The Spanish government has promised to cut next year’s annual deficit from the current 9.3% to 6% of GDP. Short-term austerity plan will generally save 15 billion euros; this includes the reduction of civil servants’ pay by 5% in 2010 and the freezing of salaries in 2011. According to “The Economist”, the government will replace only 10% of retiring public sector workers, except for health, education and medical care for the elderly.

France: French Prime Minister Francois Fillon said that by 2013 annual deficit of the country will be reduced from the current 8% to 3% of GDP. In total, the deficit will be reduced by 100 billion euros, of which 85 billion euros would be reduced by reducing costs, eliminating tax loopholes, and by profits from anticipated economic growth; the remaining $ 15 billion by the end of the program of temporary incentives. In addition, French President Nicolas Sarkozy said the reduction of government operating costs by 10%. It is expected that France announced plans to reform the pension system of the country, which, presumably, would be unprofitable for several future decades. Perhaps an invitation to raise the retirement age, causing serious protests from trade unions – currently, citizens of France, a total had at least 40 years, may retire at age 60 and receive a full pension.

Germany: Chancellor Angela Merkel to take preventive measures despite the fact that Germany has the strongest economic position among all countries of the Eurozone. She announced actions aimed at ensuring the austerity that would allow, for 2013, the reduction of the country’s deficit to 3%, compared with the current 5%, and to reduce costs to 2014 by 80 billion euros. These measures include the reduction of social benefits and greater control in the means-tested for the issue of unemployment benefits. In addition, the number of jobs in the public sector will be for four year reduced by 10,000, and will also reduce the number of German armed forces. Germany also plans to limit tax exemptions, taxing for the producers of nuclear fuel and the tax on financial transactions.

UK: When the new government will issue an emergency budget, the British will understand what the Prime Minister, David Cameron, had in mind, saying that attempts to reduce the UK deficit will affect the entire population for many years and possibly decades. It is the duty of Great Britain: the trillion dollar deficit may double after 5 years. At the same annual interest payments will increase to 100 billion dollars, up 67% compared with the current index. Cameron said the reductions will be made in the public sector – he noted that over the past few years, the sector expanded while the private sector, on the contrary, decreased by 3.7%. “We’re going to restore the balance of [the] private sector – and the process promises to be painful,” – noted Kemeron. Health will receive a tangible public support. Additional cost-saving measures will be announced in November, followed by open public debate on the development of the country’s budget in the long term.

Flashback: British Government Cuts Benefits, Tax Credits, Pensions to Avert Debt Crisis

June 9, 2010

AHN News - The British coalition government is sparing no programs from cuts in the emergency budget being crafted in a bid to avert a Greek-style debt crisis for the United Kingdom. Among the programs that will suffer a reduction for the first time, according to Chancellor George Osborne, are welfare, tax credits and pensions.

Osborne’s announcement appears to have anticipated a warning by Fitch – one of the world’s largest credit rating agencies – that Britain must reduce its spending by $124 billion (86 billion pounds) over the next five years. Fitch’s recommendation is $23 billion (16 billion pounds) higher than the government’s previous forecast of needed budget cuts.

Fitch stressed Britain must make the budget cuts to keep the country’s reputation with international investors. Britain’s current rating is a triple A.

On Tuesday, the Treasury began preparing the framework to review all government spending. Included in the review for the first time is welfare system such as child benefit, disability pay and unemployment benefits. By freezing all benefits, Britain is expected to save over $5.8 billion (4 billion pounds) annually.

In a cabinet briefing, Osborne showed an Institute of Fiscal Studies recommendation that all departments, except health and international development, must reduce spending by 15 to 20 percent yearly. Fitch’s recommends, however, a larger cut of 25 to 30 percent.

Osborne described the record-high budget cuts as the greatest national challenge of our generation. He said the newly created Office of Budget Responsibility would publish economic growth forecasts. The chancellor hinted the forecast would be a downgrade of previous prediction that U.K. would register a 3.25 percent economic expansion in 2011, possibly to just 2 percent.

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