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Third austerity package (Greece)

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Territorial extent
  
Greece

Date assented to
  
6 May 2010

Introduced by
  
Government of Greece

Enacted by
  
Hellenic Parliament

Date commenced
  
6 May 2010

Third austerity package (Greece)

Date passed
  
6 May 2010 (For: 172; Against: 121; 3 Abstentions)

The Third austerity package is part of the countermeasures of the Greek government to counter the Greek government-debt crisis. It came with the signing of the First Economic Adjustment Programme for Greece known as First Memorandum with the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB). It was announced in May 2010 and approved by the Hellenic Parliament in June 2010.

Contents

Background

On 1 May 2010, Prime Minister George Papandreou announced a new round of austerity measures, which have been described as "unprecedented". The proposed changes, which aim to save €38 billion through 2012, represent the biggest government overhaul in a generation. The bill was met with a nationwide general strike and massive protests the following day, with three people being killed, dozens injured, and 107 arrested.

Vote in Parliament

The bill was submitted to Parliament on 4 May and approved on 6 May. Out of 160 MPs consisting the PASOK government majority, 157 MPs supported the passing of the bill, while 3 MPs abstained. ND, SYRIZA and KKE voted against the bill; however, Dora Bakoyianni of ND voted for the bill in principle and was subsequently expelled from ND. LAOS voted for the bill.

Further separate votes on 29 and 30 June were held to implement portions of the package.

Specific measures

The measures include:

  • Public Sector Reform
  • The number of public-owned companies shall be reduced from 6,000 to 2,000.
  • Limit of €500 per month to 13th and 14th month salaries of public employees; abolished for employees receiving over €3,000 a month.
  • 8% cut on public sector allowances (in addition to the two previous austerity packages)
  • 3% pay cut for DEKO (public sector utilities) employees.
  • Public sector limit of €1,000 introduced to bi-annual bonus, abolished entirely for those earning over €3,000 a month.
  • The number of municipalities shall shrink from 1,000 to 400.
  • Pension Reform (passed in Jul 2010)
  • Limit of €800 per month to 13th and 14th month pension instalments; abolished for pensioners receiving over €2,500 a month.
  • Return of a special tax on high pensions.
  • Equalisation of men's and women's pension age limits. Women's retirement age increased from 60 to 65.
  • General pension age has not changed, but a mechanism has been introduced to scale them to life expectancy changes.
  • Average retirement age for public sector workers will be increased from 61 to 65.
  • Tax Reform
  • VAT rises to 23% (from 19%), 11% (from 9%) and 5.5% (from 4%).
  • Extraordinary taxes imposed on company profits.
  • Rise in the value of property (and thus higher taxes).
  • 10% rise in luxury taxes and sin taxes on alcohol, cigarettes, and fuel.
  • 10% additional rise for all imported cars.
  • Labor Market Reforms
  • Changes were planned to the laws governing lay-offs and overtime pay.
  • A financial stability fund has been created.

    • Implementation

    On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate €45 billion in loans to be provided in 2010, with more funds available later. The first instalment covered €8.5 billion of Greek bonds that became due for repayment.

    In total, €110 billion have been agreed on. The interest for the eurozone loans is 5%, considered to be a rather high level for any bailout loan. The European Monetary Union loans will be pari passu and not senior like those of the IMF. In fact the seniority of the IMF loans themselves has no legal basis but is respected nonetheless. The loans should cover Greece's funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012). According to EU officials, France and Germany demanded that their military dealings with Greece be a condition of their participation in the financial rescue.

    As of 12 May 2010, the deficit was down 40% from the previous year.

    References

    Third austerity package (Greece) Wikipedia
    (Text) CC BY-SA