States

Post 3_Greece

After a decade of fast growth, the underlying weakness of the Greek economy was made evident in October 2009, when the incoming government announced that earlier fiscal data had been misreported. The fiscal deficit and public debt estimates for 2009 were revised to 12.5% and 115.1% of GDP respectively. Financial market reacted by increasing spreads on Greek bonds and by lowering credit ratings.
In an effort to bring public finances back under control, the government announced a first package of austerity measures in March 2010, and a tax reform in April 2010.
When these failed to placate the markets the government negotiated an unprecedented €110 billion rescue package with the European Commission, the European Central Bank and the International Monetary Fund. In return of The rescue package, the governments signed a Memorandum of Economic and Financial Policies which commits the Greek government to sweeping spending cuts and steep tax increases over three years, aimed to reduce the fiscal deficit below 3% of GDP by 2014.
The main policy changes were as follows:
-Direct taxes and contributions (e.g. Introduction of ‘Pensioners’ Solidarity Contribution’, i.e. a special tax on pensions).
-Indirect taxes (e.g. Excise duty on tobacco, alcohol and fuel increased by 30% or Increases in the standard rate of VAT from 19% to 23% ).
- Benefits and tax credits (e.g. the 13th and 14th monthly pension payments were abolished).
-Public sector pay (e.g. special allowances paid to civil servants were reduced by 20% and public sector wages frozen in 2010-2012 at their 2009 level).