Papandreou’s now abandoned decision to call a referendum was actually a pretty smart move.
During the recent emergency EU summit everyone focused on the EU balance sheets and nobody even considered the Greek citizen response. Papandreou has to consider this though as he is the one dealing with persistent national rioting. In order to get the latest bailout package the austerity measures he is required to impose may not just be rejected, they may result in outright civil war.
This whole ordeal really goes to show you how utterly unreasonable the greedy public sector unions are. I for one think it’s absolutely delicious to see them reaping their just desserts.
It couldn’t be more obvious: Hey, Greek public sector unions, your country can’t afford you anymore. You cost more than your entire nation’s revenues. Your outrageous salaries and pensions are UNAFFORDABLE. The arithmetic couldn’t be simpler or more indisputable, and how do you react? By rioting and shutting down your country’s schools, hospitals and airports. You just don’t get it, you will never get it. You are insatiable and beyond any hope of reason, and you alone have created this catastrophe by collectively bargaining your nation into bankruptcy. The Greek private sector property owner is surely to be pitied!
Here are but a sampling of the austerity measures already being implemented:
The tax-free threshold for income tax will be lowered from 12,000 to 8,000 and now to 6,000 euros.
There will be higher property taxes and special separate property taxes
There will be special separate new “solidarity” taxes
VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
The VAT rate for restaurants and bars will rise to 23% from 13%.
Nominal public sector wages will be cut by 15%.
Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
All temporary contracts for public sector workers will be terminated.
Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.
This is what Ontario has to look forward to, by the way, thanks to the McGuinty Liberals who have doubled our debt, and who are bringing us ever-increasing deficits with no end in sight, and with their incestuous pandering to the public unions.
In any case, the Greek unions are going to go ballistic with this next wave of austerity. Papandreou probably figured that these measures would be impossible without a referendum... And it also portrayed him as someone to stand up against the perceived Troika bullies, although that has certainly backfired as the Troika immediately halted the cash flow, paralyzing Greece in the financial water.
Even if the austerity measures are implemented and this new bailout goes through as planned, the ultimate goal is merely to reduce Greece’s debt to 120% of GDP by 2020. Balancing the budget and paying down the debt are not even considerations! And the new plan involves a 50% haircut on Greek debt, which in actuality amounts to the beginnings of an orderly default.
With the global banking system taking this hit, cash flow and lending will surely become much more stringent. Contagion to Italy is also a definite concern, as well as to Portugal, Spain, etc. If the Greek write-down becomes disorderly, contagion will be inevitable and recession 2.0 will be upon us that much quicker, and will be much more savage. The situation in Greece is like a slow motion train wreck, and it will in turn affect all of Europe, which will in turn affect the US and Canada.
