BY Fraser Tennant
Austerity measures in the billions is the harsh outlook for Greece in 2016 following its parliament’s approval of a budget steeped in spending cuts, pension reforms, tax rises and a less than favourable GDP growth forecast.
The austerity measures, narrowly approved in the Greek parliament by a margin of eight (153 votes to 145), offer up a stringent €5.7bn in spending cuts, encompassing €1.8bn being seized from pensions and €500m from defence. Additionally, the 2016 budget contains tax increases of around €2bn.
Yet despite these measures, Greek debt is still forecast to grow to €327.6bn in 2016.
Furthermore, in terms of gross domestic product (GDP), the government’s budget plan states an expectation of zero GDP growth in 2015 (compared to the 2.3 percent contraction earlier forecast) and the projection of a 0.7 percent drop in GDP (compared to a 1.3 percent contraction prediction).
“Almost all opposition parties are absorbed with internal issues so the vote process was easy for the government”, observes Dimitris Rapidis, a political analyst and director of the think-tank, Bridging Europe. “The New Democracy party has an upcoming leadership race, the socialists and the communists are out of space, the River party had nothing to offer to the debate, whereas Centrists Union and Golden Dawn are becoming increasingly populist."
Well aware of his government’s need to make good on previous anti-austerity pledges (as well as satisfying the demands of international lenders), prime minister Alexis Tsipras called the 2016 budget, the first to be put before the Greek parliament by the Syriza-led government, “a difficult task for a government that wants to leave its mark with social justice".
Also featuring in the 2016 budget is detail on the three-year €86bn rescue package, in return for which Athens is requested to pass at least 60 'prior action' bills through parliament (including tax hikes and pension reforms), the government’s privatisation of €50bn of national assets to help pay off its debts, and €25bn in new capital that is required to keep the banking system afloat.
A further budget revelation is the admission that Greece is scheduled to be paying off its creditors for the next 42 years, at least.
Looking back, 2015 has been a turbulent year for Greece, with the Syriza government winning national elections in January and September; a much-derided €86bn EU bailout in July; and the country becoming the first ever developed nation to default on the International Monetary Fund (IMF) in June - and all this against a backdrop of a battered economy, immense pressure from international creditors and the continuing spectre of a ‘Grexit.’
On a more positive note, representatives of the eurozone, the European Central Bank and the International Monetary Fund are in Greece this week to continue talks on the pending reforms of the pension and tax systems, as well as public administration issues.