German Lawmakers to Decide on New Bailout for Greece

FRANKFURT—German lawmakers will decide about a new bailout package for Greece on Wednesday morning, a Bundestag spokesman confirmed ...

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Greek lawmakers debate reforms aimed at avoiding bankruptcy

Lawmakers in Greece on Wednesday were hotly debating tough economic reforms that the government warns must be approved to prevent the country from going bankrupt and crashing out of the Eurozone.

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Economist Richard Wolff on Roots of Greek Crisis, Debt Relief & Rise of Anti-Capitalism in Europe

As Greek voters reject further budget cuts and tax hikes in exchange for a rescue package from European creditors, who is to blame for the debt crisis ...

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A decade of overspending: how Greece plunged into economic crisis

A banner urging a no vote in Sunday's referendum in Greece hangs from a euro sign monument in front of the former European Central Bank ...

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A decade of overspending: how Greece plunged into economic crisis

Athens was poorly prepared for the 2008 crash - living off easy credit, while spending on wages and defence soared, and taxes began to fall awayHow did Greece get into this state?Greece was badly prepared for the 2008 financial crisis after a decade of overspending. In many ways, the weakness of its economy and public finances was akin to that of Spain, Ireland and Portugal, which also found themselves brutally exposed after 10 years of living beyond their means. Greece, though, was a special case, which was why in 2010 it became the first EU country to send a distress signal. Since then, Athens has struggled to piece together a deal with its lenders that allows the economy to recover. Continue reading...

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Tsipras: Either They Do Not Want an Agreement or They Serve Special Interests in Greece – Full List of Counterproposals

“Either they do not want an agreement or they serve special interests in Greece,” Prime Minister Alexis Tsipras said to his colleagues, shortly before departing for Brussels. The Greek prime minister was referring to the insistence of the International Monetary Fund to not accept equivalent measures to the ones they proposed. The IMF says that the Greek proposal is too heavy on taxes and asks for revenues from spending cuts. “The non-acceptance of equivalent measures is unprecedented. Neither in Ireland nor in Portugal were they rejected. Nowhere! This strange stance may be due to two reasons. Either they do not want an agreement or they serve specific interests in Greece,” Tsipras said, according to a government source. What do lenders propose Meanwhile, the Greek government rejected the lenders’ counterproposals on the grounds of being recessionary. According to Greek media, the IMF put forward plans for deeper pension cuts, double the cuts to defence spending, and less hikes in corporate tax rates. Regarding pensions, Greece proposed an insurance fund revenue increase from a raise in employer contributions and by limiting early retirements. Lenders, on the other hand, insist on savings of 1 percent of GDP in 2016 and elimination of the supplementary allowance for low pensions (EKAS) by th end of 2017. Moreover, institutions still insist in raising additional tax revenues of 1 percent of GDP from VAT instead of 0.74 percent proposed by Greece. Regarding corporate taxes, Athens had proposed to increase rates from 26 percent to 29 percent while creditors propose to be no more than 28 percent. The List of Counterproposals    (Full List in pdf) Fiscal Increasing revenues from VAT by 1 pct of GDP and raising VAT on catering services to 23 pct. 100 pct tax advance from legal entities Abolition of tax exemption for fuel used in farming Reduction of defence spending by 400 million euros (instead of 200 mln proposed by Greece) Smaller hikes in the taxation of legal entities (to 28 pct instead of 29 pct proposed by Greece) No tax relief for island residents (to offset an increase in VAT for islands) The institutions also refused to accept taxation revenue proposed by Greece from: e-gaming-VLT gaming machines (electronic gambling) Revenue from 4G and 5G licences Pensions The creditors insist on full implementation of law 3863/10 that deals with the way pensions are calculated, raising the lower pensions and increasing the higher pensions. They insist on equivalent measures to offset suspension of the zero deficit clause They demand cuts of 0.25-0.5 pct of GDP in 2015 and 1 pct of GDP in 2016 Complete abolition of early retirement until 2022 (to 67 years independent of years of work and 62 years with 40 years full employment). Abolition/replacement of the EKAS low-pension benefit until December 2017 Increase in pensioners’ health contributions from 4 pct to 6 pct Gradual abolition of exemptions financed by the state budget and harmonization of social insurance contributions with the structure of IKA from July 1, 2015. Abolition of all levies for third parties (such as the advertizing stamp duty) by October 31, 2015. Finding equivalent measures that will cover the cost of a Council of State ruling reversing past pension cuts. Tsipras, Juncker, Lagarde, Draghi to have talks before Eurogroup The Greek prime minister will have a meeting with the heads of Greece’s troika of lenders prior to the crucial Eurogroup meeting on Wednesday evening. European Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi and International Monetary Fund Managing Director Christine Lagarde will discuss differences on proposals with Tsipras. “Of course we want changes and they don’t, and this is part of the bargaining process, albeit less effective when done publicly,” a senior official of one of the creditors said. Why Greece cannot make further defence cuts The Greek proposal included 200 million euros in defence cuts in next year’s budget. Creditors want double that amount. However, Greece’s defence spending was reduced by 40 percent in the last four years. The consensus in Greece is that the country is under constant threat by Turkey. “With no new procurement initiative on the horizon, future defence budgets will consist largely of the cost of earlier arms purchases, military pay and pensions and the armed forces’ operating expenses. Only the last can be reduced,” says a Guardian report. There is also strong evidence to indicate that some of the contracts under which the arms were supplied were obtained by bribery, a practice for which Greece has been widely criticized in creditor nations.

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Hopes For Greek Budget Surplus Shattered By IMF’s Chief Economist

  The International Monetary Fund’s chief economist Olivier Blanchard destroyed any hopes left about a potential Greek budget surplus in 2015 during his interview in the French financial newspaper Les Échos at a central bankers’ meeting in Sintra, Portugal on Monday. Although Greece was supposed to have a 3 percent budget surplus this year, this seems not to be realistic according to Olivier Blanchard, who thinks that this would lead Greece to ask for further financial assistance from its European lenders. “This will be only avoided, if Greek government decides to present a coherent program,” he stated. The chief economist also added: “Considering that the most recent estimates mention a substantial budget deficit, we need credible measures to transform this into a surplus and maintain this surplus in the future.” And he continued: “This is far from being the case at the moment.”

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Greek budget primary surplus up in Jan-April

Greek state budget showed a primary surplus of 2.103 billion euros in the January-April period, the Finance ministry said on Monday. In an announcement on state budget execution, on an amended cash basis the budget showed a deficit of ...

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Opinion: This is how Greece should handle its crisis

Yes, “everybody knows” Greece can get out of the crisis “only” by cutting its budget, selling off state assets, getting bailed out by the IMF and ECB, ...

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Government spokesman says Tsipras' letter to Merkel led to 7-party meeting

The Greek government spokesman said on Monday the letter sent by Prime Minister Alexis Tsipras to German Chancellor Angela Merkel, which was published in the Financial Times was the one that led to the ...

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Greek Gov't Tries to Secure Liquidity Without Pension and Wage Cuts

The Greek government is trying to find ways to secure liquidity until June without pension and salary cuts or extra contributions to security funds.

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Opinion Poll: Most Greeks love the new gov’t

91.5% of SYRIZA voters and 91% of ANEL voters are happy with the gov't whereas 72% of the country's citizens, including voters of other parties, support the gov'ts moves

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Greek voters set stage for tense austerity negotiation

Syriza's victory was motivated in large part by Greek disgust with austerity. Sharp budget cuts and public sector layoffs have contributed to elevated ...

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Public Pensions Are America's Greece

Bruce Rauner, a Republican, liked to talk tough about unions and public-sector pensions when he was campaigning for governor in Illinois. "The system is full of fraud and self-dealing and abuses, such as folks who have a pay rise in the last years of their career [so their pension is higher] or folks who moved in and out of certain jobs, so they could get a pension," he said in August 2013. With two or three pensions, some are making as much as half a million dollars in retirement pay, he claimed. This, he thundered, is a rip-off of taxpayers and other workers. But as soon as Mr Rauner was elected last month, the self-made millionaire toned down the rhetoric. The size and complexity of the public-pension mess suddenly hit him, and, aware that he had to bring together Democrats, unions and creditors, he began to backtrack. He declares now that it is most important to "protect what is done--don't change history. Don't modify or reduce anybody's pension who has retired, or has paid into a system and they've accrued benefits." Illinois is like Greece in one obvious way: it overpromised and underdelivered on pensions and has little appetite for dealing with the problem, says Hal Weitzman of the University of Chicago Booth School of Business. This large Midwestern state, with a population of 13m (Greece has 11m, though a far smaller GDP than Illinois), has the most underfunded retirement system of any state and the largest pension burden relative to state revenue. It also has the highest number of public-pension funds close to insolvency, such as the one looking after Chicago's police and firemen. According to the Civic Federation, a budget watchdog, Illinois has piled up a whopping $111 billion in unfunded pension liabilities (see chart), in addition to $56 billion in debt for health benefits for pensioners. The state devotes one in four of its tax dollars to pensions, which is more than it spends on primary and secondary education. Mainly as a result of this gargantuan pension debt, Illinois's bond rating is the lowest of all the states, which means dramatically higher borrowing costs. When the state government failed to address pension underfunding in its budget for 2014, two credit-rating agencies, Fitch and Moody's, cut the state's bond rating, which in Moody's case put Illinois on a par with Botswana. (An incensed editorial in the Chicago Tribune asked what Botswana had done to be so insulted.) The main reason for the pension debacle is decades of underfunding. "Everything was always done with a short-term view," says Laurence Msall, head of the Civic Federation. "Unique to Illinois is the idea that you don't have to pay for pensions and you don't have to follow actuarial recommendations." Whereas most other states follow the rules set by the Governmental Accounting Standards Board (GASB), which, however imperfect, require some budget discipline, Illinois has mostly ignored them. In 2013 the state paid $2.8 billion into its pension fund for teachers, one of its five pension funds, but GASB rules would have required a contribution of $3.6 billion, says Joshua Rauh, a professor of finance at Stanford University. According to Mr Rauh's calculations, Illinois's true unfunded pension liability is $250 billion. All the other calculations, he says, are based on over-optimistic assumptions. For example, the state assumes an average annual return on its investments of 7.75% over 30 years. But according to Mr Rauh it has only a 25% chance of achieving gains of that order. After the public-relations disaster of the credit downgrades, Pat Quinn, the outgoing governor belatedly pushed for pension reform. In December 2013 the legislature approved a bill that reduces annual increases in pension payments, increases the retirement age and caps pensionable salaries. Some have welcomed it as Illinois's first actuarially sound pension-funding scheme, designed to get the five plans fully funded in 30 years. Mr Rauh, however, thinks that the reform "does not even come close to addressing the problem". Mr Quinn's changes were supposed to become law in June, but were held up by legal challenges and ultimately rejected by Judge John Belz of the Sangamon County circuit court for violating the state constitution, which makes existing pension contracts virtually untouchable. (Only New York and Arizona have similar safeguards in their constitutions.) Lisa Madigan, the state attorney-general, has appealed against the ruling to the Illinois Supreme Court, which is looking at the case. James Spiotto, a lawyer at Chapman Strategic Advisors, argues that if a state is unable rather than unwilling to pay its pensions, then the well-being of its citizens overrides any constitutional protections. The Supreme Court has consistently ruled that states cannot abdicate their responsibility to provide essential services and infrastructure. And if Illinois cuts public services yet further the state will lose more taxpayers, resulting in "a death spiral", says Mr Spiotto. Union representatives disagree with this scenario. Dan Montgomery, the president of the Illinois Federation of Teachers, believes Mr Quinn's reform is illegal and that the state must find ways to pay up, for instance by extending the repayment schedule of its debt and increasing tax revenue by closing loopholes and expanding a sales tax on services. Mr Rauner was elected on a promise that he would not make his predecessor's temporary increase of income and corporate tax permanent. But he has not explained how Illinois will cope with the loss of more than $7 billion in annual revenue. Nor has he laid out any broader plans for fixing the pensions mess. For a start he might look to Washington and the budget deal hashed out in Congress. This allows some distressed private-sector pension plans to cut the benefits of retirees. In Illinois, though, more inventive measures may be needed. In 2015 Illinois will either sink further into a Greek-style morass of debt or start its long-delayed rehabilitation. Mr Rauner has warned of a rough 24 months ahead. "I ain't going to be Mr Popularity for a while," he says. Voters may not mind, if he is able to sort this disaster out.Join the conversation about this story »

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Greece town budget for 2015 keeps taxes stable

For Greece residents, the upshot of the town's 2015 budget is that there won't be an increase in the overall tax rate. But while the rate will remain ...

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Greek Budget Aims to Cut Taxes and Ease Austerity Measures

Greek Budget Aims to Cut Taxes and Ease Austerity Measures

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