In Greece, a Bold Plan to Solve the Debt Crisis
By NIKI KITSANTONIS and ELISABETTA POVOLEDO
Published: July 6, 2012
ATHENS — Prime Minister Antonis Samaras of Greece set out his fragile three-party coalition government’s policy platform on Friday, a bold program of selling government assets and reducing state
But in a speech to Parliament, he also emphasized the need for measures to relieve a public weary of two years of economic austerity.
“Extreme injustices must be corrected,” he said, saying there should be no more wage or pension cuts. “We can’t have people who had homes now eating out of garbage bins; we can’t have suicides increasing.”
It was his first appearance in Parliament since being sworn in on June 20. He had been housebound since then after eye surgery.
The speech was the kickoff for a weekend parliamentary debate scheduled to conclude at midnight on Sunday with a vote of confidence on the coalition government. With 179 seats in the 300-seat Parliament, the government is expected to sail through that vote, although the economic program it must subsequently impose will be a much tougher challenge.
Italy moved forward on Friday with its own set of economic measures aimed at further reducing government spending. But analysts questioned whether the intended 26 billion euros ($32 billion) in cuts by Rome, over three years, would do enough to reduce spending that, at 720 billion euros a year, is about half of Italy’s gross domestic product.
But Greece’s budget problems are more urgent. Inspectors representing the country’s foreign creditors are in Athens to assess its progress in enacting spending cuts and other economic reforms to meet the terms of the 130 billion euro rescue package agreed to this year — Greece’s second bailout in two years.
Mr. Samaras was careful to emphasize that the terms of the bailout deal would be respected, as he promised in a letter to his euro zone counterparts last week. But he also indicated that there were limits to Greece’s willingness to bend.
“If the program goes off track again due to recession, this should not become a pretext for the imposition of more austerity measures,” he said.
The finance minister, Yannis Stournaras, acknowledged on Thursday that some aspects of the government’s painful fiscal adjustment program were “off track.” Mr. Stournaras is to flesh out the policy program in a speech to Parliament on Saturday afternoon.
Mr. Stournaras plans to travel to Brussels on Monday for a meeting of euro zone finance ministers, who are expected to have tough questions for him.
Greek opposition to the new government’s policies was evident well before Mr. Samaras spoke to Parliament on Friday.
The left-wing party Syriza, which sailed into second place in the June 17 elections on an anti-bailout platform, has accused Mr. Samaras, a conservative, of trying to renege on pre-election pledges to renegotiate the country’s debt deal. And Syriza vowed to fight the sell-off of state assets.
Mr. Samaras said on Friday that his government would give “top priority” to privatizing assets like the operational arm of the state railway company and the power board. “We don’t see privatizations as a cash generator but a generator of growth,” he said. “Whoever takes over will have to commit to create jobs.”
Pushing forward with privatizations would be a way of averting further painful cuts, he said. “We can’t continue to cut wages and pensions while state assets remain unexploited,” he said.
In Italy, whose debt load of more than 120 percent of gross domestic product is second only to Greece’s in the euro zone, the new measures reached on Friday are aimed at cutting spending in goods and services, trimming ministerial budgets and streamlining the civil service. The measures would also reduce financing to municipalities and regions, and more controversially, would drastically cut the number of Italian provinces by half.
The new program will also postpone a sales tax increase Italy had planned for October but will now put off until July 2013, in response to economists’ warnings that the tax would cause a slump in sales that the recession-racked economy could ill afford.
“This is an operation that aims to reduce excess spending,” Prime Minister Mario Monti said at the end of a seven-hour cabinet meeting early Friday. But he promised that it would not affect “the quality of the services.”
The new measures, detailed in a decree, will take effect immediately but still require the approval of the Italian Parliament within 60 days. Some initial reactions suggested that the government had some rough days ahead.
Lawmakers with the Democratic Party, one of the main political parties that support Mr. Monti’s government, said the decree had positive points but expressed reservations about the reduction of money to local governments.
“We’re concerned that these cuts will affect funding to nursery schools, assistance to the elderly and public transport,” said Stefano Fassina, the Democratic Party’s expert on economic issues. “So we will discuss these issues and try to correct them.”
Niki Kitsantonis reported from Athens and Elisabetta Povoledo from Rome.
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