This article details the fourteen austerity packages passed by the Government of Greece between 2010 and 2017. These austerity measures were a result of the Greek government-debt crisis and other economic factors. All of the legislation listed remains in force.
Background
Membership in the European Monetary Union (EMU) has posed problems for some social classes, like the working class in Germany, and also on a countrywide scale for some EU members. Greece is in the latter category, along with Portugal, Ireland and Spain, presenting the problem of sovereign default, sometimes also called a "sovereign debt crisis". This situation originated with the tenuous integration of the periphery countries of the European Union into the eurozone and was made worse by the Great Recession. Austerity was one of the policy measures available to governments to manage the economic downturn. Greek withdrawal from the eurozone is another alternative or institutional reform of the eurozone.
2010
February
The first austerity package was the first in a row of countermeasures to counter the Greek government-debt crisis. It was approved by the Hellenic Parliament in early 2010.
The purpose was to reduce the budget deficit. These measures preceded the First Economic Adjustment Programme for Greece known as "memorandum". It emerged after a promise by the Greek prime minister in the World Economic Forum of Davos, Switzerland to take measures to reduce the country's deficit. The package was implemented on 9 February 2010 and was expected to save €0.8 billion. It included a freeze in the salaries of all government employees, a 10% cut in bonuses, as well as cuts in overtime workers, public employees and work-related travel.
March
The second austerity package was approved by the Hellenic Parliament in March 2010.
On 5 March 2010, amid new fears of bankruptcy, the Greek parliament passed the "Economy Protection Bill", which was expected to save another €4.8 billion. The measures include: 30% cuts in Christmas, Easter and leave of absence bonuses, a further 12% cut in public bonuses, a 7% cut in the salaries of public and private employees, a rise of the value added tax from 4.5% to 5%, from 9% to 10% and from 19% to 21%, a rise of the petrol tax to 15%, a rise in the taxes on imported cars of up to 10%–30%, among others.
On 23 April 2010, after realising the second austerity package failed to improve the country's economic position, the government requested that the EU/IMF bailout package be activated. Greece needed money before 19 May, or it would face a debt rollover of $11.3bn. The IMF had said it was "prepared to move expeditiously on this request".
Shortly after, the European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan. The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners. In return the government agreed to implement further measures.
June
The third austerity package came with the signing of the First Economic Adjustment Programme for Greece known as First Memorandum with the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB). It was announced in May 2010 and approved by the Hellenic Parliament in June 2010.
On 1 May 2010, Prime Minister George Papandreou announced a new round of austerity measures, which were described as "unprecedented". The proposed changes, which aimed to save through 2012, represented the biggest government overhaul in a generation. The bill was met with a nationwide general strike and massive protests, leaving three dead, dozens injured and 107 arrested.
Vote
The bill was submitted to Parliament on 4 May and approved on 6 May. Out of 160 MPs consisting the PASOK government majority, 157 MPs supported the bill, while 3 MPs abstained. ND, SYRIZA and KKE voted against the bill; however, Dora Bakoyianni of ND voted for the bill in principle and was subsequently expelled from ND. LAOS voted for the bill.
Further separate votes on 29 and 30 June were held to implement portions of the package.
Specific measures
The measures include:
Public Sector Reform The number of public-owned companies shall be reduced from 6,000 to 2,000. Limit of €500 per month to 13th and 14th month salaries of public employees; abolished for employees receiving more than €3,000 a month. 8% cut on public sector allowances 3% pay cut for DEKO (public sector utilities) employees. Public sector limit of €1,000 introduced to bi-annual bonus, abolished entirely for those earning more than €3,000 a month. The number of municipalities shall shrink from 1,000 to 400.
Pension Reform Public pension reforms included: Limit of €800 per month to 13th and 14th month pension instalments; abolished for pensioners receiving more than €2,500 a month. Return of a special tax on high pensions. Women's retirement age increased from 60 to 65 to match men's retirement age. Mechanism introduced to scale general pension age to life expectancy changes. Average retirement age for public sector workers increased from 61 to 65.
Tax Reform Value added tax rises to 23% (from 19%), 11% (from 9%) and 5.5% (from 4%). Extraordinary taxes imposed on company profits. Rise in the value of property (and thus higher taxes). 10% rise in luxury taxes and sin taxes on alcohol, cigarettes and fuel. 10% additional rise for all imported cars.
Labor Market Reforms Changes were planned to the laws governing lay-offs and overtime pay. A financial stability fund has been created.
Implementation
On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate in loans to be provided in 2010, with more funds available later. The first instalment covered of Greek bonds that became due for repayment.
In total, was agreed on. The interest for the eurozone loans is 5%, considered to be high for a bailout loan. The European Monetary Union loans would be pari passu and not senior like those of the IMF. The seniority of the IMF loans has no legal basis but is respected nonetheless. The loans should cover Greece's funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012).Global Economics Flash, Greek Sovereign Debt Restructuring Delayed but Not Avoided for Long, 5 May 2010, "The amount of fiscal tightening announced over the next three years is even larger than we expected: €30 bn worth of spending cuts and tax increases, around 12.5% of the 2009 Greek GDP, and an even higher percentage of the average annual GDP over the next three years (2010–2012). With 5 percentage points of GDP tightening in 2010 and 4 percentage points of GDP tightening in 2011, the economy should contract quite sharply – between 3 and 4 percent this year and probably another 1 or 2 percent contraction in 2011." According to EU officials, France and Germany demanded that their military dealings with Greece be a condition of their participation in the financial rescue. , the deficit was down 40% from the previous year.
2011 June
The fourth austerity package, commonly called "The Medium-term Programme" or "The June 2011 measures", was approved by the Hellenic Parliament in June 2011.
In the midst of public discontent, massive protests and a 24-hour-strike throughout Greece, the parliament debated a new austerity bill, known in Greece as the "mesoprothesmo" (the mid-term [plan]). The government's intent to pass further austerity measures was met with discontent from within the government and parliament, but eventually passed with 155 votes in favour (a marginal 5-seat majority). Horst Reichenbach headed up the task force overseeing Greek implementation of austerity and structural adjustment.
Measures The new measures included: Raising €50 billion from privatisations and sales of government property. Tax Reform Increasing taxes for those with a yearly income of more than €8,000 An extra tax for those with a yearly income of more than €12,000 Increasing value added tax in the housing industry An extra tax of 2% for combating unemployment Pension Reform Lower pension payments ranging from 6% to 14% from the previous 4% to 10%. Creation of a special agency responsible with exploiting government property, and others.
On 11 September 2011, the government introduced more taxes, this time targeted at people owning immovable property. The new tax, which was paid through the owner's electricity bill, affected 7.5 million Public Power Corporation accounts and ranged from 3 to 20 euros per square meter. The tax applied for 2011–2012 and was expected to raise €4 billion in revenue.
On 19 August 2011, the Greek Minister of Finance, Evangelos Venizelos, said that new austerity measures "should not be necessary". On 20 August 2011 it was revealed that the government's economic measures were still off track; government revenue went down by €1.9 billion while spending went up by €2.7 billion.
On a meeting with representatives of the country's economic sectors on 30 August 2011, the Prime Minister and the Minister of Finance acknowledged that some of the austerity measures were irrational, such as the high value added tax, and that they were forced to apply them by the EU.
October
The fifth austerity package was aimed to ensure the 6th bailout instalment for Greece. The representatives of creditors required Greece to take new measures to limit state expenditures. That was one of the conditions so that the financing of Greek economy to continue normally. The new bill (called multi-bill) hit mostly civil servants and retirees. It was voted by the Greek parliament on 20 October 2011 amid protests. A man was killed during a demonstration at Syntagma Square. The major European countries then agreed on a reduction of Greek debt.
Measures The package included: A uniform pay scale for civil servants. Wages cut by 30% and wages and bonuses were capped. Labor reserve offers civil servants who are dismissed 60% of their pay for one year. The tax-free threshold for income tax would be lowered from €12,000 to €5,000. Monthly pensions above €1,200 cut by 20%. Retirees under 55 years old, the pension over €1,000 is cut by 40% Lump sum for retirees is cut by 20% to 30% Education spending cut by closing or merging schools
2012 February
The sixth austerity package was approved by the Hellenic Parliament in February 2012.
Negotiations
In October 2011, Papandreou got parliamentary backing for further austerity measures. These new measures would allow Greece to get an extra instalment of international loans, forming a second bailout package that would prevent a sovereign default and would allow the partial write-off of Greek debt, the so-called private sector involvement (PSI). As a result of this backing, the EU granted a quid pro quo of further austerity for a €100bn loan and a 50% debt reduction through PSI.
Within a week, Papandreou, backed unanimously by his cabinet, announced a referendum on the deal, sending shockwaves through financial markets. German chancellor Angela Merkel and French president Nicolas Sarkozy then issued an ultimatum declaring that, unless the referendum approved the measures, they would withhold an overdue €6bn loan payment to Athens, money that Greece needed by mid-December. Papandreou cancelled the referendum the next day after the opposition New Democracy Party, agreed to back the agreement.