Greece Promises Latest $14.4bn of Austerity Cuts “Will be the Last”

Last Updated: 31, August 2012

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Greece’s Prime Minister Antonis Samaras has announced a fresh round of austerity measures despite widespread protests in Athens. He said the cuts – worth $14.4 billion – were painful yet necessary to keep Greece in the eurozone but also promised that it would be the last round of fiscal tightening for the embattled Mediterranean state.

Speaking at a meeting with his conservative party, Samaras said that Greece’s economic credibility – tarnished by years of procrastination and broken promises on reform commitments – has started to improve, and with it, the country’s ability to negotiate better terms for its latest 173 billion euros ($217 billion) bailout.

“As you know, we are finalizing the 11.5 billion euros package worth of state spending cuts, something which conforms to our commitments. Some, or should I say, many, of those cuts are difficult, painful, they hurt. But they are also unavoidable. Because without them, the country would go back to square one in terms of its lack of credibility and essentially would leave the euro,” Samaras said.

He added:

[quote] But this is the last such package of cutbacks. Greece’s economy cannot take any more. [/quote]

The government has not issued official details of the upcoming cuts, though the AP reports that it is likely to rely heavily on further pension and public sector pay cuts.

However, Samaras’ promise will sound familiar to Greeks, as previous governments have offered and subsequently broken similar pledges during more than two-and-a-half-years of painful budget cuts and fiscal tightening.

Greece’s economy is already buckling from the cuts. In its fifth year of recession, the Greek economy has shrunk by 20 percent since the end of 2007 and is expected to contract almost 7 percent this year.

Unemployment in Greece is also expected to reach a new high of 23.6 percent this year.

Across Europe, leaders demonstrated strong support for Greece’s commitment to fixing its economy.

Yesterday, French President Francois Hollande called on the EU to back Greece if it shows progress with its reforms. Earlier this month, Christine Lagarde of the International Monetary Fund pledged to stand by debt-ridden Greece.

She said:

[quote] The IMF never leaves the negotiation table. We are in Greece at the moment … and we are engaged in dialogue with the Greek authorities. [/quote]

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