And then comes the deeper mandate round of austerity measures, which will reduce the salaries of policemen, firefighters and other workers of the State who protest in Athens and increase the taxes of citizens already inflamed by a recession-plagued economy and rising unemployment.
After winning a vote of confidence in his new Cabinet on Tuesday, Prime Minister George Papandreou has now a task even harder: to effect a radical cure of fiscal austerity and forced auctions for an economy already has sickened in a deep recession.
The the European Union, the the European Central Bank and the International Monetary Fund, known as the "troika", say it is the only way out of a highly indebted Greece, while some economists say that the program resembles medieval bleed — a dose of pain highly unlikely to revive the patient.
First task of Mr. Papandreou is to persuade its ruler Socialist Party to pass a law that would save or raise about $ 40 billion by 2015, equivalent to 12 percent of Greece's gross domestic product, through pay cuts and tax increases, at a time when the economy is shrinking.
To put this into perspective, spending cuts and tax increases of a similar scale in the United States would be equivalent to US $ 1.75 rake trillion, considerably more extensive than even more comprehensive proposals for reducing the federal budget deficit. And Greece promised to generate more than $ 72 billion by selling assets of the primordial State, which many Greeks consider a fire sale of the national patrimony.
While the austerity commitment allows access Greece a fresh infusion of international aid, a growing chorus of economists say the new Government programme will at best delay pattern and a restructuring of its debt, which is already more than 150% of the country's gross domestic product. More steep budget cuts and tax increases, they say, are the enemy of economic growth, which desperately needs Greece to make its debt more lightweight.
"You can't keep on milking of the cow no power," said Konstantinos Mihalos, the President of the Hellenic Chamber of Commerce in Athens.
In fact many economists fear that Greece has already entered a "debt trap", where the interest in your lot of Payables requires ever more loans. "The Greeks told to accept more than has already been able to treat the disease, medicine," said Simon Tilford, Chief Economist of the Center for European Reform in London.
The Greeks have already reduced their deficit to five percentage points of gross domestic product, "unprecedented cuts in a modern economy," said Mr. Tilford. "But the cuts had a strong negative impact on the economy than the troika imagined, fiscal austerity and pushed the economy deep in recession. Debt can only be paid out of income, and that means growth. "
Greece does not have access to several tools to combat recession, how to depreciate its currency or cut interest rates at least as long as he remains a member of the eurozone. Its monetary policy is controlled by the European Central Bank.
Some independent economists agree that Greece has no choice but to attempt a new round of cuts. Edwin m. Truman, Peterson Institute for international economics in Washington said Greece had to go through more pain, because he had run a deficit even before making payments on its debt, which means that he needed loans to pay off their loans.
Only after Greece rearranges your budget, tax collection and job market and is running a surplus — not including interest payments on the debt — can economists begin to calculate how much debt the payment in Greece is really capable of supporting, and then find out how large a debt restructuring it needs.
"While they are running a primary deficit, they need to keep tightening their belts," said Mr. Truman. "Rescheduling now not relieve Greece from the burden of fixing the economy to create a surplus."
Rachel Donadio reported from Athens and Steven Erlanger of Paris.
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