Last year, was the worst year economically after the regime change. The situation in Greek society had already become dramatic even before the coming of the hardships that were gathered throughout the year, with a background of continuing taxation and the consecutive income decreases.
According to protothema.gr, the figures released by the Greek Statistical Authority on 2010 are shocking. Suffice it to mention that poverty is testing 3 million Greeks – in fact 3,030,900 people…
In detail, according to the Authority, the monetary poverty line is at the annual amount of 7,178 euros per person and 15,073 euros for households with two adults and two dependent children under the age of 14 years.
The average annual individual equivalent income is 13,973.94 euros and the average annual disposable income of households is at 24,224.38 euros. Households at risk of poverty are estimated at 868,597 and their members at 2,204,800.
The poverty risk for children between 0-17 years is 23% and is higher by about three points from the percentage of the total population.
Furthermore, the risk of poverty for people over 65 is estimated at 21.3%, while those living in households where people have no work or are working part time, reach 544,800. That is 60,000 more than last year.
Bailout or we’ll quit euro – Greece
Greece’s Government warned yesterday that the debt-crippled country will have to ditch the euro if it fails to finalise a second, €130 billion ($215 billion) international bailout.
Spokesman Pantelis Kapsis said negotiations in the next three or four months with international debt monitors will “determine everything”, including whether Greece escapes a disastrous bankruptcy.
Greece is being kept afloat by a first, €110 billion international bailout agreed in May 2010, after investors shocked by the country’s huge budget deficit and debt mountain demanded sky-high interest rates to continue buying Greek bonds.
An additional bailout was agreed in October, when it became clear that the first batch of funds would not suffice, but that deal has yet to be finalised.
Sorting out the details of the bailout, which also foresees a €100 billion writedown of Greece’s privately held debt, is the main task of the coalition Government headed by former central banker Lucas Papademos, whose short mandate is expected to expire in early April.
“This famous loan agreement must be signed, otherwise we are outside the markets, out of the euro and things will become much worse,” Kapsis told private Skai TV.
In return for its first batch of rescue loans from its European partners and the International Monetary Fund, Greece imposed deeply resented austerity measures to contain its budget deficit set to hit at least 9 per cent of GDP last year despite repeated spending cuts and tax increases.
Kapsis said further cutbacks, possibly including new taxes, might be required to address a revenue shortfall,
“We will see what the shortfall is and it is very likely that measures will be required,” he said. “I also don’t believe it is easy to impose new taxes, but what does cutting spending mean? To close down the public sector? There is no easy solution.”
The details are expected to be determined during talks this month with debt inspectors from the EU, the European Central bank and the IMF, who will determine whether the country receives its next loan installment.
Papademos: Danger of disorderly
default if lending negotiations fail
Prime Minister Lucas Papademos appealed to social partners on Wednesday to quickly complete negotiations that will lead to an improvement of the economy’s competitiveness and higher employment rates.
“Without such an agreement with the troika and the subsequent (envisioned) lending, Greece in March faces a direct danger of a disorderly default. Therefore, during the coming weeks, everything will be judged by our actions and decisions,” he stressed.
The prime minister noted that one of the main demands by the EC-ECB-IMF “troika” is improved competitiveness and measures to combat unemployment.
Juncker: Returning to drachma
not an option for Greece
Jean-Claude Juncker, president of euro-zone finance ministers, said on Wednesday that “2012 will be a decisive year for the euro, but returning to the drachma is not an option for Greece”.
According to Dow Jones Newswires, he insisted Greece΄s debt woes could be resolved without the country having to exit the currency bloc.
Juncker said that should happen in coming weeks after the Greek government wraps up negotiations with private creditors on a debt writedown.
“2012 is a key year for the euro,” he noted in a transcript of an interview with German radio station NDR. “At the end of this year it will be apparent that further decisions which bring our goal closer were made.”
Greece and some other euro-area economies face years of financial struggle even if they manage to restructure their debts. Their prospects are so bleak that, according to one school of thought, they would be better off outside the euro system, despite the immediate costs of leaving.
Bloomberg, through an article, express a disagreement on this opinion. Not just because the immediate costs of an exit would be enormous. Even after that penalty was paid, resurrecting national currencies and regaining control of monetary policy would create as many problems as they solved.
The euro secessionists’ reasoning goes like this: Suppose Greece somehow resolves its short-term debt problems through default or other means and brings its budget deficits back under control. It will still have to deal with a crippling lack of competitiveness.
Labor costs in Greece have risen much faster in recent years than in Germany and the rest of the euro core, making its exports expensive and imports cheap. The result is chronic trade deficits, which must be financed through continued borrowing.
If Greece still had a drachma to devalue, it could cut the price of its exports and raise the price of its imports that way. Because it doesn’t, it has to restore competitiveness more brutally: by cutting wages, which in turn requires persistently high unemployment to suppress workers’ bargaining power. The present recession is bad enough, goes the argument. Extending it indefinitely would be politically impossible and an economic disaster. That leaves an exit from the euro system as the only choice.
According to Bloomberg, the trouble is, leaving the euro would be an even bigger economic disaster. It would cause a run on Greek banks as depositors rushed to move their euros abroad before the balances could be converted to drachmas. Also, Greek borrowers would still owe euros to foreigners. Because the new drachma would instantly depreciate, the borrowers would have a diminished capacity to service those debts, causing new waves of bankruptcies.
On balance, debt restructuring plus “internal” or “fiscal” devaluation — difficult as it may be — looks preferable.
True, once the accumulated cost gap has been closed in this way, Greece would have to maintain competitiveness by keeping wages under tight control. In this ongoing effort, a floating exchange rate might look helpful, but in practice it would be a mixed blessing.
Inside the system, the peripheral countries have learned a harsh lesson: They must hold growth in wages to the euro area’s rate of inflation plus any increase in national productivity. In countries such as Greece, this demands a new approach to wage bargaining by employers and unions. Overall, though, it should be no more difficult than managing a floating currency. And on this path the reward for success is greater: lower inflation rates and, with luck, faster economic growth.