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Victoria Mindova

The noose around the neck of Greece has tightened further after it became clear that it is very difficult to the socialist government to implement the plan for the budget deficit reduction. The situation is getting to its extreme as Greece will have to take measures in the amount of about 4 billion euros instead of shortening the revenue and expenditure difference by 1.8 billion euros this year. The extraordinary set of measures includes the reduction of social benefits which will be given with a dropper from now on. Bachelors who live in poverty under the national standards and have an annual income up to € 6,897 and four-member families living with no more than 14,500 euros per year will be entitled to social benefits.

The Greek rulers will try to save between 4 and 9 billion more by eliminating the tax breaks that are almost 950 types for the different groups of taxpayers, both individual and legal persons. The wages of employees in state enterprises that will contribute 1% of the GDP or savings of 2.3 billion euros in the best case will be also cut. Inevitable are the cuts of the weapons and public investment costs.

Generally, the Greece’s deficit reduction requires measures in the amount of 25 billion euros by 2015. Most of the program will be implemented in the period 2012-2014 when the country will introduce structural and fiscal measures to optimize its budget by 8% of the GDP or 19 billion euros. After ticking the greater part of its duties, in 2015 it will only have to deal with the accumulation of 1% of the GDP or 3 billion euros.
 
Given the differences between the planned and the achieved in the 2010 budget, and the delays in the implementation of the structural and institutional reforms, the representatives of the supervisory Troika – the IMF, the European Commission and the European Central Bank – are expected to insist on compliance with new stricter deadlines for the tasks. It is also expected to set higher goals than necessary to cover the gaps in the program.

The Minister of Finance George Papakonstantinou said that the medium-term program for the deficit reduction and for the recovery of the local economy will comprise two-thirds measures relating to expenditure and one-third relating to the revenue. The program must first be approved by the Troika and will be announced officially on the 15^th of April. Then a public discussion follows and its adoption by the Greek Parliament. Economic analysts in the country expressed their concerns that the plan will face serious resistance and trigger political reactions, regardless of its approval by the supervisors of the International Monetary Fund, the European Central Bank and the European Commission.

The government has time to regroup its forces to May this year, when the heads of the supervisory Troika will return to Athens to make their regular inspection of the rescue program. The payment of the next fifth installment of the aid under the Memorandum of financial support, which amounts to 12 billion euros, will depend on their report. Almost the entire amount of this money will go into the hands of the old creditors of Greece, which should be paid 11 billion euros in the same month.

The issue of the padded foreign debt and the large budget deficit have troubled Greece’s waters long time ago. The crisis that has entered Greece deeply slapped Europe for the long neglected problems in the periphery of the currency zone.

Wikileaks presents in detail the correspondence between American officials and their European colleagues, who strongly denied three years ago the possibility Europe to be affected by the global crisis. In March 2009, German officials said that there is no threat of Greece’s bankruptcy despite the warnings of their USA counterparts.

Several months after the outbreak of the global economic crisis, the US Secretary of State Hillary Clinton asked all American Embassies in Europe to contact the statesmen of the EU member states to evaluate the expansion of the crisis from America to their countries. The answer the Americans received from the German government and the headquarters of the European Central Bank was that there is no such a risk. The discussions held between the US Deputy Secretary of the Treasury Eric Meyer and the representatives of the European Central Bank show that the European financial experts stated that the Central Bank availed unlimited liquid resources and a financial collapse of a member state is impossible. "Germany is ready to help both the states of the union, and those outside it," a Greek edition cited the findings connected with the American Ambassador in Berlin, who reported to the seniors.  

Despite the stated readiness, the time has shown that it took some time to Chancellor Merkel to step back from the officially stated initial position - Greece itself has to deal with its financial difficulties and to lend a helping hand. A little more profound, however, has proved to be the Austrian Finance Minister Thomas Wieser, who said that the Germans will initially oppose the aid for their internal elections. He foresaw that when the Germans change their position and express their "unconditional" support to the weaker member states it will be too late to influence the developments.

A year later, when the international markets have already "smelled" that Greece will not and can not cope alone with its financial difficulties, Germany is considering the intervention of the International Monetary Fund in the rescue mechanism, despite its concerns that the European Central Bank may resist. The economic adviser to Angela Merkel, Andreas Nikolin shared with the US Embassy in Berlin that the IMF could cope effectively with the Greek problem. For this reason, the Greek economic analysts argue that the comment made by Juncker Stark, Board Member the European Central Bank, was not by any chance. In this period, he said that the IMF could not do the dirty political job of Greece. Later when commenting on Greece, Stark said that the country have been a disaster for years.

The big bet is no longer to support the financial aid for Greece or not, but under what conditions it could be provided so as to be accepted more easily. According to Wikileaks, the Americans have found out early last year that the main drama is the fact that Germany has been steadily tightening the belt of its national economy over the past 10 years, while Greece has been paying the 14^th salary. Meanwhile, British bankers forecasted that the unprecedented crisis in Greece would force Germany and France to give money to the troubled Mediterraneans against which they would hand the control of the public finances.

Wikileaks did not hide the truth and published the forecasts of Goldman Sachs for the economic collapse of the countries of the periphery of the area, if rescue measures are not taken quickly. The findings make it clear that on the 12^th of March, 2009 the economic analyst at Goldman Sachs Drik Schumacher warns that there is real danger Greece, Italy, Spain and Portugal to fail, stressing that the average maturity of the Greek foreign debt is smaller, and the premiums are higher. He predicted that in the event of a crisis, Germany and France will bear the financial burden of the aid, because only these countries can actually afford it.