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For Many Greeks, Here's What Austerity Will Look Like

Wednesday, 29 Jun 2011 | 10:53 AM ET
Riot policemen arrest a demonstrator as they clash with protesters during a 48-hour general strike in Athens.
Aris Messinis | AFP | Getty Images
Riot policemen arrest a demonstrator as they clash with protesters during a 48-hour general strike in Athens.

If you think you’ve got it tough living in America, just be glad you’re not going to be in Greece as that nation begins to confront the true reality of austerity.

With the Greek Parliament’s approval Wednesday of measuresdesigned to bring the country’s disastrous finances under control comes an array of measures that would make Zeus weep.

From a 15 percent cut in public wages to cigarette and alcohol taxes to Social Security reductions and means testing, the Greek measures will instill pain, necessary though it may be, for years to come.

It’s all being done for the sake of helping the country meet its 340 billion-euro debt burden.

Even with the stringent measures, Greece still will be in a heap of trouble, especially considering how much growth could be hampered by tax increases and sharp spending cuts.

“If prevailing is to be considered a success, then the Greek Parliament will prevail and will send tax receipts through the floor rather than skyward, and will prevail in spinning an already dizzy national spirit into a national spirit of economic despair,” Dennis Gartman, hedge fund manager and author of The Gartman Letter, wrote this morning.

“If that is prevailing,” he added, “we’d want no part of it.”

Gartman details the 30 or so measures taken in taxation and cuts in the public sector, defense and benefits, along with a slew of privatization measures, the government will be taking.

Here are 10 of the most onerous:

  1. Taxes will increase by 2.32 billion euros this year and 3.38 billion, 152 million and 699 million in the three subsequent years. There will be higher property taxes and an increase in the value-added tax (VAT) from 19 percent to 23 percent.
  2. Luxury levies will be introduced on yachts, pools and cars and there will be special levies on profitable firms, high-value properties and people with high incomes.
  3. Excise taxes on fuel, cigarettes and alcohol will rise by one-third.
  4. Public sector wages will be cut by 15 percent.
  5. Defense spending will be cut by 200 million euros in 2012 and 333 million each year from 2013 to 2015.
  6. Education spending will be cut by closing or merging 1,976 schools.
  7. Social Security will be cut by 1.09 billion euros this year, 1.28 billion in 2012, 1.03 billion in 2013, 1.01 billion in 2014 and 700 million in 2015. There also will be means testing, and the statutory retirement age will be raised to 65 from 61.
  8. The government will privatize a number of its enterprises, including the OPAP gambling monopoly, the Hellenic Postbank, several port operations, Hellenic Telecom and will sell its stake in Athens Water, Hellenic Petroleum, PPC electric utility and lender ATEank, as well as ports, airports, motorway concessions, state land and mining rights.
  9. Only one in 10 civil servants retiring this year will be replaced and one in five in coming years.
  10. Health spending will be cut by 310 million euros this year and 1.81 billion euros from 2012 to 2015.

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