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Greek austerity could create 'phenomenon that could cause a social explosion'

By Catholic Online (NEWS CONSORTIUM)
February 22nd, 2013
Catholic Online (www.catholic.org)

"I am afraid that we may see a phenomenon that could cause a social explosion," Savvas Robolis, scientific director for the Labor Institute of the General Confederation of Workers in Greece (GSEE) says. Robolis is talking about the drastic austerity measures the European nation is undertaking to remain solvent.

LOS ANGELES, CA (Catholic online) - These policies could create a crisis of insolvency within the country, undermining the very reason they were implemented - to repay the country's debt. These are the findings from the GSEE.

"Right now many people can't pay their taxes. That's why state revenue fell $395 million short of January targets. If that continues, I don't know if the state will be able to meet its obligations by June or July. It may not have the cash to pay salaries and pensions."

According to finance ministry data, the Greek state heavily subsidizes approximately 1.3 million pensions. It also pays the salaries of almost 800,000 state employees, roughly a quarter of those still employed in Greece. Failure to pay those pensions and salaries in full would drastically impact the state's own tax revenues, hindering its ability to maintain payments to international creditors.

According to the GSEE's Labor Institute, pensions and salaries have already been cut by 40 percent during the crisis. A new wave of austerity being implemented this year will raise those cuts to an estimated 50 percent. At the same time, Greeks have faced higher sales tax at the supermarket, higher fuel tax, a new property tax and a "solidarity fee" of one to three percent on their salaries.

The Greek taxpayer is bearing increasing indirect burdens as the government privatizes state enterprises. Commuters who use the country's main motorway, which runs from Athens to the northern city of Thessaloniki recently demonstrated as new toll booths went into effect.

In some cases it is unclear that the extra money raised goes to its intended purpose. The state's Human Resources Organization or OAED says it has not seen a penny of the solidarity fee, which was to raise $395 million a year to relieve unemployment. OAED pays unemployment benefits and runs retraining programs.

"These measures are unbalanced, unfair and chiefly ineffective," Vangelis Moutafis, GSEE's secretary for organization says. "They haven't brought prospects to the economy, but they have produced plenty of drama in society."

Finance Minister Yannis Stournaras is more optimistic. Although he remains green, on the job since last June, he pulled off a small miracle in bettering Greece's deficit target by half a billion Euros in 2012. Stournaras confidently predicts that the Greek recession will end in the last quarter of 2013.

"We have managed to turn the economy around," he proclaimed last month. "Towards the last quarter of 2013 we're going to have recovery, and definitely for the whole year in 2014. I feel sure, I feel certain, that this will be the last year of Greece's recession."

Even if he is correct, and Greece avoids the worst-case scenario of a unilateral default on its loans, it will have to contend with the social and political implications of entrenched unemployment.

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