Greece: What Economic Austerity Looks Like

Recent events in Greece provide a glimpse of what economic austerity looks like. In exchange for up to 120 billion Euros ($160 billion) from the European Union (EU) and International Monetary Fund (IMF) over the next three years, Greece has committed to reducing its budget deficit to under the EU limit of 3% of GDP by 2014 (the US budget deficit as a percentage of GDP for 2009 was 9.1%). To fulfill this promise, Greece is planning dramatic tax increases and spending reductions, including:

• Reducing effective annual wages for public sector workers (which in Greece includes teachers, doctors, nurses, train workers, air-traffic controllers, and many others) by 5-15% per employee
• Banning increases in public sector salaries and pensions for at least three years
• Increasing the Value-Added Tax (VAT) from 21% to 23%
• Raising taxes on fuel, alcohol, and tobacco by 10%

I have to wonder whether Americans would accept similar austerities...

Rioting continues in Greece as workers protest austerity measures...

Sources:

Barkin, N & Papadimas, L (2010, May 2), Greece Pledges More Budget Cuts, Gets More Time, Reuters.

Morley, N (2010, February 10), Public Service Workers in Greece on Nationwide Strike, VOANews.

US Federal Deficit as Percent of GDP (2010), USGovernmentSpending.com.

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