THE GOVERNMENT will outline a second austerity package in parliament tomorrow, in an effort to stave off further credit ratings downgrades after its already high borrowing costs spiked at a sale of domestic bonds.
Scrambling to avoid becoming the fourth euro zone country to need bailing out, the authorities are putting together the outline of a new package to ensure that the first package, panned by opposition parties as insufficient, gets approved by parliament this Thursday.
“The finance minister will offer an outline of the package on Wednesday (tomorrow),” Christos Patsalides, permanent secretary at the Ministry of Finance, told a session of parliament’s finance committee yesterday. He did not elaborate, but said the new proposals would be ready in legislative form in September.
Finance Minister Kikis Kazamias will attend tomorrow’s committee meeting to answer questions about the first package as well as convince opposition parties about the government’s clear intentions for the second. The move appears to be an effort at compromise. Initial plans had the government tabling the second package in October along with the bill for the 2012 budget.
The authorities yesterday sold 10-year domestic bonds worth €23.1 million with a yield of 7.00 per cent, compared to 6.252 per cent at the sale of €53.55 million of bonds at an auction of similar paper in June.
The authorities have increasingly focused on local markets for borrowing requirements this year to counteract volatility on international markets. A 10-year bond issued to international investors in February 2010 was bid at over 11 per cent yesterday.
The existing proposals pending approval include a two-point increase in VAT, a three percent contribution from civil servants’ salaries and additional tax for high earners. Over a two-year period they are designed to save some 750 million euros.
Opposition parties, currently holding a majority in the 56-seat parliament, yesterday said the package falls well short of a unanimous set of measures agreed to with all political parties last month, and which the government subsequently altered.
House Finance Committee Chairman Nicolas Papadopoulos said the final package tabled in parliament was missing previously agreed measures such as closing some semi-government organisations, reducing starting salaries in the civil service and abolishing vacated positions, as well as changes in a now costly pension calculation system and better targeting of state benefits.
“Unfortunately the same catastrophic policy of inaction and diffidence continues,” said Papadopoulos. “The measures are totally insufficient and unfair.”
