What is in Greece's new austerity law?

The IMF is releasing 3.2 billion euros to debt-stricken Greece.

Πηγή: iol
By Reuters
Oct 17 2011

Below is a list of the key measures included in Greece's new austerity law, which will be put to a vote in the country's parliament later this week.

Passage of the law is a must for the country to qualify for further rescue payments under its current EU/IMF bailout, as well as for a planned second bailout to be discussed at an EU summit on October 23.

PUBLIC SECTOR WAGE CUTS

For the first time in the country's 190-year history, all the country's 700,000 civil servants will be paid and promoted under the same set of rules, set out in a new wage scale.

The wage scale curtails basic salaries and abolishes a host of bonuses, leading to an average income cut of about 20 percent, according to estimates by public sector labour unions. This wage cut comes on top another 20-percent salary reduction passed under a previous austerity round last year.

Wages at public sector companies are set at 65 percent of their Dec. 2009 level. The average wage cost per employee is capped at 1,900 euros a month.

The government's General Accounting Office (GAO) estimates that the single wage scale and the public sector wage caps will result in savings of about 2 billion euros a year.


PUBLIC SECTOR JOB CUTS

About 30,000 state workers will be put into a “Labour Reserve”, where they will draw just 60 percent of their salaries. They will be laid off permanently if no other public sector job is found for them within a year.

About half of those likely to be assigned to the reserve are close to retirement, reducing the potential impact of the measure, but the government puts the savings next year at 300 million euros.


LABOUR MARKET REFORM

The law makes it easier for firms to cut their payroll costs by concluding company-level wage agreements. It does this by suspending wage bargaining at industry-wide, “sectoral” level. At least two ruling party members of parliament said they will vote against the measure if it is not watered down or withdrawn.


PENSION CUTS

The part of a pension that exceeds 1,000 euros ($1,387) a month will be cut by 20 percent. Pensioners below 55 years of age, mainly former police and army personnel, will suffer a 40 percent cut.

Supplementary pensions paid out to civil servants and by the country's biggest pension fund, IKA, will be cut by between 20 and 30 percent.

Pensions to former bank and state company employees will be cut by 15 percent.

Lump-sum payments to public sector employees upon retirement will be cut by between 20 and 30 percent.

According to GAO estimates, the pension cuts will save 235 million euros a year from the state budget and more than 1 billion euros from pension funds, which are run by the state.

TAX HIKES

The tax-free threshold is lowered to 5,000 euros a year from 8,000 euros. Tax credits on consumer spending will be curtailed.

A solidarity tax, which has already been announced earlier this year and equals between 1 and 5 percent of gross income, will be paid twice next year - once on 2012 income and once, retroactively, on 2011 income.