Greece is in a precarious situation. It had to accept a new round of hard austerity measures being pushed by the European Union in exchange for the release of $96 billion in bailout funds that would pay its maturing debt, save it from bankruptcy, and stave off its ouster from the shared euro currency.
But the fresh bail out fund comes with a hard price. Among these austerity measures are:
1. Increase in the value added tax of most food items from 13 to 23 percent.
2. Cut in pensions through withholding taxes and deductions for health care.
3. Imposition of a special property tax called ENFIA exacted on all property owners. This is an addition to the slew of taxes introduced since 2009 such as solidarity tax, professional tax, tax on petrol and consumer items.
4. Privatization of government assets in which the government would transfer 50 billion euros worth of its most valuable assets – to include stakes in Greek banks, electrical and utility companies, airports and ports – to a privatization trust fund, which would be managed by Greek authorities under the supervision of “relevant European institutions.”
5. Guarantee against passing laws to protect labor rights and collective bargaining agreements.
The new round of tax hikes further adds to the burden of Greek citizens considering that they pay already around 45 percent of their income to taxes. In addition, the privatization of government assets is expected to result in massive layoffs in government owned and controlled corporations.
Greek citizens in a referendum have rejected these austerity measures but the government of Prime Minister Alexis Tsipras was forced to agree to these measures after being given a deadline by the European Union. Austerity measures have been the subject of massive demonstrations since these were first introduced in 2009.
There have been two previous bailout funds lent to Greece: 110 billion euros in May 2010 and 130 billion euros in February 2012. And it appears that these bailout funds did not do anything to help Greece recover but merely enabled it not to default on its loan payments, albeit temporarily. While on the other hand, Greek citizens are made to bear the brunt of progressively harder austerity measures.
Greece would not be this deeply indebted, in the first place, if not for a secret loan agreement proposed and facilitated by Goldman Sachs in early 2001. Goldman Sachs earned 600 million euros from the loan transaction. When the crisis struck during the latter part of 2001, the loan facilitated by Goldman Sachs, which was disguised as a cross-currency swap, put Greece deeper into debt from 2.8 billion to 5.1 billion euros by 2005. The government debt has now reached 357 billion euros.
Greece is now swallowing the bitter pill again because its creditors from among the European Union, especially Germany, want to make sure that Greece is not only able to pay its debts; the creditors would also like to profit from the sufferings of Greek citizens.
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