On May 2, 2010, the Greek government penned an agreement with the IMF and EU in a last ditch attempt to keep the wolf from the door, namely: bankruptcy.
In forging the deal, Prime Minister George Papandreou admitted that it would be tough on ordinary people:
“I am aware that our decision today will require our citizens to make great sacrifices, but the alternative would be catastrophe.”
Together the IMF and EU agreed to loan Athens 110 billion euros over three years. To date, 53 billion has already been transferred. In exchange the Greeks are told to make savage cuts to the tune of 30 billion euros.
The financial plan is to reduce the Greek deficit by 10.5 per cent for 2010 and 7.4 in 2011. The deal has been backed by parliament, despite uproar, strikes and huge street protests.
Pensions are under attack, women are now asked to work until age 65 as opposed 60, full pensions have been slashed, and those that take early retirement also get less.
Yet the recession continues to bite. 2010 saw GDP shrink by 4 per cent, and in the first quarter of 2011 Greek GDP dropped by 5.5 per cent.
At the end of April, the Greek deficit was running at 10.5 per cent, while the forecast predicted a rate of 9.4.
The IMF and EU upped the pressure on the government for more rigorous cuts if they wanted the fifth instalment of the loan, to avoid defaulting.
A fresh rescue package is currently being thrashed out. For the Greeks the hope is they can extricate themselves from the financial quagmire, achieve growth and begin to repay their staggering 340 billion euro debt.