Greek Prime Minister George Papandreou has the impossible job of calming public anger over massive spending cuts and soothing anxiety in the markets that the country can’t pay its debts.
Observers believe lawmakers will eventually back the 78-billion-euro plan amid concerns that a default could also raise borrowing costs for other troubled eurozone economies.
Some investors have already made up their minds. One economist said Europe’s “Lehman Moment” is nigh.
Papandreou’s latest of measures are needed to receive the fifth installment of an EU and International Monetary Fund bailout package. This tranche is worth some 12 billion euros.
The aim is to slash Greek’s public deficit by 28.5 billion euros by 2015. The American-born premier wants to save 6.5 billion in this year alone.
Welfare payments, civil servant salaries and healthcare spending are all on the block
And despite US calls for European members of NATO to spend more on defence, Greece’s military will see 1.2 billion euros shaved from its budget within the next four years.
Part of the plan includes new luxury taxes. For those Greeks with enough money to buy upmarket goods, yachts, houses and premium cars are about to get a lot more expensive.
Sales tax will also rise from 13 to 23 percent. The government says all these changes will bring in over six billion euros in extra revenues within the next three years.
All this at time when unemployment has soared to close to 16 percent. The measures will further dampen Greek spending power and could hamper growth.
Athens is also banking that a crackdown on fraud and tax evasion will pull in over three billion euros.
An extra 50 billion is expected to be raised from a firesale of state assets.
Up for grabs will be stakes in the state betting monopoly, banks, port operators and telecom firms.
Utilities will also be party privatised, while investors will be able to buy shares in Greek airports and highways.