Tag Archives: debt crisis

Greece and Portugal: Twinned in austerity

Prime Minister Lucas Papademos has returned to Greece after holding talks in Brussels, Luxembourg and Frankfurt with European Union officials aimed at securing further emergency loans. It remains unclear whether he has done enough — or indeed if he can do enough on his own — to secure further funding.

There have been no such problems for Greece’s debt-plagued bailout brother Portugal, which on November 16 was told it would be receiving its third installment of a 78-billion-euro emergency loan package. While Greece is hanging on for the 8 billion euros it needs by mid-December to prevent bankruptcy, Portugal has already received exactly the same amount.

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Paying the cost of the crisis

The news earlier this month that Greeks, acting on fears the country might exit the euro, transferred 30 billion euros to foreign banks, many of them in Switzerland, would have left most people in the debt-ridden country perplexed. It is a year since Greece signed a deal with the European Union and the International Monetary Fund to receive a 110-billion-euro bailout to prevent bankruptcy. That agreement came with strict terms and over the last 12 months the government in Athens has imposed the kind of austerity measures that make it difficult for Greeks to imagine that some of their countrymen might have enough spare cash to deposit in Swiss bank accounts.

One of the key features of the loan agreement has been repeated tax increases. Value added tax (VAT) has gone up several times since last year, income tax has been adjusted, duties on alcohol, fuel and tobacco products have been hiked and the tax on pensions has been increased. As a result, Greece now has the third-highest VAT rate in the EU, the second-highest duty on petrol and the third-highest social security contributions in the 27-nation bloc.

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