Greek austerity packages

This article details the fourteen austerity packages passed by the Government of Greece between 2010 and 2017. These austerity measures were a result of the Greek government-debt crisis and other economic factors. All of the legislation listed remains in force.
Membership in the European Monetary Union (EMU) has posed problems for some social classes, like the working class in Germany, and also on a countrywide scale for some EU members. Greece is in the latter category, along with Portugal, Ireland and Spain, presenting the problem of sovereign default, sometimes also called a "sovereign debt crisis". This situation originated with the tenuous integration of the periphery countries of the European Union into the eurozone and was made worse by the Great Recession. Austerity was one of the policy measures available to governments to manage the economic downturn. Greek withdrawal from the eurozone is another alternative or institutional reform of the eurozone.
The first austerity package was the first in a row of countermeasures to counter the Greek government-debt crisis. It was approved by the Hellenic Parliament in early 2010.
The purpose was to reduce the budget deficit. These measures preceded the First Economic Adjustment Programme for Greece known as "memorandum". It emerged after a promise by the Greek prime minister in the World Economic Forum of Davos, Switzerland to take measures to reduce the country's deficit. The package was implemented on 9 February 2010 and was expected to save €0.8 billion. It included a freeze in the salaries of all government employees, a 10% cut in bonuses, as well as cuts in overtime workers, public employees and work-related travel.
The second austerity package was approved by the Hellenic Parliament in March 2010.
On 5 March 2010, amid new fears of bankruptcy, the Greek parliament passed the "Economy Protection Bill", which was expected to save another €4.8 billion. The measures include: 30% cuts in Christmas, Easter and leave of absence bonuses, a further 12% cut in public bonuses, a 7% cut in the salaries of public and private employees, a rise of the value added tax from 4.5% to 5%, from 9% to 10% and from 19% to 21%, a rise of the petrol tax to 15%, a rise in the taxes on imported cars of up to 10%–30%, among others.
On 23 April 2010, after realising the second austerity package failed to improve the country's economic position, the government requested that the EU/IMF bailout package be activated. Greece needed money before 19 May, or it would face a debt rollover of $11.3bn. The IMF had said it was "prepared to move expeditiously on this request".
Shortly after, the European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan. The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners. In return the government agreed to implement further measures.
The third austerity package came with the signing of the First Economic Adjustment Programme for Greece known as First Memorandum with the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB). It was announced in May 2010 and approved by the Hellenic Parliament in June 2010.
On 1 May 2010, Prime Minister George Papandreou announced a new round of austerity measures, which were described as "unprecedented". The proposed changes, which aimed to save €38 billion through 2012, represented the biggest government overhaul in a generation. The bill was met with a nationwide general strike and massive protests, leaving three dead, dozens injured and 107 arrested.
The bill was submitted to Parliament on 4 May and approved on 6 May. Out of 160 MPs consisting the PASOK government majority, 157 MPs supported the bill, while 3 MPs abstained. ND, SYRIZA and KKE voted against the bill; however, Dora Bakoyianni of ND voted for the bill in principle and was subsequently expelled from ND. LAOS voted for the bill.
Further separate votes on 29 and 30 June were held to implement portions of the package.
The measures include:
Public pension reforms included:
On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate €45 billion in loans to be provided in 2010, with more funds available later. The first instalment covered €8.5 billion of Greek bonds that became due for repayment.
In total, €110 billion was agreed on. The interest for the eurozone loans is 5%, considered to be high for a bailout loan. The European Monetary Union loans would be pari passu and not senior like those of the IMF. The seniority of the IMF loans has no legal basis but is respected nonetheless. The loans should cover Greece's funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012). According to EU officials, France and Germany demanded that their military dealings with Greece be a condition of their participation in the financial rescue. As of 12 May 2010, the deficit was down 40% from the previous year.
The fourth austerity package, commonly called 'The Medium-term Programme' or 'The June 2011 measures', was approved by the Hellenic Parliament in June 2011.
In the midst of public discontent, massive protests and a 24-hour-strike throughout Greece, the parliament debated a new austerity bill, known in Greece as the "mesoprothesmo" (the mid-term [plan]). The government's intent to pass further austerity measures was met with discontent from within the government and parliament, but eventually passed with 155 votes in favour (a marginal 5-seat majority). Horst Reichenbach headed up the task force overseeing Greek implementation of austerity and structural adjustment.
The new measures included:
On 11 August 2011 the government introduced more taxes, this time targeted at people owning immovable property. The new tax, which was paid through the owner's electricity bill, affected 7.5 million Public Power Corporation accounts and ranged from 3 to 20 euros per square meter. The tax applied for 2011–2012 and was expected to raise €4 billion in revenue.
On 19 August 2011 the Greek Minister of Finance, Evangelos Venizelos, said that new austerity measures "should not be necessary". On 20 August 2011 it was revealed that the government's economic measures were still off track; government revenue went down by €1.9 billion while spending went up by €2.7 billion.
On a meeting with representatives of the country's economic sectors on 30 August 2011, the Prime Minister and the Minister of Finance acknowledged that some of the austerity measures were irrational, such as the high value added tax, and that they were forced to apply them by the EU.
The fifth austerity package was aimed to ensure the 6th bailout instalment for Greece. The representatives of creditors required Greece to take new measures to limit state expenditures. That was one of the conditions so that the financing of Greek economy to continue normally. The new bill (called multi-bill) hit mostly civil servants and retirees. It was voted by the Greek parliament on 20 October 2011 amid protests. A man was killed during a demonstration at Syntagma Square. The major European countries then agreed on a reduction of Greek debt.
The package included:
The sixth austerity package was approved by the Hellenic Parliament in February 2012.
In October 2011, Papandreou got parliamentary backing for further austerity measures. These new measures would allow Greece to get an extra instalment of international loans, forming a second bailout package that would prevent a sovereign default and would allow the partial write-off of Greek debt, the so-called private sector involvement (PSI). As a result of this backing, the EU granted a quid pro quo of further austerity for a €100bn loan and a 50% debt reduction through PSI.
Within a week, Papandreou, backed unanimously by his cabinet, announced a referendum on the deal, sending shockwaves through financial markets. German chancellor Angela Merkel and French prime minister Nicolas Sarkozy then issued an ultimatum declaring that, unless the referendum approved the measures, they would withhold an overdue €6bn loan payment to Athens, money that Greece needed by mid-December. Papandreou cancelled the referendum the next day after the opposition New Democracy Party, agreed to back the agreement.
On 10 November Papandreou resigned following an agreement with the New Democracy party and the Popular Orthodox Rally to appoint a new prime minister to promulgate laws implementing the new measures that were agreed with the EU. The person chosen for this task was non-MP technocrat Lucas Papademos, former Governor of the Bank of Greece and former Vice-President of the European Central Bank; his appointment was criticised by left-wing parties and branded "unconstitutional". By contrast, three separate polls taken when Papademos assumed office revealed that around 75% of Greeks thought that temporary, emergency technocratic rule was "positive".
The EU insisted that whichever government was elected in 2012, it must honour the agreed upon EU-IMF austerity strategy. It thus demanded that Greek party-political leaders sign legally binding letters to this effect, as well as to any additional measures that might be required in future as part of the second rescue-package. Papademos argued in favour of signing, despite opposition from major pro-austerity factions in his government. Such letters would bind governments to austerity and structural adjustment through 2020. It was announced that the general election to replace Papademos' administration was to be delayed until April, or even May 2012 because more time was needed to finalise plans, as well as to complete negotiations over debt reduction.
Finalising the deal on the 50% PSI debt write-off, required by the Troika as a condition for extending more aid, proved difficult in early 2012, given objections primarily from hedge funds. In an interview with The New York Times, Papademos said that if his country did not receive unanimous agreement from its bondholders to voluntarily write down €100bn of Greek's €340bn debt, he would consider legislating to force bondholder losses, and that if things went well, Greeks could expect "an end to austerity" in 2013. Others believed that even the proposed 50% would not be enough to prevent a sovereign default.
In February, facing sovereign default, Greece needed more funds from the IMF and EU by 20 March, and was negotiating over a €130 billion lending package. On 10 February, the Greek cabinet approved the draft bill of a new austerity plan, which was calculated to improve the 2012 budget deficit with €3.3 billion (and a further €10 billion improvement scheduled for 2013 and 2014). The austerity plan includes:
The latest round of austerity measures meant that Greece would face at least another year of recession before the economy started to grow again. Foreign observers were shocked by both the cold-heartedness of German negotiators and a perceived lack of integrity from Greece not honoring its commitments.
Showing disagreement, transport minister Makis Voridis from the Popular Orthodox Rally party, along with five deputy ministers from various ministries, resigned. On 11 February, Papademos warned of "social explosion and chaos" if the parliament did not approve the deal the next day. Speaking to members of Parliament before their vote, Papademos stated that if the majority voted against the austerity measures, the government would not be able to pay employee salaries. On 13 February, the Greek Parliament subsequently approved the measures 199 to 74. During the parliamentary debate, massive protests were witnessed in Athens that left stores looted and burned and more than 120 injured. The riot was one of the worst since 2010.
Despite its position as one of the ruling parties, the Popular Orthodox Rally voted against the plan and withdrew from the government. Forty-three MPs from the other two ruling parties (social democratic PASOK and conservative New Democracy) also voted against the plan and were immediately expelled from their parties. This reduced the combined power of these two parties from 236 to 193 seats, still enough for a majority of the 300-seat parliament. The vote was a major precondition for the EU and IMF to jointly release the funds, which are supposed to cover all financial needs in 2012 and 2013, with the hope that Greece can start lending again at the private capital markets in 2014.
The determination of the Greek leaders to implement the new austerity package was however doubted. For example, Antonis Samaras (leader of New Democracy) talked about renegotiating the deal, despite voting for the package. Because of this uncertainty, Eurozone finance ministers demanded that Greek main politicians sign a written assurance for their continued support to implement the austerity package, both before and after any elections.
After passing the package on 13 February, four other hurdles remained for Greece to receive the new €130 billion bailout loan:
The seventh austerity package was approved by the Hellenic Parliament in October 2012.
Some of the main elements are:
The fiscal plan is an extension of the initial bailout package, as it contain the framework for €5.3bn of additional measures (primarily tax hikes) to be implemented in 2015–16 along with the €13.5bn of measures for 2013–14. The extension (and accompanying agreement) were to be covered in more details by a new bailout program in November 2012
The package and reforms were outlined in the second bailout agreement (March 2012). Initially, the package only dealt with those €13.5bn of measures (comprising €10bn spending cuts and €3.5bn tax hikes) for implementation in fiscal year 2013 and 2014. According to the implementation plan of the second bailout agreement, the measures were expected to have been passed by the Greek parliament in June 2012.
The passage of the austerity package was delayed due to political turmoil. Two parliamentary elections were held, on 6 May and 17 June. Subsequent political calls prompted by a worsened recession asked for a 2-year extension of the bailout programme, and for the politicians to settle the exact content of the measures. This was finalised on 29 October.
As of 1 October, the Troika and the government were negotiating a €13.5bn austerity package for 2013–14, of which €10bn was to be implemented as spending cuts and €3.5bn as tax hikes. The government's proposal was that the financial budget for 2013 should implement the first €7.3bn of spending cuts and €0.5bn of tax hikes; with the remaining cuts scheduled for 2014. According to earlier Troika statements, the report would depend on the level of ambition and seriousness of the government's measures and on the progress on structural reforms and privatisation.
The Troika on 2 October explained to the government that the points agreed to in the March 2012 bailout agreement had to be effected before the €31.5bn capital payment:
The Troika reportedly pushed for lower minimum wages and a 30% reduction of the compensation paid to dismissed employees. This proposal was rejected by the government. Another point of disagreement was whether 20,000 civil servants should be simply laid off (recommended by the Troika) or placed in a so-called "labor reserve scheme" at a reduced wage for two years before having their status re-evaluated (preferred by the government).
On 3 October sources from the Greek Ministry of Finance revealed that the Troika had asked the government to frontload the austerity package with measures of €9.3bn in 2013 with the remaining €4.2bn to be implemented in 2014. The Troika expected a slightly worse GDP decline in 2013 compared to the government forecast and that the economy subsequently would recover faster if the austerity package frontloaded its savings for 2013. According to Kathimerini, the extra €0.6bn of increased savings in 2013 would most likely be found by removing all Christmas, Easter and summer bonus payments for civil servants, equal to €1000 per year for each civil servant.
According to Kathemerini's source, the Troika had also indicated they were willing to accept the large tranche of unspecified savings from structural reforms, if the government were ready to accept the frontload of the austerity package. IMF at the same time also called for a decision to liberalise the fuel sector, as their review report of the sector had concluded that Greeks on a yearly basis currently pay about $1bn more for fuel than they should.
The government attempted to sign a final deal with the Troika about the content and size of the austerity package and 2013 fiscal budget before the scheduled Eurogroup meeting on 8 October. If the Eurogroup approved the content of the negotiated deal, it would be submitted for a final approval by the European heads of state at the EU summit on 18 October. As the exact content of the package needed to be revealed before the Troika can reach its conclusion about the sustainability of the Greek economy, it was expected this important report appear in the first half of November.
On 17 October the Troika released the following statement:
Responding statements from the government indicated that an agreement about core elements had been agreed. Disagreement remained about labor market reforms, with the government still resisting direct layoffs or wage/pension cuts for public workers. Another outstanding point was that the government requested that the Troika finance a 2-year delay of the fiscal targets in the bailout plan, to avoid the need for the government to pass an additional austerity package (in addition to the €13.5bn) to reach the initial fiscal targets. It was likewise hoped that these additional disagreements could be settled during additional talks with headquarters.
At the EU summit on 19 October, it was announced the Eurogroup would arrange a conference call on 29 October to approve the final version of the austerity package, and provided this package subsequently was passed by the Greek parliament before 11 November, the Eurogroup was ready to make the decision at their ordinary meeting at 12 November to accept the release of the bailout funds.
The crucial passage of the Labor market reform, Midterm fiscal plan 2013–16 and Fiscal budget 2013 resulted in the exclusion of several MPs from the three coalition parties. New Democracy lost 4 of 125, PASOK lost 7 of 26 and Democratic Left lost 3 of 14. The combined majority was reduced to 165/300 and that the majority for the two most reform-friendly parties was only 151 MPs.
On 7 November amidst protests of tens of thousands of people, the Greek parliament narrowly approved another austerity package worth €13.5 billion. Without the vote, the Troika warned, the next instalment of €31.5 billion in financial aid would not be granted. Samaras told MPs that this package was "definitely the last", though some commentators immediately disagreed.
The latest measures cut pension on average between 5% and 15% and increased the retirement age from 65 to 67. Wages of civil servants were cut again by up to 20%. Some workers from the public sector would lose as much as 30% of their salaries.
The eighth austerity package included two multi-bills.
The first multi-bill was approved by Greek parliament on 28 April, receiving 168 votes. The law created a new tax for immovable property that would be defined later. The teachers reacted to the bill by declaring strikes. However, the government prohibited the strikes, proceeding to implement Civil mobilization.
On 17 July, the Greek Parliament approved an eighth austerity package to secure payment of its next €2.5 billion credit tranche. The laid off another 15,000 public employees, among them high school teachers, school guards and municipal policemen. Democratic Left (DIMAR) had withdrawn from the governing coalition in June. The package received 153 votes. The next day, a general ban on demonstrations was enacted and 4,000 police officers mobilized to avoid larger protests in the Greek capital during Schäuble's visit.
The ninth austerity package was approved by Parliament on 9 May with 150 votes. It included provisions about Greek economic policy during the following four years. The bill's title was Medium-term Fiscal Strategy plan 2015-2018 and the relevant law is 4263/2014.
The bill froze wages and pensions until 2018. It cut public sector expenses, such as the Ministry of Health. It provided that the primary surplus in 2014 would be 2.3% of GDP (€4.19 billion) 5.3% (€11.585 billion) in 2018.
The parliament failed to elect a president and the Samaras Cabinet collapsed. The election took place on 25 January and the left-wing party Syriza won the election. The new government tried to adopt anti-austerity politics. In the first quarter of 2015 the Greek economy returned to recession. The deterioration of economy forced the government to accept another bailout, known as the Third Economic Adjustment Programme for Greece known as Third Memorandum. This bailout required a new austerity package.
The first round of measures was approved by the Greek parliament on 16 July 2015. The measures include:
The second set of measures passed on 23 July changed the Code of Civil Procedure.
The eleventh austerity package was voted by the Greek Parliament as part of the agreement between the Tsipras Government and the 'quartet' of creditors (the IMF, ECB, ESM and EU) for a third loan. The law contains two parts. The first was the loan agreement while the second contained the measures agreed to secure the first tranche of the new loan.
It was tabled by the government on 13 August 2015 and was approved by parliament on 14 August 2015 with 222 votes for and 64 against. It included provisions about Greek economic policy during the three next years. The bill's title was Ratification of the Financial Assistance Draft Contract by the ESM and provisions for the implementation of the Financing Agreement.
The Government tabled the Bill containing the measures and the loan agreement in the afternoon of August 13 and requested that it be discussed under the extremely urgent Parliamentary procedure. The bill passed the committees on August 13 and was discussed in the plenary session between 2 am and 10 am of August 14. At 6 am, the MPs decided by vote to shorten the discussion, thus the vote was held earlier than envisioned by the Standing Orders regarding extremely urgent procedures, at 10 am.
The measures passed by this bill were the following:
The twelfth austerity package was passed as part of the agreement between the Tsipras Government and the 'quartet' of creditors (the IMF, ECB, ESM and EU) for a third loan. The first round of bills passed on 16 October 2015 with 154 votes.
The measures passed were:
The thirteenth austerity package is a part of the agreed measures between government and IMF, EU, ECM for an 86-billion-euro bailout. The package was voted upon in two rounds. The first round passed on 8 May with 153 votes amidst demonstrations.
It includes another €5.4 billion in pension cuts and tax reforms. The measures aim to achieve a 3.5 percent primary budget surplus target in 2018.
The first round of measures mostly affected pensions saving €3.6 billion. The measures voted on 8 May include:
The second round of measures included €1.8 billion in new taxes and the creation of a contingency spending cuts mechanism (cutter mechanism). The vote was on 22 May with 153 votes in favour.
The fourteenth package, the Medium-term Fiscal Strategy Framework 2018–2021, was approved on 18 May. It amended provisions of the thirteenth package. The extra measures were to support a debt deal. The measures were approved by the Syriza-ANEL coalition with 153 votes.
The measures include: