Daily Austerity Watch wouldn’t want to be Greek Prime Minister George Papandreou for all the baklava in Athens. Then again, we wouldn’t want to trade places with Gov. Jerry Brown (D-CA) for all the stars on Hollywood Boulevard, or any other governor for that matter.
Papandreou has the unenviable task of telling his constituents, who are already reeling under the constraints of fiscal austerity, things are going to get worse. Details of his new fiscal reform package, which includes 23 billion euros ($33 billion) in austerity measures that would slash the budget deficit to 1% of GDP by 2015 from 10% in 2010, were released today.
The plan will be completed in the coming weeks and will be then submitted to parliament,” Papandreou is quoted by Reuters as telling his cabinet. “Today we are presenting the basic guidelines of a roadmap that will lead us from the Greece of crisis to the Greece of creativity.”
Last year, the European Union and IMF gave Greece a 110 billion financial bailout to avert what would have been a calamitous default by the Southern European country. In response, Greece cut public salaries, raised taxes and reduced pensions. There were riots, of course, so this time Athens is taking a more moderate course, at least in theory. As the Associated Press notes, the government’s plan, which is being fleshed out, would “focus on curbing wasteful spending at state enterprises, limiting public sector payroll costs and cracking down on tax evasion and the nonpayment of social security contributions.”
In other words, Greece is going to try and cut its way to prosperity. This has not worked before and won’t work now. Analysts were disappointed by the speech. Moreover, capital markets investors don’t seem to be buying it either. Investors in Greek debt were asking for returns of 13% Thursday after German Finance Minister Wolfgang Schaeuble said Greece may have to renegotiate its debt, according to the BBC. Greek officials deny this is necessary.
Besides, there are many other headaches for Athens. The country has to raise 50 billion euros from privatizations, a figure many experts see as optimistic, the news service says. Tax evasion is an epidemic levels. EU statistics show that Greece’s revenue from income tax was 4.7 percent of GDP in 2007, compared with an EU average of 8 percent, Bloomberg News says.
Compared to Papandreou, Brown’s problems seem trivial.
All he has to do is convince Republicans in Sacramento to agree to extend some taxes to close the state’s gargantuan $14.5 billion budget deficit that are set to expire in July.
“Following failed negotiations with lawmakers over a June ballot measure on extending the taxes, Mr. Brown is aiming to put a tax initiative on the ballot this fall, according to people familiar with the matter,” according to the Wall Street Journal.
Brown faces a tough road. Support for extending the taxes is eroding. The Republicans, for their part, are not cutting Brown any slack. They are even trying to remind voters why he earned the nickame “Governor Moonbeam” four decades ago.
“Jerry Brown wants to embrace his ‘Governor Moonbeam’ image, but the last thing we need in the middle of a budget crisis is a space case leading the way,” says California Republican Party Communications Director Mark Standriff on the party’s official website. ” If Governor Brown wants a lasting legacy, he should drop the push for job-crushing taxes and embrace the serious, permanent budget solutions that Republican leaders have already offered.”
Finally, fiscal times must be pretty bad if they are talking about a government shutdown in Montana.
Governor Brian Schweitzer, a Democrat, and the Republican-controlled legislature are playing a high-stakes game of fiscal chicken, much like the one that recently played out in the US Congress. Montana Watchdog reports that Schweitzer sent a letter to Attorney General Steve Bullock about how to handle a July 1 shutdown if lawmakers fail to pass an adequate budget.
“The letter comes after the Republican-led Legislature, now nearing the end of the 90-day 62nd legislative session, steered clear of the Democratic governor’s proposed budget and instead worked on a balanced spending plan for the next two years that cut millions in state services,” the website says.
Both sides casting blame on the other for a shutdown.
Sadly, when it comes to fiscal matters, the more things change the mire they stay the same.
–Jonathan Berr
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