Greece got 110 billion euros from the euro zone countries andfrom the International Monetary Fund yesterday, the biggestfinancial aid for a country ever. In exchange for this money, whichaccounts for about half of the country's GDP (240 billion euros in2009), the authorities in Athens pledged to adopt really harshausterity measures. Greece promises budget spending cuts by up to10% of the Gross Domestic Product (GDP), up to 30 billion euros instate budget savings until 2012, dropping the 13th and 14thsalaries Greeks get for holidays and tax hikes, such as VAT, whichshould go up from 21% to 23%.
It remains to be seen, however, if the Greek state is able to keepits word and enforce the austerity measures it committed to. "Themeasures are very hard to stick to, considering Greece's pastexperience and the social opposition, which is high in thiscountry, but the Greeks have no other option," said Ionut Dumitru,Raiffeisen Bank's chief economist.
The euro zone countries have always been regarded as examples ofrigorousness and fiscal discipline, an essential pre-requirement tojoin the economic and monetary union. The irony of it all is thatthe weak links of the euro zone have to follow in Latvia'sfootsteps, one of the worst affected countries by the world crisis,which is not a euro zone member. The government of that Balticstate cut public sector employees wages' by 25% and laid off 20% ofthe people working in the sector.
Economics professor Daniel Daianu said the financial aid packagegiven to Greece was not theoretically a bailout and could beregarded as help for European banking groups exposed to thecountry's economy.
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