Under the gun to make cuts or find equivalent savings of $14.16 billion, the Greek government has put a hold on all spending, except for pensions and salaries, and will not pay its bills. The new coalition administration of Prime Minister Antonis Samaras said it has imposed the moratorium until the next bailout installment from international lenders, some $38.8 billion remaining from a first package of $152 billion in rescue loans, is released.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) is also withholding a second bailout of $173 billion until the cuts are made and more reforms are implemented, squeezing the government to save money wherever it can.
Government spending for this year has been budgeted at 108.5 billion euros, some $133.27 billion, including money to be set aside to recapitalize state banks who took 74 percent losses on their Greek bond holdings under a program from a previous government to write down the country’s debt by $134 billion, but which left private investors taking the hit. The government said the moratorium is the only way for now that it can stay on target to reduce the deficit to 3 percent within two years, down from about 9.1 percent now.
Greece owes suppliers 6.6 billion euros, or $8.1 billion, and long ago had stopped paying many of them. Debts to suppliers have risen 15.4 percent, or by $1.08 billion since the beginning of the year. The Public Investment Program has also been frozen and social security funds and hospitals will have to wait as well.
The moratorium will do little to help Samaras get the deficit, as well as the country’s staggering $460 billion debt under control though, as without making the cuts demanded by the Troika the rescue loans could be cut off, leaving the country without money to pay anything or anybody, including workers and pensioners. Finance Minister Yiannis Stournaras is said to be working furiously to prepare a list of cuts that Samaras and his coalition partners – but political rivals – the PASOK Socialists and Democratic Left can accept.