Better to avoid collapse of Greek economy

Russian Finance Minister Alexei Kudrin said on Saturday that it is better to save Greece from a default to avoid the rising risks of the global economy.

“It is better to save [Greece from a default],” Kudrin told reporters on the sidelines of the G20 finance ministers meeting in Washington.

“[If the default is announced], the risks of the world economy would increase sharply and interest on Italy and Spain’s debt would increase dramatically and it would be harder for them to service their debt,” Kudrin said.

Talks of a possible Greek default intensified on Friday, with finance officials from around the world pressuring European policymakers to increase their efforts to prevent Greece’s debt crisis from spreading.

“Creditors must agree between themselves on how far they can go to write off part of the debt while still receiving something,” the Russian minister said.

In the first eight months of the year, Greece’s budget deficit have overshot its 2011 target of 7.5 percent of gross domestic product and the European Union and the IMF have warned they may not disburse the next 8 billion euro tranche from a 110 billion euro bailout if Athens did not stabilize its budget shortfall.

The Greek government agreed this week further austerity measures with international lenders – the European Commission, the European Central Bank and the International Monetary Fund.

Officials cited in the Greek business media said lenders want as many as 200,000 redundancies in the next four years. Wages in the public sector may be cut by further 40 percent in addition to previous cuts. The maximum size of pensions is expected to dwindle to 1,800 euros from the current 2,800 euros, which will affect about 150,000 retirees.

In winter the Greek government also wants to raise sharply the tax on diesel fuel used by Greek households to heat their houses. The tax hike will cost an extra 500-600 euros per heating season for each Greek household.

In addition, the Greek government intends to further increase property taxes to raise an additional 2 billion euros.

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