Pressure mounts on Greece to step up austerity measures

In a bid to pacify foreign lenders, the government of Greece has agreed to new spending cuts on Sunday. Though this may not unlock €130 billion bail-out fund Greece desperately needs to stave off bankruptcy, but it has kept open dialogues to resume on Monday. The troika of foreign lenders that have mounted pressure on Greek government are the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF).

The announcement was made on Sunday after a five-hour long meeting led by Greek Premier Lucas Papademos along with leaders of three main parties. In the meeting it was decided to bring down Greek spending by 1.5 percent of GDP in 2012 through various such measures as wage cuts, reduction in supplemental pensions, cut in social security contributions and bank recapitalization plan, etc.

Though the leaders of coalition government have broadly agreed on new austerity measures, consensus has to be reached on finer points. The troika of foreign creditors has put forward a slew of demands in exchange for fresh release of €130 billion Greek rescue fund. Important among them are – public sector workforce to be reduced to 1,50,000, cut in supplemental pensions, wage cuts in private sectors, etc. With unemployment hovering at around 19 percent and the country already in recession, it is certainly not going to be easy for Greek government to push through more stringent economic policies.