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Greece

No Reforms, No Cash: How Euro Bailout Conditions Would “Re-create” Modern Greece

The euro zone countries and the IMF are now making it clear to Greece: bailout cash will only come after the kind of drastic reforms that would effectively transform Greek society. But are the measures too drastic to make it possible?

Her future at stake (George Laoutaris)
Her future at stake (George Laoutaris)
Stefanie Bolzen and Florian Hassel

BERLIN - Before international lenders free billions of euros in credits to Greece, its government must see through groundbreaking reforms – that's according to the new loans package Greece agreed on last Thursday with the E.U. Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). The program was approved on Sunday by the Greek parliament.

Die Welt obtained a copy of the 51-page document, which is dated Feb. 9, 2012 and entitled Memorandum of Understanding on Specific Economic Policy Conditionality. Compared to the other bailout agreements signed up until now, the terms this time are much, much sharper. If implemented (Athens may end up declaring bankruptcy before it can be) it could lead to a virtual overhaul of the Greek economy and a remaking of its society. Some of the contents of the program are the equivalent of social and political dynamite.

Greece needs to get its hands on more money by March 20 at the latest. That's when Athens has to pay back loans amounting to 14.5 billion euros. This is money that Greece doesn't have.

According to what is set out in the memorandum, Athens not only has to implement various spending cuts amounting to some 3 billion euros, but must meet a Wednesday deadline set by euro country finance ministers outlining where it will make an additional 325 million euros in cuts. Particularly explosive is the issue of blocking at least 300 million euros worth of government payments to pension funds running deficits, and making radical reforms to the pension system, before the first payment of the new loan program is made. All pension funds are to be joined together, with costs and staff reduced by 30%.

Pension cuts will affect some 3 million of Greece's 11 million inhabitants. Chronic deficits in both social and pension funds are one of the major reasons for the country's present misery. According to Greek Minister of Labor Giorgios Koutroumanis, there are currently 2.73 million Greeks making payments to social security and 2.76 million pensioners.

Crackdown on tax evasion

By the end of June, Greece has to make further cuts in social, health, military and administrative spending. In order to be able to reduce the budget deficit as promised, according to government sources, these must add up to some 10 billion euros – three times the cuts outlined in the current program.

But before receiving the next loans, Greece will have to do away with amnesties for tax cheats and sharpen and speed up legal procedures for evaders. Back taxes of more than 10,000 euros for individuals and 75,000 euros for companies can no longer be paid in installments but must be paid right away. By the end of June, the country must have cleared up half of all open tax cases, and the rest have to be dealt with by the end of August 2013 at the latest.

Also, before it can receive the first loans under the new agreement, the country must liberalize certain sectors -- by presidential decree or ministerial decision that cannot be overturned by parliament -- thus opening them up to competition. This would impact hospitals, pharmacies, opticians, bookkeepers, real estate agents and taxi drivers, among others.

By the end of June, hiring a lawyer for certain transactions like buying a home will no longer be required, and lawyers' fees will be cut by presidential decree. Furthermore a number of segments of the economy will have to open up to foreign competition. By that date, all E.U. citizens and companies should be legally entitled to open and run a gas station, a transport company or a railroad line. The energy sector will be opened as well.

"Mid-term," Athens is expected to bring in 50 billion euros through privatizations, with 39.2 billion euros in state coffers by the end of 2015.

The E.U. Commission is cautiously optimistic about the new austerity package and its approval by Greece's party leaders, cabinet and parliament. E.U. Commissioner for Economic and Financial Affairs Olli Rehn stressed that Greece's political parties would be required to agree in writing to continue to implement the austerity and reform program after possible elections in April.

Some Greek politicians, notably Antonis Samaras of the leading New Democracy conservative party, have been saying that after elections they would renegotiate the terms of the loans, which goes against both the expectations and the understanding of the lenders.

"We expect clear agreement before the next election campaign begins," Rehn told Greek conservatives. "Mr. Samaras gave his approval to the program before the parliament and before all Greek citizens." He added that Greece had been "living above its means for over a decade." A lot is being asked of its citizens now – but there is no other path to growth and stability, he said.

Read the original article in German

Photo - George Laoutaris

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Geopolitics

The Trumpian Virus Undermining Democracy Is Now Spreading Through South America

Taking inspiration from events in the United States over the past four years, rejection of election results and established state institutions is on the rise in Latin America.

Two supporters of far-right Brazilian President Jair Bolsonaro dressed in Brazilian flags during a demonstration in Belo Horizonte, Brazil.

Bolsonaro supporters dressed in national colours with flags in a demonstration in Belo Horizonte, Brazil, on November 4, 2022.

Ivan Abreu / ZUMA
Carlos Ruckauf*

-Analysis-

BUENOS AIRES — South Africa's Nelson Mandela used to say it was "so easy to break down and destroy. The heroes are those who make peace and build."

Intolerance toward those who think differently, even inside the same political space, is corroding the bases of representative democracy, which is the only system we know that allows us to live and grow in freedom, in spite of its flaws.

Recent events in South America and elsewhere are precisely alerting us to that danger. The most explosive example was in Brazil, where a crowd of thousands managed to storm key institutional premises like the presidential palace, parliament and the Supreme Court.

In Peru, the country's Marxist (now former) president, Pedro Castillo, sought to use the armed and security forces to shut down parliament and halt the Supreme Court and state prosecutors from investigating corruption allegations against him.

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