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Cuts of €700m a riddle

16/08/2013 07:20
Budget 2014 is a tough case for the government and the way that spending cuts will be achieved is a top secret.
The Finance Ministry is preparing feverishly to finalize the new budget, having asked all Ministries to identify margins for reducing government spending.

Based on a circular sent in May, the Ministry seeks spending cuts of €700 million or 11%.

With the large spending cuts, the Ministry will try to offset revenue losses due to the sharp contraction in economic activity.

Under the revised memorandum, the Ministry will have to send its 2014 budget for approval at the Troika until mid-September.

The cuts in the revised Memorandum is the reduction of social benefits by €28,5 million, the further reduction in wages and pensions in the public sector by 3%, the temporal extension of the special contribution of all employees, the increase in contributions to the social insurance fund by 1% and the VAT increase by 1%.
The President of the Republic has repeatedly stated that there will be no cuts in wages and pensions beyond what has been agreed with the troika.

The planned cuts, however, do not appear to be sufficient to meet the target of €700 million.

The state salaries and pensions, for example, cost €2,8 billion per year and with the cut of 3%, the government would save only €84 million.

The Ministry insists that there is still room for cuts before needing to cut salaries and pensions.

Its primary goal is to reduce operating expenses, which in 2012 amounted to €907 million.

Minister Haris Georgiadis also aims to drastically reduce annual costs of €90 million for overtime.

The immediate goals of the Ministry also include further reduction in wage allowance received by various professional categories in the public and broader public sector.

There may be also a reduction in development costs, which for 2013 were budgeted close to €850 million.