Greece has outlined its new austerity measures for the next two years and unions responded by announcing a 48-hour general strike.
It is timed for for next week, when the new measures demanded by Greece’s international creditors are expected to be voted on in parliament.
The €13.5bn cutbacks for 2013-14 include a two-year increase in the retirement age – from the current average of 65 – salary and pension cuts and another round of tax increases, including raising taxes for the interest on bank deposits from 10 to 15%.
The vast majority of the measures will be taken next year and were presented in a new draft of the budget for next year. Parliamentary approval of the measures is essential if Greece is to receive the next instalment of its bailout loans. Without the funds, the country has said it will run out of money on November 16.
The torturous months of negotiations over the measures with international debt inspectors have severely strained ties in the already uneasy three-party governing coalition of conservatives, socialists and a small left-wing party.
With just days to go before an expected parliamentary vote on the measures next week, the Democratic Left has insisted it cannot back them. Prime minister Antonis Samaras has warned that the country will face financial chaos if they are not passed.
Finance ministers from the other 16 countries that use the euro have said they would decide on November 12 whether to give Greece its next batch of bailout loans provided the country agrees to the reforms.
After a telephone conference the ministers praised Greece’s agreement to undertake “ambitious and wide-ranging measures in the areas of fiscal consolidation, structural reform, privatisation and financial sector stabilisation and called on Greek authorities to conclude the negotiations as quickly as possible.
German Finance Minister Wolfgang Schaeuble, however, sounded pessimistic about the chances of a quick decision on the payout of the bailout instalment.
“To secure the tranche being paid out, we need preconditions to be met that still have not been achieved,” said.
The strain in the governing coalition was evident in a parliamentary vote on a bill to allow the government to privatise public utilities. The bill passed by majority, but MPs from the two junior coalition partners voted against certain articles.
The revised figures highlight the country’s monumental struggle in turning around its public finances.
Government debt is projected to rise to 189.1% of gross domestic product in 2013, above the 182.5% predicted in the preliminary draft submitted at the start of October, and up from the 175.6% forecast for this year.
The deficit is now projected at 5.2% of GDP in 2013, up from 4.2% predicted in the preliminary draft of the budget – but still an improvement from the 6.6 % predicted for this year.
The recession, meanwhile, will be deeper than the 3.8% contraction the preliminary draft had predicted, with the new figures estimating the economy will shrink by 4.5%.
Unemployment is projected at 22.8% next year, marginally higher than the 22.4% predicted for 2012.
Greece registered record unemployment in July this year, with the jobless rate reaching 25.1%.