Greece drive targets low wage earners

Greece's beleaguered government said it will start taxing minimum-wage earners and encourage local banks to help the state delay debt payments for bonds maturing as late as 2015. The announcement came on Thursday as the government reached a final deal on a €28 billion (Dh147.28 billion) austerity package with debt inspectors from the European Union and the International Monetary Fund. Getting the new spending cuts, economic reforms and privatisations through parliament next week is a precondition for Greece to get more aid, without which it will default on its massive debts. The deal reached between the Greek government and the debt inspectors, which regularly check on Greece's implementation of its €110 billion bailout programme, contains an additional €3.8 billion in spending cuts, an EU official said early yesterday. The experts from the EU and the IMF found that the austerity package to be sent to parliament initially fell short of the promised €28 billion in savings, but that the Greek government promised to offset the shortfall with additional cuts, the official said. The official was speaking on condition of anonymity because the cuts have not yet been announced. Earlier, Evangelos Venizelos, the country's new finance minister, said the government is encouraging a deferment scheme under the so-called "Vienna initiative," signing up private investors such as banks and investment funds to voluntarily renew their debt holdings as they expire. Similar discussions are currently going on throughout the Eurozone, in an attempt to cut the overall amount of money other Eurozone nations and the IMF have to lend Greece in a second bailout package that is in the process of being negotiated. Voluntary bond rollovers were used successfully in 2009 to help East European countries during the global financial crisis. But Athens runs the risk that a similar move may be considered a default by ratings agencies, because it will likely involve banks charging interest rates that are significantly lower than what they would currently get on Greek bonds bought on the open market. "The Vienna process is totally voluntary," Venizelos said. "Are we encouraging the Greek banks to participate? The answer is yes." Asked what bond maturities would be considered in the voluntary process, he said: "They may include 2015." A Greek default could drag down Greek and European banks, endanger weak Eurozone countries like Portugal, Ireland and Spain, and potentially spark turmoil in global markets, the European Central Bank has warned. From / Gulf News