Austerity in Greece – What Has Gone Wrong?
A Brief Update on Recent Developments
On Friday, the Greek government has submitted its latest reform proposals to the EU. According to press reports, these are supposed to raise €3 billion and consist of the following:
“[…] moves to combat tax evasion, more privatizations and higher taxes on alcohol and cigarettes. […] The Greek government said the 18-point reform program did not include any “recessionary measures”.”
In the meantime it has also emerged that the privatization of the port of Piraeus, which Syriza had previously reportedly opposed is about to go forward after all, and is expected to bring in proceeds of around € 500 m. Pressure on the Greek government has recently increased, not only due to the fact that it is expected to run out of money soon, but also as a result of a downgrade of its credit rating by Fitch late last week to a lowly CCC rating. This makes it even less likely that the government will be able to roll over maturing treasury bills.
Below are the most recent updates of domestic deposit outflows and central bank credit to the banking sector, showing the situation as of the end of February. Note that we have adjusted the data on deposit outflows by deducting all government deposits from the domestic deposits time series, so that only the deposits of Greek households and business are shown.
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