The Greek cabinet approved late on Friday a draft law setting out the tough reform and austerity program it needs to take as the price of a new EU/IMF bailout.
Deputies will vote on the plan late on Sunday. Some measures will require follow-up legislation to be implemented.
Below are the main measures. All the information has come from a speech by Prime Minister Lucas Papademos and from the text of the draft law as included in hundreds of pages of legislation posted in Greek and English on the parliament's website.
- Before any funds are disbursed under the bailout in March, the government must pass a supplementary budget including spending cuts worth 1.5 percent of gross domestic product this year, or 3.3 billion euros ($4.37 billion).
- The cuts include about 1.1 billion euros in health spending, mainly by lowering pharmaceuticals prices, 400 million euros from public investment, 300 million euros from the defense budget, 300 million from pension cuts and 300 million from the central government.
- Measures equivalent to 325 million euros still need to be specified.
- In June, the government then in charge following possible elections penciled for April will have to specify additional austerity measures worth 10 billion euros for 2013-2015.
- All banks will be required to achieve a core tier-1 capital ratio of 9 percent by the third quarter of 2012 and of 10 percent in the second quarter of 2013, by raising capital themselves and/or receiving bailout funds.
- Depending on the degree of state help they will need, banks will receive state funds in exchange for common voting shares, shares with restricted voting rights or convertible bonds.
- Cumulative privatization receipts since June 2011 should be at least 4.5 billion euros by end-2012, 7.5 billion by end-2013, 12.2 billion by end-2014 and 15 billion by end-2015. An initial privatization target of 50 billion euros should be achieved over the medium term.
- Increased powers for Greece's privatization agency to sell an asset in pieces, or liquidate it if it cannot be sold in its current form.
- The list of companies whose full or partial privatization will be launched in 2012 includes gas company DEPA, gas grid operator DESFA and refiner Hellenic Petroleum.
- Before any bailout funds are disbursed, Greece must pass legislation to reduce the minimum wage, currently at about 750 euros gross, by 22 percent. For people below the age of 25, it will be cut by 32 percent; automatic wage increases based on seniority will be scrapped, collective wage agreements will be allowed to adapt to changing economic conditions on a frequent and regular basis, social security contributions to be reduced by 5 percent.
- About 15,000 state workers will be placed in a labor reserve in 2012, meaning they will receive 60 percent of their basic wage and dismissed after a year; one civil servant will be hired for every five retiring, aiming to cut the state sector workforce by about 150,000 people by 2015.
- Before receiving any funds, Greece must revise legislation to make sure that a variety of professions is opened up to competition, including primary health care, stevedores, accountants, tourist guides and real-estate brokers.
FISCAL, ECONOMIC TARGETS
- For 2012, the annual general government primary deficit should not exceed 2.06 billion euros. For 2013 and 2014 the primary surplus should be at least 3.6 billion euros and 9.5 billion euros respectively. The figures above are subject to change.
- In 2012-2014, the general government budget deficit must be reduced by 7 percentage points of GDP. The fiscal targets may be stretched by one year into 2015 if economic growth is weaker than expected.
- The economy is seen shrinking overall by 4-5 percent in 2012 and 2013. Recovery is expected to begin in 2013, with the economy growing at a pace of 2.5-3 percent in each 2014 and 2015.
The bill lays out the legal groundwork for the EU's EFSF rescue fund and the European Central Bank to facilitate a planned debt swap deal.
- A 35-billion euro so-called ECB Credit Enhancement Facility Agreement will enable Greece to finance a repurchase offer, under which the ECB, acting as Greece's representative, would offer to repurchase from national central banks for the euro zone system some Greek government bonds, held by the national central banks as collateral for monetary transactions or open market transactions.
- The European Financial Stability Facility will make 30 billion euros available as a sweetener for the debt swap.