As of today (October 4, 2011) Greece only has enough cash to cover expenses through November (the bailout tranche for November was €8B ($10.9B). The next round of bailout money to keep Greece out of default after November, was put on hold in early October due to news that Greece's deficit for 2011 will be 8.5% of gdp (€18.69B which is higher than the 7.8% of gdp/€17.1B deficit projected earlier); News of the higher deficit was also made worse by the fact that Greek gdp contraction will be greater than first thought (5.5% smaller than 2010 gdp versus the anticipated 3.8% recessionary figure). Greece's gdp shrank for 12 consecutive quarters (last quarter that recorded growth was the one ended August 2008); In contrast Germany's gdp hasn't had a problem growing (two consecutive quarters as recently as January 2011 (ended) when it grew 4% & 3.9%. For German bonds, as of February 14, 2011 the 10 year yield was 3.33% (highest since Jan.14, 2010), 2 year yield 1.41%. Between January and mid February 2011 investors made a 4.3% return from Greek bonds, 0.8% from Spanish and 0.1% from Irish but lost 2.1% from German bonds. The eurozone's rescue fund, which has already provided aid to Ireland and Portugal, is €440 billion ($595B) in size. Also anounced on Tuesday: US Fed will purchase up to $5 billion worth of 8-10 year treasury notes (Due between November 2019 and August 2021) in an attempt to lower long term borrowing costs (buying more bonds helps to lower yields/interest rates). Belgium and France stepped up to the plate when Brussels-based Dexia faced problems stemming from their exposure to Greek debt). The shift over to US treasuries as a safe investment haven (30 year long bond) lowered yield rates to 2.70%, the lowest the yield has been since January 2009. (Bonds rise as Greece debt woes spur bank fears)
This question has come up a lot: Is Greece doing enough to reduce the deficit and finally take responsibility for its own debt? I think it has but I'll let you decide.
Pensions: 1. 20% of any amount over 1200 euro will be taken away (ie €2000 pension will be lowered to €1880). Only about half a million Greeks get pensions over 1200 euro. 2. Pensions going to people younger than 55 will lose 40% of any amount that exceeds €1000 while another three million pensioners will be affected by auxillary pension cuts of up to 50% (that loss is just the beginning for those three million because their pension funds are already insolvent). When people retire they sometimes receive lump sum payments, that will be lowered anywhere from 20% to 30%.
Taxes: Taxes will be rendered on 855,000 low income earners for the first time ever after the tax income threshold was lowered from €8 to €5000 (annual gross income). There's also a reduction in the tax free allowance from 12 to €8,000 that will levy an additional €700 in annual tax burdens on those Greeks affected. Net monthly pay lowered by €150 as early as next month for nearly all of the salaried taxpayers represented among the 855,000 people affected.
On Sunday October 2, 2011 the Greek cabinet completed a plan to reduce staff in the civil service by 30,000 overall. (KCTV5: Greek deficit projected at 8.5% of GDP) That figure seems unfathomable considering the public transport employee representatives stated on September 22 that their staff is already low, 20% lower than it was just a couple months ago.
Here is where Greece is coming from. Last year they had 800,000 civil servents collecting $48,000 annually in full pensions, those pensioners became eligible for that at age 52. New austerity measures are likey to impact those people significantly. European banks typically leverage about 80 times (debt used to acquire additional assets), that puts the EU in a more preciarious situation than the United States (40 times leverage).
Making matters worse
