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Can Greece ever meet its austerity targets?

EU flag flying in front of the Parthenon in Athens
Image caption The Greek government could be excused for feeling under siege

The Greek government must feel like the ancient Spartans - vastly outnumbered and under attack.

But instead of 300 Spartans taking on more than a million Persians, in this battle Greece has new foes - the European Union (EU) and the International Monetary Fund (IMF).

And the present fight is being fought with far more sophisticated weapons than swords and spears.

The weapons in this war are austerity measures, the spending cuts and revenue raising policies that the EU and IMF are insisting Greece carries out to continue to receive instalments of their initial 110bn euros ($150bn; £96bn) bailout loans package.

Yanis Varoufakis, professor of economic theory at the University of Athens, tells the BBC they might as well be swords.

"They are cutting deep into the Greek government and the Greek economy," he says.

"They are cutting into the flesh, not just the fat. And the patient - Greece - is dying from its wounds."

Amid much public opposition, the Greek parliament agreed to 30bn euros of austerity measures in May 2010, and an additional 28bn euros in June of this year.

It has also pledged to raise 50bn euros through a mass privatisation programme by 2015.

The problem is that both the EU and the IMF continue to accuse the Greek government of dragging its feet, of not carrying out the agreed austerity measures both in full or quickly enough.

So much so that they are currently withholding the next instalment - 8bn euros - of Greece's emergency funds.

It this money does not arrive by about 10 October, the Greek government will not have the funds to pay its civil servants and pensioners.

And a default on its foreign debts could follow, plunging the eurozone into crisis.

Following fresh discussions with EU and IMF officials on Wednesday, the Greek government has now announced further austerity efforts to try to secure the 8bn euros.

But which austerity measures has Athens so far carried out, and which have been delayed?

Poor price

The privatisation issue is the most black and white - Greece is way behind schedule.

So far the only privatisation scheme that has been carried out is the government selling its 10% stake in mobile phone group OTE to Deutsche Telekom for 400m euros.

Image caption Finance Minister Venizelos Evangelos has vowed to speed up redundancies in the civil service

As a result, the government will fail to hit its end of September target for privatisation revenues of 1.7bn euros, and needs a miracle to raise the 5bn euros it said it would by the end of 2011.

While public explanations from the government on the issue have been few and far between, analysts agree why the government's privatisation programme is way behind schedule.

Firstly, they say the government recognises that in the current dire economic climate it will get a very poor price for its stakes.

Secondly, they add that the government controls vast swathes of the country's industries, and is exceptionally reluctant to let go.

Regarding increased tax collection, the government has passed a large number of measures.

These include big rises in Value Added Tax, higher income taxes for the wealthy, and a new property tax.

Yet the government continues to be hampered by the country's notoriously high levels of tax evasion, and an ineffective system of tax collection.

The tax collection authorities are so badly thought of that the government has instead tasked the country's energy firms with collecting the new property tax via customers' electricity bills.

However, the unions at the energy companies are saying their members will refuse to collect the property tax.

And Greece's restaurants are refusing to accept a big rise in VAT, which for the country's hospitality sector has gone up from 13% to 23%.

The government has also made little progress on plans to trim its bloated civil service in the face of fierce union resistance and legal difficulties.

While pay freezes and pension cuts have been put in place without too much difficulty, Athens has been continually delaying its pledge to shed as many as 120,000 jobs or 20% of the total.

Instead of actual redundancies, affected staff have instead been placed on a "strategic reserve" footing, on 60% of their previous salary.

Nickolaos Travlos, doctor of finance at the Alba Graduate Business School in Athens, says: "The political cost is too high for the government to make decisions [on redundancies], there is a lot of opposition within the governing party.

"The government is also having a difficult time getting the measures applied - the civil service is so bureaucratic you can't get the decisions reached, you can't find the person who has to make the final move."

Greece's Finance Minister Venizelos Evangelos has now pledged to force through immediate redundancies.

Vicious circle

In Greece's defence, the worsening state of its economy is making its austerity measures much harder to achieve - it is having to run just to stand still.

Image caption The government's austerity measures have faced serious opposition across the country

The IMF now estimates that the Greek economy will contract by 5.5% this year, and Greece's unemployment rate stands at 16%.

The continuing recession means lower tax revenues, both from income tax and VAT, and higher payments of unemployment benefits.

So as the Greek government continues with its austerity measures, it risk worsening the situation, creating a vicious circle.

"Basically the Greek government has entered into an agreement with the EU and IMF that it cannot deliver," says Matina Stevis, London correspondent for Greek newspaper Eleftherotypia.

"They cannot deliver in full, it is politically impossible and economically damaging.

"The EU and IMF correctly want Greece to improve its really bad tax collection, but that will take years to sort out, and needs investing money in - someone you can't do with mass spending cuts."

But with the EU and IMF continuing to demand further austerity measures from Greece before the country gets further loan instalments, where will it end?

Ms Stevis says: "If I was to brave a guess, Greece will get the next loan at the last minute.

"Not because Greece will meet its targets, but because the euro system is not ready yet to deal with Greece defaulting on its debts.

"Greece is screwed either way, the real question is what happens with the rest of Europe. Whether Greece ultimately defaults or not, a huge change is required to fix the structural problems with the euro, and the weakness of European banks."

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