NEW YORK (CNNMoney.com) -- Greece requested its first round of international funding on Tuesday. Now comes the really hard part: The Greeks will have to tighten their belts to bring the nation's finances in line.
The initial loans from the European Union and the International Monetary Fund should allow Greece -- at least for now -- to stave off financial collapse.
But the debt agreement also sets into motion a raft of austerity measures to bring the national finances into compliance.
The measures are designed to rein in a country that has been living beyond its means.
"These are very, very serious and very, very rapid cuts," said Mitchell Orenstein, professor of European studies at Johns Hopkins University.
The austerity measures fall heavily on public workers, who will receive pay cuts and have to postpone retirement until later in life, and pensioners, who will have their pensions reduced.
"The current pension system is unsustainable and will become insolvent if responsible measures are not taken to place it on a sound footing," read an IMF document detailing the austerity measures.
Here are some of the details agreed upon by the Greek government, which hopes to reduce its annual deficit to 8.1% of its gross domestic product this year, compared to 13.6% in 2009:
Salaries: Wages will be cut to save the government € 1.1 billion in 2010. A spokeswoman for the Greek Finance Ministry declined to provide a flat percentage, because the cuts will vary depending on a worker's salary. Two rounds of wage cuts have already occurred this year.
Retirement: Pensions will also be cut, except for those in the lowest income bracket. The retirement age will be set at 65. This is quite a contrast from the current system, which allows some workers to retire at 61. The government will toughen eligibility for disability, and for any other type of early retirement.
Sales taxes: The nation's value-added tax will be increased by a tenth, meaning that a 10% tax will get notched up to 11%, and a 21% tax will be increased to 23%, to use examples provided by the IMF. This is expected to save the government € 800 million in 2010.
Excise taxes: Special taxes will be imposed on fuel and cigarettes, each of which will provide estimated revenue of € 200 million this year.
A tax will also be imposed on alcohol (including the traditional Greek liquor ouzo), providing estimated revenue of € 50 million in 2010. And the government will slap an excise tax on luxury items, such as yachts and private jets.
This luxury tax targets the wealthy, said Orenstein. But that doesn't help the fact that the working and middle classes will bear the brunt of the hardship, he said.
The looming era of austerity fanned the flames of last week's protests in Athens. Lower income workers see themselves as paying the price for tax-dodging fat cats, whom they blame for causing the problem.
"The Greek context is one in which there's been a lot of tax evasion," said Orenstein. "It seems to me that people who can't hide their income -- public workers, teachers -- are the ones who are going to pay the price. That's the downside of the austerity program."
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.50%||3.49%|
|15 yr fixed||2.65%||2.67%|
|30 yr refi||3.39%||3.46%|
|15 yr refi||2.67%||2.70%|
Today's featured rates:
Wells Fargo is under increasing pressure to punish the executives who oversaw the bank during a massive fraud that involved creating more than 2 million unauthorized accounts. More
Donald Trump renewed his threats to cut two EPA regulations. He's also said he would be 'dismantling' Dodd-Frank while supporting one hiring regulation. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
The Department of Education revoked its recognition of the accreditor ACICS, the agency that gave the now defunct ITT Tech and Corinthian for-profit schools stamps of approval. About 245 other schools are at risk of losing accreditation. More