Greece is shutting down with petroleum industry workers, who have declared a 10-day strike, the latest to join the list of protesters against Prime Minister George Papandreou’s €6.6 billion ($8.7 billion) austerity plan. In coming days, prison guards and hospital workers are expected to join the pack, with Greek tax inspectors set to strike next week.
The ongoing wave of protests follows the heated public-sector walk-out staged last week when ADEDY, Greece’s biggest public sector union, called to strike after European Union ministers hinted that they might renegotiate the terms of Greece’s most recent bailout. “They are not trying to save Greece. They are just killing workers,” ADEDY Vice President Ilias Vrettakos said in a rally speech. Some 20,000 supporters took part.
Protestors are opposed to Papandreou’s plan to reduce pay for 30,000 public sector workers, raise property taxes and slash wages and pensions across the country. The strikes are blocking essential day-to-day operations of the nation, with hundreds of flights cancelled at Athens International Airport, garbage piling up as sanitation staff refuse to work, and schools, government ministries and archaeological sites closed for business.
At a news conference in Athens, Greece’s Finance Minister Evangelos Venizelos said: “We are dependent on the aid and loans of our institutional partners. That is the situation of the country. And we must make superhuman efforts to win the wager of history.”
Regardless of new austerity measures announced by the International Monetary Fund (IMF) and the European Union, the Greek government said it would not reach its 2011 deficit target, falling short by almost €2 billion ($2.6 billion).
European banks that hold Greek debt could potentially suffer once again, as July’s bailout plan of €109 billion ($145 billion), the second bailout for the country in two years, may need to change. The plan was agreed on based on specific assumptions that Greece would return to growth next year with a 0.6% increase and meet pre-determined deficit and privatization targets; reforms were also part of the plan.
IMF Warns Greek ‘Haircut’ Not Enough
The Head of the European Department of the IMF, Antonio Borges, told Reuters that the assumptions, on which the original bailout deal was based, are no longer valid. “The Europeans have chosen in July to provide very good terms for the banking sector and to fund Greece as much as we needed to compensate for that,” Borges said at a news conference. “Since then, because the situation has become somewhat different, particularly concerning interest rates in Europe, the program will necessarily have to be revised.”
Borges stated that the revisions would have to be determined by the European Union: “We in the IMF could operate easily on the basis of a bigger or smaller haircut on the credit of international investors, this is very much an issue for the Europeans to decide.” Borges warned that a haircut, or the loss to be taken by banks, was not the way to solve Greece’s problems, and an adjustment to July’s bailout terms is still necessary.
Amidst doubts that the bailout package will proceed, the European Union is preparing to rescue banks, with European Economic and Monetary Affairs Commissioner, Olli Rehn, telling the Financial Times: “There is an increasingly shared view that we need a concerted, coordinated approach in Europe, while many of the elements are done in the member states. Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty.”
Key Statistics – Greek’s Debt Situation (source: International Monetary Fund)
- Greek debt could rise to over 189% of GDP in 2012, higher than the 172% forecast in June.
- Greek debt was at 165.5% of GDP this year, with forecast debt burden of almost 188% of GDP for 2013.
- Greece’s fiscal deficit is estimated at 8% of GDP this year, and is expected to drop to 6.9% in 2012.