Wednesday 26 July 2017

Painful new cuts fail to allay fears of Greek default

Measures follow months of foot dragging by government

THOUSANDS of protesters, many carrying gas masks for fear of police tear gas gathered in Athens last night as Greeks reeled from painful new government cutbacks.

While some details of the cuts have been leaked, many Greeks who spoke to the Irish Independent last night seemed stunned by the realisation that even the worst paid would have to find several hundred euro to pay a one-off income tax.

They were also coming to terms with the idea that a temporary property tax of as much as €1,200 is now permanent.

"This is the end. The absolute end," said Alexis Kostalas, a thin and tired-looking prison officer who said he earned around €1,900 a month. "We are being crushed by our own government and by Europe which has given up on Greece. Austerity doesn't work. Ireland should learn from us."

The Greek government's belated decision to introduce a host of measures follows months of foot dragging. "The situation is extremely critical and even dangerous because there is a high level of anxiety in the euro area, the European banking system and the world economy," Greek Finance Minister Evangelos Venizelos told parliament in Athens yesterday.

Many people inside and outside Greece remain unconvinced that Greece can still avoid default with potentially catastrophic consequences for other countries with bloated debts.

Stephen Roach, the non-executive chairman of Morgan Stanley Asia, said yesterday that "Greece will default" and while that event was "pretty close" to being priced into financial markets, the consequences for banks that had lent to the country were not understood.

"I don't think we have a clear sense of what the whole web of counterparty risk is in the event of a Greek default," he added.

The Greek capital's five million inhabitants had to make do without any public transport or taxis yesterday and face a similar strike today. There will also be general strikes in October to protest against 20pc cuts to pensions higher than €1,200 a month and moves to sack 30,000 public sector workers.

Determination

Most observers say the latest cuts will be enough to force the IMF and EU to approve the next €8bn aid tranche before Greece runs out of money in October. Inspectors are now expected to return to Athens early next week to complete their review.

"The measures announced show determination on behalf of the Greek government to speed up fiscal adjustment," said Nikos Magginas, an economist at National Bank. "They should satisfy the troika's demands for permanent measures aimed at spending cuts."

But the government faces huge resistance from the public who are convinced Greece will default anyway.

One of Greece's biggest unions planned a three-hour work stoppage against education reform, while it agreed with another -- together they represent some 2.5 million workers -- to strike for two days next month to protest cost cuts.

"We will fight to the end, to topple this policy," said Ilias Iliopoulos, general secretary of public sector union ADEDY. "The troika [EU and IMF] and the government must go."

The strikes represent the first big nationwide protests since early summer, when daily demonstrations culminated in violent clashes after weeks of unrest.

As is increasingly the case in Ireland, Greece remains bitterly divided between private sector workers who say a bloated state bureaucracy is strangling Greeks and public servants who say the biggest problems are political corruption and tax evasion.

"Yes, maybe we lived a life bigger than we could afford. And we wouldn't object to these sacrifices if we knew they would get us somewhere. But there is no way out," said public sector worker Fragoulis Krokos, "There is no end to this slide. If I could, I would leave the country now."

The conservative opposition, which has a slim lead over Prime Minister George Papandreou's Socialists in opinion polls and has called for snap elections, maintained its refusal to co-operate with the government, which has irked EU leaders.

Opposition New Democracy party spokesman Yiannis Michelakis criticised the "tsunami of unfair and unbearable measures" and blamed Mr Papandreou and Mr Venizelos for lacking the courage to announce the measures themselves.

"Mr Venizelos did not dare announce them this time and of course neither did the prime minister, who has been nowhere to be seen all this time," he said.

Irish Independent

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