A possible deal with lenders requires another 3.3 billion euros in spending cuts and more austerity measures.
By Andy Dabilis for Southeast European Times in Athens -- 10/02/12
A petrol bomb explodes near riot police during protests in Athens on Friday (February 10th) against planned reforms by Greece's coalition government. [Reuters]
Unions in Greece went on strike Friday (February 10th) protesting a second proposed bailout that would cut 3.3 billion euros from state spending, lower the minimum wage by more than 20%, and lay off thousands of workers.
Demonstrators in front of parliament threw rocks and petrol bombs at police, who retaliated with tear gas. There were no immediate reports of injuries.
The coalition government agreed to the deal Thursday, and finance ministers from the 17-nation eurozone met in Brussels to set its conditions for approval of the 130 billion-euro bailout.
Eurozone finance ministers said they would withhold action until the Greek parliament approves the measures at the weekend and makes an additional 325m euros in cuts by Wednesday, when the finance ministers are to meet again. Greece must also negotiate pending write-downs of as much as 70% of debt with creditors.
"It's up to the Greek government to provide concrete actions through legislation and other actions to convince its European partners that a second programme can be made to work," EU Economic and Monetary Affairs Commissioner Olli Rehn said.
Greece must secure an agreement to cut its debt burden in the next few days to prevent a "disorderly" default that could cause panic in its banking system and capital flight in nations from Portugal to Ireland, Fitch Ratings said.
European markets initially were cool to the plan, with stocks in England, Germany and France showing losses midday Friday.
Speaking at an EU-India summit in New Delhi, European Commission President Jose Manuel Barroso predicted the deal would be finalised and that Greece would remain in the eurozone.
"I call on the responsibility of Greek leadership and all members of the eurozone to rapidly attain this goal, which is important not only for the euro area, but also for the global economy," Barroso told Reuters.
The Greek plan would cut the minimum wage by 22% to 32%, lay off 15,000 workers this year, and let employers eventually set salaries -- a bitterly-disputed negotiation that officials said was made to spare more cuts to pensions.
After exhaustive talks with his divided government, interim Prime Minister Lucas Papademos succeeded in procuring consensus after the EU-IMF-ECB Troika -- which has previously laid out 109 billion euros in rescue loans -- said the money pipeline would be shut off otherwise.
Riot police grapple with a demonstrator during Friday’s protests in Athens. [Reuters]
Greece needs continued aid to meet a 14.2 billion-euro loan payment due March 20th and to keep paying its workers and pensioners.
Finance Minister Evangelos Venizelos said it is time for Greece to decide if it wants to remain in the eurozone. "Nobody can hide behind anyone else," said Venizelos. "Nobody can keep pretending to be the good guy. Our choice will be between sacrifices and even bigger sacrifices," he said.
With Greece in its fifth year of deep recession, the news coincided with new unemployment statistics showing the jobless rate hit 20.9%. Under the agreement, almost 50% of the under-25 age group will see their minimum wage fall from 751 euros to 503 euros, monthly.
A 48-hour general strike docked ships and stopped public transport Friday. Hospital doctors, bank employees and teachers also walked off the job, Reuters reported.
Georgia Papadopoulou, 23, has been out of work for nearly a year, is nearing the end of her unemployment benefits and doubts she'll find another job.
"I can't be independent. I'll have to keep living with my parents whose pay has been cut too," she said. Even if lowering the minimum wage means she can find work, it won't help much.
"How can I live with that kind of money? It's almost pocket money," she told SETimes.
George Stathakis, an economics professor at the University of Crete, said the deal will fail.
"The income from taxation and other sources is expected to fall 15% to 20% this year, which means the cuts they are planning will be undermined by the decline in income -- the budget will not be balanced," he told SETimes.
Defence spending, long a sacred cow in Greece, could see some of the biggest hits as the government agreed to cut military expenditures by 325m euros. Under Thursday's deal, the government needs to find another 300m euros in reductions to save basic and auxiliary pensions from 15% cuts.
In Greece, people whose basic pension is low receive an auxiliary pension. But if the young were sacrificed to save the elderly, it didn't offer much solace to Athanassios Antoniou, 82, a retired tailor who has a basic pension of 503.90 euros and an auxiliary pension of 230 euros, both of which would be cut 15% unless the government manages to trim in other areas.
"I can manage with what I have, but if they cut my pensions I'd have to depend on my daughter whose salary has been cut 30%. I worked for years and earned this pension," he told SETimes.
But some disagree with the proposed defence cuts.
"Our defence system is in a direct line [of vulnerability] now. If we keep cutting from defence, the security of the nation will be [jeapordised]," Stavros Karkaletsis, a defence analyst who operates the Athens-based Hellenic Centre for European and International Analyses, told SETimes.
Nikolaos Vettas, a professor of economics at the University of Athens, said the government had to act, but it must do more.
"These things are necessary, but they are not sufficient. They need to jump-start the economy with real reforms that would facilitate investment. Right now, no one is investing [in Greece]," he told SETimes.
Greek leaders said they would speed the pace of privatising state-run companies and sell or lease state-owned properties, but the profit projections have fallen by 50 billion euros to 19 billion.
"They are trying to rescue Greece," Vettas said.