Business, Finance & Economics

Greek budget cuts spark protests


ATHENS, Greece — As the Greek government prepares to implement a host of austerity measures to bring the country’s massive public debt under control, this new year may be accompanied by the shouts of protesters rather than merrymakers.

Greek Prime Minister George Papandreou, in office for just over two months, acknowledges the country faces “painful” choices as it scrambles to assure international investors — and its European partners — that it will not default on its debt.

But in a country where generations of politicians have used state jobs and resources to curry political favor and mute social unrest, attempts to prune the country’s bloated civil service and cut social security spending are likely to meet stiff resistance.

“The employers should have to pay, not the worker,” said Eleni Nakri, an unemployed 30-year-old protesting the austerity measures outside Greece’s parliament on Thursday. “We’ve made enough compromises.”

The current crisis was sparked by the recent downgrading of Greece’s credit rating by two major debt-rating companies, Fitch Ratings and Standard & Poor’s, which raised fears that the country could default on its debts and potentially cause ripple effects across the 16-member eurozone. Greece’s public debt has reached $442 billion, according to government officials, the highest in its history and more than 112 percent of GDP.

But Greece’s new socialist government insists the country is no Dubai or Iceland and says it will not default or seek a bailout. On Monday, Papandreou said the country was in “critical condition,” but pledged to take tough action to address the crisis, including new taxes, slashing social security spending by 10 percent and freezing many public sector wages. He stopped short, though, of calling for public sector salary cuts.

Still, many of the new measures are likely to be unpopular. And in a country with a long and proud tradition of protest, many fear a long season of strikes and marches lies ahead.

On Thursday, thousands of Greeks took the streets to protest the measures in a show of force by one of the country’s most militant unions, the Communist-led PAME. The country’s largest unions have adopted a wait-and-see attitude, but warn that social benefits and salaries must be protected.

The global economic crisis may have pushed Greece’s economy into the spotlight, but few of the problems are new. Indeed, while Papandreou swept to power only a few months ago on a wave of popular anger over corruption in the previous government, his party and family bear more than a little blame for the country’s deeply-entrenched economic problems. His grandfather was prime minister three times and his father twice.

Papandreou and his largely British- and American-educated economic team have vowed to tackle difficult problems such as widespread corruption and the bloated civil service. But they must convince an electorate resistant to change and largely unrepentant about tax evasion.
Many Greeks doubt government claims that coffers are empty and believe the state’s money is being stolen by corrupt officials and greedy bankers.

“The bankers took all the money,” said Joanna Karatziou, a temporary government worker, echoing a frequent refrain here.

To allay those fears, Papandreaou has promised a 90 percent tax on banker bonuses. But the government is also counting heavily on widening the tax base to ease its deficit crisis.

On Friday, Finance Minister George Papaconstantinou said the government would prepare a new tax law aimed largely at tackling tax evasion. He said that only 3,000 Greeks — in a country of 10 million — reported having incomes greater than 200,000 euros ($287,000). More than 5 million Greeks claimed incomes lower than 12,000 euros.

“Tax reform will be key,” said Papaconstantinou at a press conference.

But despite government attempts to reassure skittish international investors, there remains widespread skepticism that the proposed measures are tough enough.

Announcing its downgrade Wednesday, Standard & Poor’s said it was not convinced Greece’s plan to reduce its deficit went far enough and said it feared efforts to bring the budget into line would face fierce domestic resistance.