UPDATE: European leaders have reached a deal to help Greece out of its financial crisis, EU President Herman Van Rompuy said Thursday. Immediate details were not available, but Polish Prime Minister Donald Tusk told reporters earlier that the aid was likely to come in the form of voluntary loans.
ATHENS, Greece — First it was the farmers, who have been blocking Greek roads and border posts with their tractors for weeks. Then, on Wednesday, civil servants shut down airports, public offices and schools. Taxi drivers take their turn today, when they’ll strike over new fuel taxes.
As Greece struggles to cut public spending and tackle its double-digit budget deficit, it’s facing resistance from unions and workers who say they shouldn’t be the ones to pay for the state’s profligate ways. They hope a wave of public discontent will force the government to back down on pledges to cut public sector wages and increase the retirement age, as has happened in the past.
“Cutting wages won’t affect the real, deeper problems in the economy,” said Ilias Vrettakos, vice president of ADEDY, the largest Greek public servants union, which organized Wednesday’s strike. “The capitalists got us into this situation and the capitalists should pay.”
But with intense pressure from the markets and other European countries — along with intensifying rumors that a bailout is imminent — Greece’s four-month-old Socialist government has little room for compromise.
While Greece’s economic problems have been dominating the headlines in recent weeks, the fundamental problems stretch back decades — back to before the country joined the European Union and eurozone. Successive governments have used the public sector to reward supporters, while turning a blind eye to corruption.
In the public sector, “the wages are low and the productivity is low,” explained Stravros Katsios, associate professor of international economic relations at the Ionian University in Greece. Under the system as it exists, public sector employees are forced to take second, under-the-table jobs. Their work for the state brings benefits, but little pay: “We pretend to pay them and they are pretending to work.”
The toxic mix of widespread tax evasion — which reduces revenues — and a bloated civil sector has led to the fiscal mess Greece currently finds itself in. Greece’s finance ministry estimates that there are 700,000 public employees in Greece, but some estimates put the number at over a million, nearly one in four workers. The reality is the government itself doesn’t know how many people it pays. It’s trying now to create a centralized payroll system.
But ordinary workers, like the ones who took to the streets on Wednesday, say their salaries are already low and their tax burden is high.
Despina Koutsoumba, a 36-year-old archeologist who works for the Greek Ministry of Culture, protested Wednesday wearing a ghoul mask and a sign that said: “I stopped smoking, I stopped drinking, what else do you want me to give up?”
She said her base salary is 880 euros a month, about $1,200. On top of that, she usually earns another 420 euros, or $580, in bonus pay. But under the proposed austerity measures, she will see a 10 percent cut in her bonus pay.
“It’s 50 euros less, which makes a big difference to me,” she said. “I’m married. I have a child. This is a good salary by Greek standards, but it’s still hard to survive.”
Many protesters questioned whether Greece’s economic straights were as serious as the country’s leaders — and international markets — insist.
“I’d be more willing to make sacrifices if I could trust that the rich and the capitalists would be taxed too,” said Panayotis Katikas, 58, an engineer who works for the government. “But once again the costs are being pushed to the workers and nothing is going to get better.”
But so far, Greece’s government is holding firm. It says it has no option but to implement painful austerity measures and that Greeks across the social spectrum will have to make sacrifices. Last year, the country’s deficit soared to 12.7 percent of GDP and its public debt rose to 113 percent of GDP. Now the markets, and many of Greece’s European partners, fear the country won’t be able to borrow enough money to keep paying its debts. Other European countries like Spain and Portugal are facing similar scrutiny and doubts, raising concerns about the stability of the euro and the future of the 16-member eurozone.
Despite pledges for weeks that Greece wouldn’t need a bailout, talk in Europe this week turned to the discussions of how to help Greece. European leaders are meeting in Brussels today to discuss the crisis and there are widespread expectations that a rescue plan may be announced. (European leaders have reached a deal to help Greece out of its financial crisis, EU President Herman Van Rompuy said Thursday, though further details were not yet avaliable.)
But any bailout will likely come with harsh conditions. Other heavily indebted European countries like Ireland and Spain have already pledged deeper cuts than those proposed by Greece’s government and many analysts predict that assistance from Europe will be accompanied by demands that Greece cut its spending even further.