Tags: Eurozone | Greece | Plan | Cuts

Eurozone Still Skeptical of Greece’s Planned Cuts Amid Public Outrage

Monday, 13 Feb 2012 07:28 AM

The Greek government was under pressure on Monday to convince a skeptical eurozone that it would stick to the terms of a multi-billion-euro rescue package endorsed by lawmakers despite violent protests.

Parliament backed drastic cuts in wages, pensions and jobs on Sunday as the price of a 130-billion-euro ($172 billion) bailout by the European Union and International Monetary Fund, as running battles between police and rioters in central Athens outside parliament drove home a sense of deepening crisis.

Firefighters on Monday doused the smoldering remains of cinemas, shops and banks set ablaze in the capital. It was the worst violence in years, and spread from Athens to Greece's second city of Thessaloniki and the islands of Crete and Corfu.

Eurozone finance ministers meet on Wednesday.

The fragile ruling coalition of Prime Minister Lucas Papademos has until then to say how 325 million euros of the 3.3 billion euros in budget savings will be achieved.

Brussels also wants written commitments from party leaders that they will implement the terms of the deal even after an election penciled in for April.

But a recession, now in its fifth year, and two years of painful spending cuts have shaken the political establishment to its core.

Voters could be driven further to the left and right, straining EU confidence in whether Greece will hold the course.

First reaction from eurozone paymaster Germany was cautious.

"Now we need to wait and see what comes after the legislation," Economy Minister and Deputy Prime Minister Philipp Roesler said on German television.

"We have taken one step in the right direction but we are still far from the goal," he said.

Critics on Monday said more austerity would only condemn the economy to an ever-deepening downward spiral.

"Yesterday's vote in the parliament may have saved the country temporarily from default, but the Greek economy is going bankrupt and the country's political system is failing," the head of the Greek Commerce Confederation, Vassilis Korkidis, said in a statement.

Papademos had warned of a "social explosion" if lawmakers rejected the deal and Greece defaulted next month. They passed it after 10 hours of fiery debate.

But the unrest outside, and a rebellion by 43 parliamentarians of the ruling coalition, suggested Athens might already be on the brink.

SHOCKWAVES

"The people yesterday sent a message: Enough is enough! They can't take it anymore," said Ilias Iliopoulos, general secretary of public sector union ADEDY.

The cuts include a 22 percent reduction in the minimum wage and 150,000 jobs from the public sector workforce by 2015.

Greece needs the international funds before March 20 to meet debt repayments of 14.5 billion euros, or suffer a chaotic default that would send shockwaves through the eurozone.

The deal provides for a bond swap to ease Greece's debt burden by cutting the real value of private-sector investors' bond holdings by some 70 percent.
Greece would have missed a Feb. 17 deadline to offer a debt "haircut" to private bondholders if the vote had not passed.

But the bill strained political loyalties and puts further pressure on the Papademos government.

A Greek government spokesman said that, "despite the problems, we will proceed with the implementation of our commitments."

But in comments that could further sow doubt in the minds of eurozone finance ministers, conservative New Democracy leader Antonis Samaras - a frontrunner to be the next prime minister - indicated Athens might yet try to renegotiate the deal.

"I am calling on you to vote for the new loan agreement because I want to avoid falling into the abyss, to restore stability," he told Sunday's parliamentary debate, "so that we can have the possibility tomorrow to negotiate and change the policy that is being imposed upon us today."

"We have to exist first to be able to change it."

Tens of thousands of people had filled Syntagma Square outside parliament on Sunday. The violence that erupted was the worst since 2008, when unrest gripped Greece for weeks after police shot a 15-year-old schoolboy.

MILD MARKET RELIEF

The rioters were a minority, but spoke to the groundswell of anger among Greeks who say their living standards are already collapsing and more austerity will only deepen their misery. Unemployment in Greece reached 20.9 percent in November, and half of young Greeks are jobless.

In all, 150 shops were looted in the capital and 48 buildings set ablaze.

Some 100 people — including 68 police — were wounded and 130 detained, a police official said.

The Attikon cinema, housed in a neo-classical building dating from 1870, was left a blackened shell. Terrified Greeks and tourists fled the rock-strewn streets and the clouds of stinging teargas, cramming into hotel lobbies for shelter as lines of riot police struggled to contain the mayhem.

"When will we exit the crisis, why can't they just tell us when this will be over?" said 53-year-old Nikos Kourkoulos, a municipality gardener and father of two who has seen his monthly salary cut by 600 euros since 2008.

Asian shares and the euro gained modestly on Monday and MSCI's broadest index of Asia Pacific shares outside Japan edged up as much as 0.3 percent.
Relief saw bank shares lead European stocks higher.

Papademos, a technocrat brought in to get a grip on the crisis, said violence would not be tolerated, and acknowledged it might yet take time to impose the cuts on an angry nation.

Six members of his cabinet had resigned over the bill.

"The full, timely and effective implementation of the program won't be easy," Papademos told parliament.

"We are fully aware that the economic program means short-term sacrifices for the Greek people."

© 2017 Thomson/Reuters. All rights reserved.

 
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Monday, 13 Feb 2012 07:28 AM
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