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Europe turns debt screw as Greece faces new strikes

16 February 2010, 14:22 CET
Europe turns debt screw as Greece faces new strikes

Papaconstantinou - ecofin - Photo EU Council

(BRUSSELS) - Europe tightened a budgetary screw on Greece on Tuesday but Athens, given just 30 days to rein in its bulging deficit and debts, was immediately hit by a new wave of strikes.

In a bid to regain market confidence, non-eurozone Sweden led a fresh charge going into a meeting of EU finance ministers, insisting that Athens must "surpass" financiers' expectations if it is to fight off market attack dogs.

However, Greek Prime Minister George Papandreou, holding separate talks centred on trade with Russia's top two leaders in Moscow, now faces intensified pressure domestically as Greek unions warned that the country is nearing breaking point.

Already severe austerity measures are set to be ramped up by March 16 after the 16 euro countries agreed to impose a vice-like grip of "additional measures," further cutting costs and raising taxes should progress be deemed insufficient.

But Greek customs workers responded by announcing the start of a fresh three-day stoppage, less than a fortnight after 3,200 members staged a 48-hour walkout.

"Although we contribute to 40 percent of state revenue and our working conditions are hard, the government wants to reduce our salary and take away our tax breaks," customs union chief Anargyros Sakellaropoulos told AFP.

Greek tax officials also met on Tuesday to discuss a possible strike on Wednesday, while three other unions have called a national strike for February 28.

Papandreou's efforts to get the country's finances in order include a freeze on public sector salaries, a hike in the retirement age and the end of bonuses for some state employees, including customs and tax officials.

But Swedish Finance Minister Anders Borg said Athens must go much further if it is to deliver on a stated target of reducing its 2009 deficit-to-output ratio by almost one third this year alone.

"What we've seen so far is not enough," Borg warned. "We need more concrete steps when it comes to taxes, otherwise they can't keep their social cohesion. (And) we need concrete steps when it comes to expenditure."

Borg maintained that without a more ambitious programme in Athens, a months-long onslaught by international fund managers and investors on Greece, which has pulled the euro down against the dollar, will only "drag out."

Greece is committed to reducing a deficit running to 12.7 percent of gross domestic product by four percentage points over the course of 2010. The eurozone has a three percent limit for deficits.

However, the country's euro partners have now effectively seized control of its budgetary sovereignty after finance ministers cut Athens out of the decision-making process.

Juncker, who also said after Monday's talks that contingency bailout plans are being prepared to shore up the euro, has insisted that "the financial markets are completely wrong if they think they can destroy Greece."

On Tuesday, the Luxembourg premier declared an additional call by Borg for greater International Monetary Fund surveillance and monitoring to be an "absurd" irrelevance "fuelled by Anglo-Saxon voices" seen as hostile to the shared currency.

"If California had a refinancing problem, the United States wouldn't go to the IMF," Juncker said.

Greek Finance Minister George Papaconstantinou failed on Monday to elicit publicly the "explicit message" he wanted from his euro peers detailing concrete, financial help from Brussels.

Spanish Finance Minister Elena Salgado said on Tuesday that no details of bailout planning would be released to speculators, after EU leaders last week vowed to implement "determined and coordinated measures" to "safeguard financial stability."

Greece's ballooning public deficit has seen its total debt shoot up to about 300 billion euros, or 113 percent of GDP, nearly double the 60 percent eurozone limit.

Moody's credit rating agency calculates that Greece must allocate 15.1 percent of all its revenues just to service its debts this year.

Economic and Financial Affairs Council (Ecofin)

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