Debt-hit Greece hunkered down to enforce austerity after EU leaders brokered new conditions for cash to avert a default which could endanger the eurozone. The Socialist government of George Papandreou has just a week to push new austerity reforms through a divided parliament in the face of protests and resistance from unions which are preparing a 48-hour mass walkout.
World markets are following the Greece-eurozone drama closely for fear that a wrong step now could cause far-reaching damage. After late-night talks between EU leaders, EU President Herman Van Rompuy said the new rescue demanded by the International Monetary Fund and worried international partners should allow initial “disbursement in time to meet Greece’s financing needs in July.”
That refers to a 12-billion-euro instalment of loans from last year’s 110-billion-euro bailout ($156 billion), which Greece needs to avert default in July but which was blocked pending next week’s vote in the Greek parliament.
The new Greek bailout would combine fresh eurozone loans and privatisation proceeds with a contribution from banks and other private investors who are being pressed to rollover Greek bonds coming due for redemption. Greek government spokesman Elias Mossialos said the debate in Europe concerned a three-year bailout worth “many billions of euros.”
“We are not talking about the future of the fifth loan tranche but of the next three years after 2011,” he told state television NET. The new bailout could run over 100 billion euros. Papandreou has a five-seat majority in parliament but some of his lawmakers have threatened to shoot down the reforms, in particular over a controversial sale of state assets designed to lighten the country’s crushing debt.
Opposition parties also reject the tight economic policy deemed to have killed off Greece’s slim growth prospects, while labour groups are pledging to fight tooth and nail against the privatisation drive. Rolling power cuts by unionists at the Public Power Corporation, one of the main entities earmarked for partial privatisation, have already caused household disruption around the country.
In a bid to defuse public anger towards Greece’s political elite, Finance Minister Evangelos Venizelos announced on Thursday an emergency five-percent tax on deputies, elected officials and senior civil servants. “When we impose reductions and measures on the Greek people we must be the first to suffer the main cut, it is a moral responsibility,” said the minister, a former foe of Papandreou appointed to the post in a reshuffle last week.
Thousands of Greeks have been gathering outside parliament on a weekly basis to heap abuse on lawmakers for driving the country to the brink of ruin. EU leaders on Thursday called on “all political parties in Greece to support the programme’s main objectives,” saying “national unity is a prerequisite for success.”But the country’s number two party, the opposition conservatives, intend to oppose the plan. “We disagree with the policy mix which has already led to a deep and protracted recession,” party leader Antonis Samaras said after talks with fellow conservative leaders in Brussels. “Our responsibility lies not in accepting the mistake but in correcting it. “I held my position to the end,” Samaras said, amid reports that he received a dressing-down for his refusal to back a five-year programme of spending cuts and tax rises worth over 28 billion euros by 2015.
