By Paul Tugwell and Marcus Bensasson - Oct 20, 2011 4:00 AM GMT+0700
Greek Prime Minister George Papandreou is set to risk further social unrest over a new round of austerity measures that he needs to convince euro-area leaders that Greece will hold to its bailout program.
Papandreou secured the support of all 154 of his lawmakers in the 300-seat parliament in a preliminary vote in Athens late yesterday, setting up a final vote on the bill today that tests his party’s unity for a second time in 24 hours. The package comprises tax rises, cuts to pensions and wages and plans to dismiss 30,000 state workers, plus provisions to break the collective pay-bargaining power of Greek unions.
“The issue is how to avoid default and in my view it is absolutely doable,” Stefanos Manos, a former Greek finance minister, said in an interview with Bloomberg Television. “But it requires some very tough decisions right away.”
The measures, the second in four months, are needed to help Papandreou’s government meet budget targets that are a precondition for more outside aid and any reduction in Greece’s debt load to be discussed by European leaders at an Oct. 23 summit. Passage of the package risks further enraging workers and unions preparing for a second day of protests that have closed government offices, hospitals and schools and led to clashes with police in central Athens.
Parliament’s show of support for the package means “there will be even more people in the streets,” Kostas Ziogas, an official for the Communist Party of Greece-backed PAME union, said in an interview with private Alter television. “Workers shouldn’t fear the threats made by the government and the troika over what will happen if the measures aren’t passed.”
Cabinet Talks
Papandreou will chair a meeting of his Cabinet at midday today Athens time to brief his ministers on “current economic developments” ahead of the European Union summit that aims to announce a wider plan to stamp out the debt crisis.
The voting took place as Chancellor Angela Merkel, President Nicolas Sarkozy and other euro-area leaders took advantage of an event in Frankfurt yesterday marking the conclusion of Jean-Claude Trichet’s term as head of the European Central Bank to try to narrow their divisions before the summit.
EU leaders are due to receive the latest report on Greece’s finances by the troika of inspectors from the ECB, the European Commission and International Monetary Fund.
“Without the measures, the 2011 budget won’t be met, neither will the budget in 2012,” Greek Finance Minister Evangelos Venizelos told lawmakers before the vote in comments broadcast live, as groups of hooded protesters in gas masks lobbed Molotov cocktails at the riot police outside. “We are giving the battle of battles up to Sunday evening.”
Running Battles
The vote capped a day of protests against the government cuts across Greece yesterday that descended into running battles outside parliament on the capital’s Syntagma Square between police firing tear gas and demonstrators hurling marble rocks ripped from surrounding walls and buildings.
About 70,000 people gathered in Athens for the first day of a 48-hour strike in one of the biggest protests yet against Papandreou’s program of cost-cutting and tax rises, according to police. They said 50 officers were injured in the square and they had reports of 3 civilians hospitalized in the clashes. Twenty-eight people were detained for attacks on police and another five arrested.
Public-Sector Anger
Two years after the debt crisis came to light in Greece, Papandreou is courting social unrest that risks boiling over as he pushes through additional austerity. The steps, which are needed to continue receiving outside support under a 110 billion-euro ($152 billion) bailout agreed last year, have provoked a wave of strikes by public-sector employees who constitute about 17 percent of Greece’s total workforce.
Drawing particular fire from unions and some members of Papandreou’s own party is an aspect of the legislation known as Article 37, which suspends the power of unions to impose wages and work rules through collective labor agreements. One Pasok deputy has said she’ll vote against the article if it isn’t changed.
GSEE, Greece’s biggest private-sector union, said that strike participation was 100 percent at refiners, shipyards, on transport, ships and at ports, and 90 percent in the construction industry, commerce, banks, the power company, phone company, postal service and water companies. Municipal garbage collection workers were ordered back to work two days ago by an executive decree to clear more than a week’s worth of refuse piled up in the streets.
‘Held Hostage’
Introducing the bill, Papandreou said that Greece was being “held hostage by strikes and protests.” With a four-seat parliament majority, he is banking on his Pasok party to face down the public anger and pass the bill in today’s vote.
Successive rounds of tax increases and cuts to wages and pensions have deepened a recession now in its fourth year, with the economy set to contract 5.5 percent this year and 2.5 percent next, according to the 2012 budget. The unemployment rate reached 16.5 percent in July, data released Oct. 18 by the Hellenic Statistical Authority showed.
“If Greece can dramatically reduce its debt burden and interest payments, that may well mean that it needs to implement slightly less austerity in the near term,” Ben May, an economist at Capital Economics Ltd. in London, said in a Bloomberg Television interview. “It certainly won’t solve all of Greece’s problems and it will have to continue to reduce its deficit over time, but it might make that process a bit more manageable and less painful.”
To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net; Paul Tugwell in Athens at ptugwell1@bloomberg.net.
To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net
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