ISSN 2330-717X

Greece’s New Austerity Plan Draws Mass Protest


Tens of thousands of Greeks rallied in central Athens on Sunday (5 June) to denounce politicians, bankers and tax dodgers, as the government prepared to inflict another bout of austerity demanded by its international lenders.

Turnout was the biggest so far in a series of 12 nightly rallies on the square inspired by Spain’s protest movement. Police put the crowd at 50,000 by mid-evening, but numbers continued to grow as dusk fell over the Greek capital.

The cabinet of Prime Minister George Papandreou is due to discuss on Monday an economic plan, which a senior government official said would impose €6.4 billion of budget measures this year alone, on top of austerity already imposed under Greece’s original international bailout agreed last year.

The medium-term plan includes tax increases, while international lenders are pushing for a crackdown on widespread tax evasion. The black economy is thought to be around 20-30% of gross domestic product.

As Greece battles to avoid defaulting on its debt, which totals about €340 billion, unemployment has soared to almost 16%.

New bailout

The extra austerity is the price for a new bailout agreed with the European Union and International Monetary Fund to replace the old one, which has proved overoptimistic in assuming Greece could resume borrowing commercially early next year.

German news magazine Der Spiegel reported on Sunday that the new bailout could end up costing more than €100 billion, if Athens still needs foreign aid in 2013 and 2014.

Spiegel cited estimates by experts from the German Finance Ministry and the “troika” of the EU, International Monetary Fund and European Central Bank. In Berlin, the finance ministry declined to comment on the weekly’s report.

Greece agreed its first bailout, worth €110 billion, a year ago. But this assumed that it could resume borrowing commercially early next year, which now appears inconceivable.

So far, Athens has received €43 billion under the first bailout, although it urgently needs another €12 billion which had been due in late June to cover debt repayments and for its day-to-day running costs. The troika said on Friday that money should now be forthcoming in July.

Eurozone finance ministers and the IMF board must still back the new bailout, which would supersede last May’s rescue.

It is expected to demand that commercial creditors share some of the cost of Greece’s huge funding needs. A source close to talks on the bailout involving EU officials in Vienna last Thursday said it would involve some participation of private investors.

The ECB opposes any attempt to cut the overall value of creditors’ bond holdings, known as a haircut, fearing this would badly hurt banks which hold Greek debt and provoke a violent reaction on international financial markets.

However, creditors may be asked to buy new Greek bonds when old ones mature, to avoid Athens having to produce more money.

Papandreou pressed from all sides

Prime Minister George Papandreou has used his parliamentary majority to ram through successive rounds of austerity including cuts to pensions and civil servants’ salaries. But faced with the popular anger, some PASOK lawmakers are becoming uneasy.

A group of 16 wrote to the prime minister on Thursday demanding a full party debate on the medium-term plan as “a matter of patriotism and democracy”.

But Interior Minister Yannis Ragousis warned that rocking the boat could lead to early elections, which opinion polls suggest would lead to political stalemate, raising the risk that the new bailout deal with the EU and IMF might unravel.

“Anyone who drives the nation towards elections now will be effectively giving it the last push over the cliff,” Ragousis told Sunday’s edition of the Realnews newspaper.

In Germany, which funds much of the bailouts, a conservative politician was unmoved by the Athens protests.

“We can’t let ourselves be influenced by the demonstrations in Greece,” said Volker Kauder, an ally of German Chancellor Angela Merkel.

Germany was due to put up €24.4 billion of the €110 billion total of the original rescue. “Greece is trying, but its efforts are insufficient,” Kauder, who leads the Christian Democrat party in parliament, told Bild newspaper.

Original article

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