Greece Struggles to Stay Afloat as Debts Pile On

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

De strijd wordt dus gestreden door 112,7% van de inkomsten uit te geven,
terwijl de staatsschuld al 100% van Bruto Nationaal Produkt is.
De pensioengelden zijn genoeg voor de komende 10 jaar.

Groet / Cees

http://www.nytimes.com/2009/12/12/world/europe/12greece.html
December 12, 2009
Greece Struggles to Stay Afloat as Debts Pile On
By RACHEL DONADIO and NIKI KITSANTONIS
ATHENS — Ever since Greece’s credit rating was downgraded last week, its
new Socialist government has fought back, saying it has the mettle to
tackle the soaring deficit and structural woes that have earned the
country a reputation as the weak link in the euro zone.

“We will reduce the deficit, we will control the debt and there will be
no need for a bailout,” the Greek finance minister, George
Papaconstantinou, said in an interview in his office here this week. “We
are not Iceland; we are not Dubai.”

But Mr. Papaconstantinou may have good reason for the traditional Greek
metal worry beads he fingered during the interview. Outside his office,
garbage was piled high in Syntagma Square, a result of a two-week strike
by trash collectors that ended Friday.

A student demonstration was advancing on the square a day after
pensioners had taken to the streets. This week, protests for the first
anniversary of the death of an Athenian teenager shot by the police
turned violent, but did not cause as much damage as disturbances last
year.

Common in Greece even during better times, such protests are expected to
increase drastically once the government introduces austerity measures
in its 2010 budget, including wage freezes and measures to scale back
public sector hiring, steps it says are needed to bring Greece’s
finances under control.

As Mr. Papaconstantinou suggested, the problem is not Greece’s alone:
heavily indebted countries, including Ireland, Britain and Spain, are
under pressure to show that they can stimulate growth and grapple with
debt burdens at the same time. Investors and European monetary officials
are skeptical.

Greece, in particular, has to transform a culture with a low tolerance
for change and a high tolerance for protest, no easy task for a
two-month-old Socialist government that says it is committed to
sustaining social spending. While convincing European Union leaders in
Brussels, the new government also has to win over Greece.

The president of the civil servants’ union Adedy, Spyros Papaspyros,
said the union was prepared to strike if cutbacks were unilateral and
severe. “If funding cuts are made in critical sectors such as health or
welfare, we create a serious risk of destabilization,” he said.

The political and social challenges are intense. “It will be a very tall
order for any country to pull off the fiscal rescue they’ve now got to
pull off,” said Simon Tilford, the chief economist at the Center for
European Reform in London, a research group. In light of Greece’s
political challenges, he added, “I find it at this point difficult to
see how Greece is going to manage this without some kind of fiscal
crisis.”

Certainly, the bond markets think Greece is a risky bet. Yields on the
country’s two-year bonds soared to 3.09 percent from 1.9 percent this
week — the worst for the markets here in more than a decade — and were
about 3 percent on Friday, while the 10-year bond rose to 5.3 percent
this week from an already elevated 4.99 percent. In the United States,
by contrast, a 10-year bond yields 3.55 percent, and a two-year bond
0.81 percent.

The dire economic situation has prompted the question of what went wrong
in a country that was once seen as a model for European Union membership
and that enjoyed 15 years of sustained growth, coming from behind to
host the 2004 Summer Olympics.

“We didn’t use the Olympic spirit well,” said Elias Clis, a former Greek
ambassador. “The previous government took the safe way, and the safe way
is a very dangerous path.”

After winning by a wide margin in October, the Socialist government of
Prime Minister George Papandreou announced that the country’s budget
deficit was 12.7 percent of the gross domestic product, more than four
times the 3 percent ceiling set by the European Monetary Union.

Mr. Papandreou last week estimated the national debt at $430 billion,
calling it Greece’s worst crisis in three decades and blaming his
conservative predecessors for the economic state. Greece’s national debt
is expected to rise above 110 percent of its gross domestic product.

Last week, the ratings agency Fitch downgraded Greece’s credit rating
based on fears that the deficit might cause the country to default, and
the change sent Greek shares plunging and made the markets jittery.
Standard & Poor’s has said it will reserve judgment until it sees the
plan the government is expected to announce in January.

On Friday, Mr. Papandreou stressed the need for drastic measures. “We
acknowledge the scale of the problem that we are faced with, and we are
determined to make the shift toward a sustainable and healthy economy,”
he said in Brussels.

He called for a “merciless crackdown on the corruption that is endemic
in society and on widespread tax evasion.”

Yet that is not expected to be easy. The underground economy, which some
estimates place as high as 30 percent of gross domestic product, helps
people in countries like Greece that have European prices but salaries
below the European average.

As he sat in a cafe with friends in the chic Kolonaki area on a recent
afternoon, Antonis, 33, who disclosed only his first name, proudly
announced that he refused to pay taxes.

“Why should I pay?” he asked with a grin. “I don’t care about my
government; I don’t care about my country,” he added. He conceded,
however, that he did care about soccer and women.

Such views, while not always so vehement, are common in Greece, where
the government is widely seen as corrupt, regardless of who is in power.
Few people expect much from the state — except highly coveted public
sector jobs. Today, one in four Greek workers is employed by the state,
a result of decades of public hiring to stave off social unrest.

The Papandreou administration has said that in 2010 it will hire only
one new state worker for every five who retire. But that, too, poses
problems. Savas Robolis, a member of the main labor union, the Greek
General Confederation of Labor, who serves on a government committee on
pension reform, called the pension situation a “time bomb.”

He said Greece had only enough money to pay pensions for one more year.
If the country does not replenish the pension funds, “then we will face
a huge social crisis in 10 years,” Mr. Robolis said.

Fears of cutbacks are causing widespread anxiety. Lambrini, who works in
the Health Ministry and would give only her first name, said a possible
freeze on her $1,300 monthly salary was a real concern for her and her
husband, a municipal worker.

“We want to plan a family, but I don’t see how we can with such low
incomes and with prices going up all the time,” she said.

She said she had never joined a labor protest before, but would take to
the streets if her salary was frozen or cut. “I’ll be there,” she said.
“And so will half the population.”

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