Greece faces ‘big sacrifices’ as £95bn bail-out agreed

Telegraph
02.05.2010
By Richard Fletcher

Greece committed to make swingeing budget cuts as it clinched support from eurozone finance ministers for a €110bn (£95bn) bail-out.

Having secured the backing of the finance ministers, the three-year loan package needs to be approved by a number of European legislatures - including Germany and France - before a full meeting of the eurozone leaders next week.

George Papandreou, the Greek prime minister, said the austerity measures agreed at an emergency meeting of the cabinet were the “only road to save the country”.

The plan agreed by the cabinet includes new budgets cuts of €30bn, which Mr Papandreou hopes will slash the public deficit to less than 3pc by 2014. “With our decision today our citizens will have to make big sacrifices,” he said.

The additional austerity measures include:

Scrapping bonus 13th and 14th month wages for public sector workers as well as for retired people from both the public and private sectors.

Raising the retirement age for women from 60 to 65, bringing it in line with that for men;

Raising the sales tax from 21pc to 23pc this year.

The austerity package, which has been agreed with the European Union and International Monetary Fund, is aimed at averting bankruptcy.

Unions immediately voiced their dismay and vowed to step up their campaign against the cuts. Yannis Panagopoulos, president of the million-member strong GSEE union: “They are going to worsen the recession and plunge the economy into a deep coma. It’s time to step up the social battle.

The package was welcomed by Angela Merkel, German Chancellor, who argued that it justified her demand for the IMF to be involved in the Greek bail-out over the objections of her European peers.

Greece’s deficit reached 13.6pc of gross domestic product last year. The country faces an urgent need for help with €9bn of debts that are due on May 19. Eurozone leaders hope a deal will prevent contagion to other countries including Spain and Portugal.

Full article

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Telegraph
01.05.2010
By Harry de Quetteville and Paul Anast

Revolution from Greece’s ruins as crisis deepens

As Greeks face changing their way of life, rioters in Athens clash with police at the start of a very long, painful summer for the country

The week was already going badly enough for mild-mannered Greek prime minister George Papandreou. After months of insisting that his country would be able to claw its own way out of decades of mismanagement and corruption, his belated SOS to the International Monetary Fund (IMF) ensured that Greece’s world famous ruins are now financial, not archaeological.

But then things got worse. Even as Mr Papandreou likened himself to Homer’s great survivor, Odysseus, his country’s fortunes were being sunk between a modern Scylla and Charybdis: German intransigence over a financial bailout on one side, and market jitters that downgraded Greek bonds to junk status on the other.

On Sunday, however, as the details of an economic life raft from the EU and IMF are due to be announced, Mr Papandreou will be forced to survey not simply the wreckage of the Greek economy, but the beginnings of “cultural revolution” that analysts say his homeland’s crisis is set to unleash across the continent of Europe.

Saturday’s riots on the streets of Athens, in which police fired tear gas cannisters after being pelted with stones and petrol bombs by crowds protesting at the proposed new austerity measures, may prove to be the start of a long, hot summer. And for Greece, the pain is sure to be immediate, intense and enduring.

Many take-home salaries will be effectively halved overnight by severely increased taxes, rising in some cases from less than 10 per cent to 38 per cent, and by the fact that those taxes will now have to be paid. Workers who had looked forward to a comfortable retirement in their mid-50s on up to 80 per cent of their final salaries now face the prospect of working on for more than another decade, for less at the end.

That medicine is proving too strong for many. London estate agents are reporting record business from Greeks, who, like Italians last year, are seeking to pre-empt a tax crackdown by investing in bricks and mortar abroad.

For those assets which can’t be shifted, other help is at hand. Vangelis Vasilopoulos is the chief engineer for a company which builds swimming pools in the wealthy northern suburbs of Athens, home to ship-owners and tycoons like Spyros Latsis, one of the richest men in the world, who hosts Prince Charles on his travels to Greece. Industrialist Theodore Angelopoulos and his wife Gianna, who led the organising committee for the Athens Olympic Games (only six years ago, when Greece was heralded a “little nation miracle”) are installed there too, as is Mr Papandreou himself.

There is little option however: in return for up to 120 billion euros over the next three years, Greece is being asked to make a further 24 billion euros, almost precisely 10 percent of its GDP, in budget reductions on top of swingeing cuts already made.

Such adversity is being met with a bitter humour by many. While tourist shops in Athens exploit the bad news to sell visitors masks made famous by Greek tragedies of old, locals laugh at Mr Papandreou’s Homeric imitation. After the Odyssey, they recall, there was only one survivor.

“To cut a long story short, the party is over for most Greeks”, said Christos Alexopoulos, a 55-year old financial consultant who lives in the wealthy northern Athens suburb of Kifissia. “Even though I am considered to be in the upper middle class bracket and to live in a nice area, my income has dropped dramatically and we are living in real anxiety as to what the future holds. We have to think carefully now before going out to a restaurant or deciding to buy something. We have become very price sensitive and are looking for bargains, more value for money. At the lower end of the scale, what we will see is a much larger number of Greeks actually living beneath the poverty level.”

National humiliation is sharpened by the fact that the chief architects of Greece’s bailout, and thus of conditions attached that will shape the Mediterranean country’s future way of life, are Germany and the IMF.

For many Greeks, the IMF is closely linked with America, a nation they widely distrust for backing the colonels’ junta of the 1970s, and whose embassy is still regularly pelted with stones during street demonstrations in Athens. For a people who already instinctively associate America with “cultural imperialism”, the IMF intervention is likely to be highly unwelcome.

“We find ourselves before the most savage, unprovoked and unjust attack,” Spyros Papaspyros, head of a civil servants union, said after learning some of the details of the aid package this week. “The answer will be given in the street.”

The first signs of that came on Saturday, with May Day protests that mixed a traditional anti-capitalist message with the threat of violent rejection of any imposed austerity measures.

Police fired tear gas cannisters after being pelted with stones and petrol bombs by crowds protesting at new austerity measures, in what may prove to be the start of a long, hot summer. And for Greece, the pain is sure to be immediate, intense and enduring.

But it is the prospect of a lesson in living from Germany, which will provide almost 10 billion euros of aid, that most threatens the Greek way of doing things, as longer working hours, lower pensions, and fewer strikes become the norm.

According to Wolfgang Nowak, chief economic advisor to Gerhard Schroeder, the German chancellor who himself implemented painful economic and welfare reforms at the beginning of this century, Germans will demand that Greece shapes up.

“Germans just don’t like to pay for people to retire early, to claim several holiday bonuses,” he said. “We hear that Greeks are not ready to accept change in these things and are blaming Germany, but the reality is that Germany is already having to adapt to keep up with the economies of Brazil, Russia, India and China. Greece must adapt too.” Such is the disillusionment within Germany about what is perceived as a Mediterranean work ethic in direct contrast to the discipline at home that a cultural chasm has opened up between northern and southern Europe.

The EU must take the opportunity to bridge that chasm by imposing a fresh, northern-European rigour on Portugal, Italy, Greece and Spain (the so-called PIGS), said Mr Nowak.

“It’s cultural,” he said. “These [southern European] states must adapt. If we help Greece we must help Portugal and Spain too. It’s a chain reaction.

Full article

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