Bloomberg News

Greeks Told to Forget ‘Miracles’ as Aid Depends on Austerity

October 20, 2011

(Updates with protester death in second paragraph, IMF comment in seventh. For more on Europe’s debt crisis, see EXT4.)

Oct. 20 (Bloomberg) -- Greek Finance Minister Evangelos Venizelos warned lawmakers they must implement further austerity to “rewrite” Greece’s behavior, as the government prepared to put a vote to parliament that risks stoking social unrest.

Tear gas was fired in central Athens as protesters clashed with police for a second day outside the parliament building where Prime Minister George Papandreou will put the legislation to a vote later today. Parliament’s acting speaker confirmed the death of a protester and offered lawmakers’ condolences as the debate continued into the evening local time.

The urgency was underlined by the latest report by outside assessors on Greece’s finances that recommended paying the next installment of bailout money to Greece “as soon as possible” after the government makes good on its austerity pledges.

“We must tell Greeks the truth,” Venizelos said in a speech to parliament in comments broadcast live. “There are no miracles. The country won’t be saved by some miracle. The miracle will be the result of hard work.”

Police said about 50,000 protesters faced off against 2,500 officers encircling parliament before the protest turned violent for a second day. A group of about 200 hooded youths threw stones and Molotov cocktails at demonstrators from the Communist Party of Greece-backed PAME labor union who were protesting the austerity measures.

Head Wounds

People with head wounds were taken to a first-aid station in Syntagma Square, the focus of the demonstrations. A 53-year- old construction worker died of cardiac arrest after a rock hit him on the head, Skai.gr website reported, without saying how it got the information.

The International Monetary Fund is watching the Greek protests closely and “with concern,” spokesman Gerry Rice told reporters in Washington.

“We understand that this is a very difficult time for the people of Greece, and times of crisis are always difficult, especially if people perceive that changes that need to be made are unfair,” he said.

With a four-seat parliament majority, Papandreou is banking on his Pasok party to face down the public anger and pass the measures that are a precondition for continued international aid. Venizelos said the bill was a “credibility ticket” for a meeting of euro-area finance ministers tomorrow and an Oct. 23 summit of European leaders that will discuss potential cuts in Greece’s debt load as part of a package to halt the crisis.

EU Summit

Papandreou was due to brief his ministers today on “current economic developments” ahead of the European Union summit that aims to consider Greece’s finances as well as leveraging the euro rescue fund and bank recapitalizations as part of a plan to stamp out the debt crisis.

While the Greek government has made “important progress,” the country’s debt dynamics remain “worrying,” according to the latest report from October on Greece’s finances by the so- called troika of inspectors from the European Commission, the European Central Bank and International Monetary Fund.

“The Commission services recommend the sixth disbursement to Greece to take place as soon as possible: as soon as the agreed prior actions on fiscal consolidation, privatization and labor-market reform, which were announced by the government, have been legislated,” the report said.

48-Hour Strike

The scale of the government’s challenge was made clear as Greece entered the second day of a 48-hour strike that has closed hospitals, schools and government offices in protest at the austerity package. The measures comprise 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.

Government ministers “don’t want to implement these tax measures across the country, but unfortunately they’re needed in order to regain some composure within the country and actually get things back on a proper footing,” Nick Maroutsos, who oversees the equivalent of about $4 billion at Sydney-based Kapstream Capital, said in a Bloomberg Television interview. “They’re going to have to take the pain now.”

Two years after the debt crisis came to light in Greece, Papandreou is courting social unrest that risks boiling over as he pushes the additional austerity through. 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.

Test of Unity

Papandreou is testing his party’s support for the second time in 24 hours after he secured the backing of all 154 of his lawmakers in the 300-seat parliament in a preliminary ballot on the bill late yesterday. Today’s ballot is a vote on each article of the legislation.

He received a further fillip today when a ruling party lawmaker, Vasso Papandreou, a founding member of Pasok who is not related to the premier, said she will back all articles of the bill to ensure Greece receives the sixth loan payment. She earlier said she would oppose an article in the legislation “to send a message.”

Successive rounds of tax increases and cuts to wages and pensions have deepened a recession now in its fourth year, with the Greek 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. That’s more than double the 7 percent that month in Germany, the biggest contributor to euro-area bailouts including for Greece.

Greeks “haven’t known such hunger since 1940,” Panagiotis Antoniadis, 71, a pensioner who came to protest outside the parliament, said in an interview. Antoniadis said he lives on a pension of 700 euros a month. “It’s pure poverty, as simple as that,” he said. “We can’t put up with more measures.”

--With assistance from Eleni Chrepa, Tom Stoukas, Paul Tugwell and Marcus Bensasson in Athens, Rishaad Salamat in London and Ian Katz in Washington. Editors: Alan Crawford, Maria Petrakis

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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