Athens: Greece’s main public sector union extended plans for nationwide strikes in response to a government austerity package that cuts wages and pensions.
The ADEDY union, which represents about half a million public sector employees, said it would stage a 48-hour walkout starting on Tuesday, instead of the one-day strike it had previously planned for Wednesday.
“We will continue and intensify our struggle,” the union vowed in a statement on Monday.
Prime Minister George Papandreou’s government unveiled a “pain-for-aid” deal with the EU and IMF on Sunday that relies primarily on cuts in the bloated public sector, which makes up a third of the workforce, to reduce a swollen budget deficit.
In exchange, Athens is to receive €110 billion in financial support over three years, a package designed to calm fears of a debt default and buy the country time to reinvent its uncompetitive and debt-ridden economy.
Greece has a history of violent protests and the government’s ability to implement its draconian programme depends heavily on how the public reacts to the new steps.
Greek President Karolos Papoulias warned Papandreou on Monday that his government would have trouble winning over the population unless pain for average workers was accompanied by a crackdown on corruption, which is estimated to have cost the economy $1 billion last year.
“I am certain the Greek people will respond positively, but they need to be convinced that justice will be done, that tax evasion will be wiped out,” Papoulias said. “There must be a crackdown on everyone who enriched himself at the expense of the Greek people.”
Several hundred rubbish collectors marched through central Athens on Monday behind a dozen garbage trucks, holding banners reading “hands off our salaries” and chanting “parliament is where the rubbish is.”
Therapy Worse Than Disease
Greek newspapers displayed a mix of resignation and outrage at the new steps, which aim to slash the budget deficit to 8.1% of gross domestic product (GDP) this year, from 13.6% in 2009.
Centre-right newspaper Eleftheros Typos said the government was telling Greeks that they must die in order to live, describing the economic medicine it was doling out as “more harmful than the disease”.
Centrist daily Ta Nea said the way of life to which Greeks have become accustomed had come to an end on Sunday. Centre-left Ethnos said the plans meant “asphyxiation” for the Greek people and a “violent modernisation” for the economy. There are precedents for the massive fiscal adjustment that Greece is undertaking, but economists say the country faces a more difficult challenge because of the weak state of its economy, which is expected to contract by 4.0% this year and 2.6% in 2011.
To avoid “reform fatigue” the government is frontloading its fiscal measures, meaning Greece faces what amounts to economic shock-therapy over the coming year.
That could put huge pressure on the banking sector, which is likely to see its non-performing loans rise substantially. As part of the government’s package with the EU and IMF, it plans to set up a special fund to recapitalise vulnerable banks.
Greek banking shares were trading 0.5% lower by mid-afternoon after opening higher on the rescue deal, and the main stock index was 1% lower.