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Greece braces for “violent modernisation”

Greece braces for “violent modernisation”
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First Published: Mon, May 03 2010. 02 48 PM IST
Updated: Mon, May 03 2010. 02 48 PM IST
Athens: Greece reacted with a mix of resignation and outrage on Monday to a painful new austerity package from the government that newspaper editorials said would force a long-delayed “violent modernisation” on the country.
“The time to pay the bill has come, the time of responsibility for all of us tackling this crisis must become the big opportunity to modernise our public life, even if we have to bleed,” said financial daily Kerdos.
Prime Minister George Papandreou’s government unveiled the plan to overhaul Greece’s debt-ridden economy on Sunday after talks with officials from the International Monetary Fund (IMF) and European Union (EU).
It foresees a massive fiscal adjustment driven primarily by cuts in the country’s bloated public sector, which makes up roughly a third of the workforce.
A public sector pay freeze was extended until 2014 and treasured holiday bonuses will be scrapped for many employees. Pensions will also be cut.
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”.
Ta Nea, a centrist daily, said the way of life Greeks had become accustomed to had come to an end on Sunday, while centre-left Eleftherotypia deemed the measures unfair because they would hit average wage earners and pensioners hardest.
Centre-left Ethnos said the austerity would mean “asphyxiation” for the Greek people and a “violent modernisation” for the economy, which according to new government projections will contract by 4.0% this year and 2.6% in 2011.
Nationwide Protests
Papandreou met President Karolos Papoulias on Monday morning and requested a meeting of the heads of Greece’s political parties to inform them in detail about the austerity package and seek their backing for it.
“With the consent of the political and social forces we will make the changes that are needed to the political system and the economy that should have been made years ago,” Papandreou said. “Now is the opportunity to make these changes.”
How the public reacts to the measures will be decisive in determining whether the government is successful in implementing them.
Smaller protests were expected on Monday ahead of nationwide strikes by public and private sector workers on Wednesday, which will offer a first glimpse of the extent of the anger with government plans. 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 the economy and the expectation that it will continue contracting for the next two years.
To avoid “reform fatigue” the government is frontloading its fiscal measures with the goal of pushing the budget deficit down to 8.1% of gross domestic product (GDP) this year, from 13.6% in 2009.
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.
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First Published: Mon, May 03 2010. 02 48 PM IST
More Topics: Greece | IMf | EU | Protests | Modernisation |