Eve of Austerity Strikes Consume Greece Ahead of New Cuts
Thousands of Greeks took to the streets of Athens on Tuesday on the first of two days of strikes to protest yet more biting austerity measures. Their anger is palpable, but if parliament fails to pass the cuts on Wednesday, the consequences could be dire.
Hundreds of thousands of Greeks began a 48-hour nationwide strike on Tuesday, shutting down schools, banks, local government offices and ports to protest the government's latest round of austerity measures.
Transportation in Athens became difficult as subway and taxi services were halted and flights in and out of the country were stopped for three hours early in the day. State hospitals were running on emergency staff.
About 16,000 people gathered at a union-organized protest outside parliament in Athens, where lawmakers on Wednesday will vote on the law, chanting slogans like, "People, don't bow your heads!" and "This strike is only the beginning!" Several thousand more marched in a separate demonstration in Athens, and about 20,000 protested in Greece's second-largest city, Thessaloniki.
In addition to further tax hikes and cuts to pensions, the expected measures will raise the retirement age from 65 to 67 and make it easier to fire or transfer civil servants. Altogether they are aimed at saving the state 13.5 billion ($17.3 billion) and are a key condition of Greece's international creditors to continue to receive emergency bailout funds.
Socialist Defections Threaten Majority
The measures are expected to pass with a slim majority. The three-party governing coalition holds 176 out of 300 seats in parliament, but the smallest partner, the Democratic Left, has said it will vote "no." In addition, a small number of center-left Socialist lawmakers said they will break party ranks and also vote against the measures, leaving the government with 154 votes -- just enough for the necessary absolute majority.
The main opposition Radical Left Coalition called on demonstrators to surround parliament during the vote, saying the austerity measures "will turn the country into a financial and social desert" and "will lead us decades back, without medicine or state health care, without schools and universities, without a future, with endless armies of unemployed, suicides and desperate people."
A rejection of the savings measures would mean that Greece would not have access to its next tranche of bailout credit, worth 31.5 billion. Without those funds, Greece would be unable to pay back its debt, pushing the country into default and potentially forcing it to abandon the euro currency. A return to its previous currency, the drachma, would result in hyper-inflation, decimating any savings held in Greek bank accounts and creating all new problems for the country.
European Council President Herman Van Rompuy said at the end of an Asia-Europe summit in Laos that Greece must continue with its efforts to cut its deficit, particularly through privatization of state assets.
"I call on the Greek government and the ruling parties to make all the necessary decisions in order to reach agreement with the troika," he said, referring to the tripartite group of creditors, the European Commission, the International Monetary Fund and the European Central Bank.
Decision on Bailout Tranche Looms
Athens is hoping for an extension on the troika's prescribed 4.5-percent primary budget surplus -- a figure that excludes debt payments -- which would ease some of the pressure to cut spending. However the government has forecast an even worse economic contraction next year that originally thought, as well as a peak of its total debt burden at 192 percent of gross domestic product in 2014 -- 10 percentage points higher than its previous forecast.
The troika's latest report on Greece's progress in reducing its deficit is due sometime this month. The Eurogroup of euro-zone finance ministers is expected to discuss the next bailout payment to Greece at its next scheduled meeting on Nov. 12, although officials have played down speculation that they will also decide on whether to approve the payment.
"A deal is still likely in November, but not necessarily on Nov. 12," an EU official told Reuters on the sidelines of the G-20 summit in Mexico City on Monday.
acb -- with wire reports