ATHENS – Facing a growing mutiny in his shaky coalition government against austerity measures demanded by international lenders in return for a second bailout to keep Greece from going bankrupt, interim Prime Minister Lucas Papademos has told any dissenters they’ll be fired unless they support him. With time fast running out to save the bankrupt country and Fitch’s ratings agency warning Greece is days away from default unless it accepts more Draconian pay cuts despite a deep recession, Papademos said Greece’s only choice is to do what it’s told or be forced out of the Eurozone of countries using the euro as a currency and return to the drachma it abandoned a decade ago, which many analysts said would spell its final economic doom and collapse.
“It goes without saying that whoever disagrees and does not vote for the new program cannot stay in the government,” he said. Papademos, a former European Central Bank Vice-President, said that declaring bankruptcy was not an option for Greece. He argued that those who thought it might be better for Greece to default on its debts were “seriously misguided” or guilty of “demagoguery,” and said: “We cannot allow the country to go bankrupt.” He said that a default would “create conditions of uncontrolled economic chaos and a social explosion,” while Fitch’s said it would destroy the country’s banks and cause a panic in European markets.
Greece is between its proverbial Scylla and Charybidis, with the government and Parliament having to choose between approving the tough measures insisted upon by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) in return for a lifeline of $152 billion in loans and promise of $169 billion more and attached austerity measures, or reject them and put the country in a depression.
But six cabinet ministers in the coalition that includes holdovers from the former ruling PASOK Socialists, their bitter rival New Democracy conservatives and the far Right-Wing LAOS party have quit in protest at the measures and LAOS leader George Karatzaferis said his four ministers have tendered the resignations. The high-stakes drama was being played out as the country’s two largest unions began a 48-hour strike and thousands of protesters took to the streets, with a showdown looming Sunday afternoon when then Parliament is expected to vote on the package adopted by the government. The Troika has put its approval on hold, however, and said the second bailout needed to pay workers and pensioners and a March 20 loan payment of $18.9 billion won’t be released until the Parliament ratifies the measures and the government puts its support in writing and promises it will be binding even after new elections are held, tentatively set for sometime in April.
Confusion reigned in Athens as Papademos saw the deal unraveling and more critics saying despite the dire consequences that Greece should no longer go along with ceaseless demands from the Troika to keep cutting pay, raising taxes, slashing pensions and proceed with 15,000 firings immediately and 135,000 more over the next three years. Troika officials said Greece must pay the price for decades of packing public payrolls with hundreds of thousands of unneeded hires in return for votes, evident to anyone who’s been in a government office and seen people sitting around drinking coffee, smoking, and ignoring customers.
The government of former Prime Minister George Papandreou, the PASOK leader who quit on Nov. 11, 2011 in the wake of two years of protests, riots and strikes against the austerity measures, and Papademos have hit public workers with 30 percent pay cuts, doubled property and income taxes, and raised the Value Added Tax (VAT) to 23 percent, which has put the country into a recession of 20.9 percent unemployment and led to the closing of 111,000 businesses. Now the Troika wants pay cuts extended to the private sector in what it said would help restore the country’s competitiveness, and the coalition has approved 22-32 percent cuts in the minimum wage, which could leave workers with less than $500 a month, and will let bosses set wages. Some in the private sector said their employers have seized on that and cut their pay as much as 50 percent.
Leaders of the Eurozone, the 17 countries that use the euro, said Greece has until Feb. 15 to go along or face being removed, a warning passed along by Greek Finance Minister Evangelos Venizelos. As Papandreou did before him, Papademos said he would not brook any dissension. He reiterated that government ministers would be removed unless they gave their total support, remarks that came after Karatzaferis, who supported the deal, changed his mind, as he often has, and said LAOS not would not endorse the deal.
Papademos said the cost of not going along is too great. “The state would be unable to pay wages and pensions and cover basic operational costs such as those of hospitals and schools,” he said, adding that it would it would make imports of basic goods such as medicines and fuel problematic and that businesses would close down en masse. “The living standard of Greeks would collapse and the country would be dragged into a spiral of recession, instability, unemployment and misery,” he said. “All these developments would lead, sooner or later, to Greece’s exit from the Eurozone.” And, he added, “The priority now is to do whatever it takes to approve the new economic program and move forward with the new loan agreement.”
While Greece gave in on almost every front demanded by the Troika except for an outright cut in private sector salaries – which is happening anyway – he said he and his Cabinet had negotiated hard and can save pensions from further reductions, but only if it can make $428 million in cuts in other areas of the budget – with defense spending and health care high on the list – as part of $4.34 billion in overall cuts this year. Despite that, and a pending writedown in the country’s debt of as much as 70 percent, German Finance Minister Wolfgang Schaeuble said the second bailout is not enough and Greece will have to make another $26 billion in cuts to get out from under a staggering $460 billion debt and a deficit that is about 160 percent of Gross Domestic Product, a hole from which no country has ever emerged without going bankrupt.
Papademos said the country eventually return to growth, although many analysts said it could take a decade or more and many of Greece’s young are fleeing to other countries in search of jobs and a better life, giving up on their own country. He said that it was time to show “historic responsibility,” and added: “The endurance of the government is being tested and it is clear that not everyone can endure this burden,” he said in an apparent reference to the two ministers and four deputy ministers who have resigned. The newspaper Kathimerini said he’s considering a shakeup of his Cabinet on Feb. 13, a day after the Parliament is expected to vote while protests roar on outside.
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