ATHENS – The Greek Parliament has ushered in a continuing age of austerity for recession-battered Greeks, approving a government package of more deep pay and pension cuts in order to guarantee another rescue package from international lenders to keep the bankrupt country from defaulting, which could jeopardize the 17-member Eurozone of countries using the euro as a currency. The $4.3 billion in spending cuts include those to pensions that the hybrid PASOK Socialist-New Democracy Conservative government of interim Prime Minister Lucas Papademos vowed wouldn’t be touched in return for cutting the minimum wage up to 32 percent. In the end, they relented on both to meet the demands of the European Union-International Monetary Fund-European Central Bank Troika to get a second bailout of $172 billion to go along with a first ongoing series of $152 billion in loans.
The austerity measures have added to a deep recession, now in its fifth year and there were signs that private companies were already moving to make cuts in their workers salaries to keep pace with the dropping minimum wage, with some employees saying their pay is being cut as much as 50 percent. Parliament voted 202-80, with 18 votes not recorded, to do as the Troika and the government wanted, and was scheduled to make permanent changes to the pension funds and big cuts in health care and pharmaceutical spending as well.
Greece’s biggest labor unions called for a three-hour work stoppage on Feb. 29, but two years of protests, riots and strikes have not worked. “Things are and will be difficult,” Finance Minister Evangelos Venizelos told the chamber before the vote. Venizelos, who has doubled property and income taxes and stands to be PASOK’s candidate for Prime Minister in the April elections, defended the actions he said supported a Feb. 21 deal with the Eurozone to get the second bailout. “Now we are gaining a safe framework with the decisions of Feb. 21, with private-sector involvement, recapitalization of banks but it needs work, work, work, unity, consensus, seriousness,” he said. “It is dramatic to cut someone’s pensions. … But why do we have to take these measures? Because our budget is still running at a loss,” Venizelos said. “We are still adding debt to our debt. And if we do not start to generate a primary surplus next year, that will be catastrophic.”
It may have worked to keep the country from defaulting, but at a heavy price for beleaguered Greeks, facing 21 percent employment and the closing of more than 111,000 businesses, and amid predictions by analysts the further austerity measures will deepen the recession and make life worse for Greeks. As part of the deal though, Greek banks will get an infusion of $47 billion to keep them from going bust as Greece is also negotiating a write down in its debt of $130 billion which would see banks and investors taking losses up to 74 percent.
The new vote means a 12 percent cut in pensions above $1,750 a month and more across-the-board wage cuts for all state employees, including 10 percent for the fire and police departments, with the minimum wage falling 22 percent, and 32 percent for those under 25, reducing their pay to $686 a month before taxes. Fire and police department workers marched through the city center to protest, saying their wages will fall to as low as $787 a month before taxes. Limits also are being imposed on collective wage agreements and the process of labor arbitration, with some measures to remain in effect until overall unemployment falls below 10 percent.
COPS PROTEST TOO
About 100 uniformed police, coast guard and fire service unionists protested pay cuts outside Parliament, with a small group burning a wartime military German flag used in the Nazi era in 1935-1945. While Germany is a major contributor to both Greek bailouts, Berlin’s insistence on an austerity-based cure for the country’s financial woes has angered many Greeks and memories of the Nazi occupation of WWII and atrocities have been re-ignited in some quarters.
Antonis Samaras, the leader of New Democracy, who went back on his vow not to support pension cuts, is nevertheless leading in opinion polls, repeated his call for elections to be held as soon as the financing package is wound up. “With this new loan agreement, with this drastic cutting of the debt, we have averted the country’s explusion from the euro,” he told the chamber. “Opening the road to elections, we have saved social cohesion, at least for now.” Standard & Poor’s (SPY) cut Greece’s credit ratings to “selective default” on Feb. 27 after the country began the biggest sovereign debt restructuring in history, a key element to the second bailout.
European Parliament President Martin Schulz was in Athens during the vote for a series of meetings, and he gave a speech in Parliament stressing that “Greece must remain in the euro.” He added: “We must do everything we can to prevent the collapse of the euro,” he said, adding that more emphasis must be put on measures to promote growth rather than only on cutbacks. “A policy based solely on austerity spells economic disaster,” he told Greek deputies. “Budgetary prudence is certainly essential (but) … there is too much focus on financial penalties and austerity packages,” Schulz said, adding that economic growth could be stifled in many European countries.
(Sources: Bloomberg, Kathimerini, AP)
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