Greeks Gird for More “Blood and Tears” Economic Hits



Greek Finance Minister Evangelos Venizelos raised the notion of a default

With Greece still poised on the edge of bankruptcy and growing predictions the country will fail, Prime Minister George Papandreou said he will institute new deep cuts in public spending – another 20% pay cut for workers and a scheme to fire many in a year.

Papandreou is under pressure from the Troika of the European Union-International Monetary Fund-European Central Bank to implement yet another round of austerity measures to get an $11 billion installment as part of a $152 billion package of rescue loans.

That was due in mid-September but has been pushed back to October after Troika inspectors said Greece has not met its promises to reduce spending and its near 10% deficit and staggering $460 billion debt.

As Greece seeks a solution, a growing chorus of analysts said the country’s economy is doomed, 18 months after Papandreou began bludgeoning workers while the country’s rich elite of tax evaders costing an estimated $40 billion in lost revenues have mostly gone untouched.

Minister of Finance Evangelos Venizelos, who has emerged as Greece’s point man on the crisis while Papandreou has been taking less of a role, will have a conference Sept. 19 with leaders of the Eurozone, the 17 countries using the euro as a currency. He hinted at more pain for workers, leading Greek media to blare headlines that more “Blood and Tears” is coming in return for the next loan installment. After meeting with Papandreou, who cancelled a U.S. trip to deal with the crisis, Venizelos said Greece must meet its budget targets and start creating a surplus although he offered no solution.

“If we want to avoid default, to stabilize the situation, to remain in the Eurozone … we must take big strategic decisions,” he said, the first time he has used the D-word, default, as a possibility after repeatedly saying that would not happen. He said, however, that the bloated public sector of nearly 1 million workers will be reduced, although Greek media said workers can expect a 20% pay cut on top of previous cuts and big tax hikes that have failed to slow Greece’s slide toward an economic abyss.

Venizelos said Greece was being “threatened and humiliated” by the Troika’s continued demands for cuts, which include mass firings of public workers, but is preparing a plan to do that, media reports said. He lashed out at political opponents and the Eurozone countries who are loaning Greece the money to stay afloat, unhappy with the conditions. “We should not be the scapegoat or the easy excuse that will be used by European and international institutions in order to hide their own lack of competence to manage the crisis,” he said.

Last week, the government blamed the shortfall on a deeper-than-expected recession and decided to put a new tax on real estate in the hope of collecting about 2 billion euros annually, but resistance to paying by austerity-wracked Greeks is already building and, even if collected, the money would not put a dent in the deep recession that has created 16% unemployment, closed more than 65,000 businesses and sent young Greeks fleeing to other countries for work and a new life. “The Troika thinks the recently announced property levy will not suffice to plug the budget hole and is pressing for measures on the spending side – cuts in public sector wages and employment,” said a government official who asked not to be named. Lenders have warned Greece against one-time measures and more taxes as a way out of the crisis as that has backfired. Instead, the Troika wants Papandreou to privatize state-run entities and sell or lease state-owned properties to raise $71 billion, but complained he has been sitting on his hands and done nothing to accomplish that.

The major opposition Conservative New Democracy party’s leader Antonis Samaras said the answer is snap elections, tax cuts, no layoffs of workers and renegotiating the terms of the loan with the Troika, although it was his party while in power from 2004-09 that EU leaders said lied about Greece’s economic condition and set off the crisis. There is growing unrest, vows by union leaders to take action, even as riot police on Sept. 18 had to disperse protesters in front of the Parliament, whose members have largely exempted themselves from the austerity measures and make 10 times the annual salary of many Greek workers.

(Sources: Reuters, Kathimerini, various media)