Kouvelis Says Greece Could Still Default Yet

Democratic Left leader Fotis Kouvelis isn’t optimistic about Greece’s chance of surviving the economic crisis

ATHENS – Fotis Kouvelis, leader of the tiny Democratic Left party that is a partner in New Democracy Conservative Prime Minister Antonis Samaras’ uneasy coalition with the PASOK Socialists, has warned that Greece may yet default on its loans to international lenders because the austerity measures they insisted on have created an irrecoverable recession.

Kouvelis, Samaras and PASOK leader Evangelos Venizelos agreed to postpone some $14 billion in cuts demanded by the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika that gave Greece $152 billion in rescue loans but is withholding a second bailout of $173 billion until the government makes the cuts and imposes more reforms.

The pay cuts, tax hikes and slashed pensions that came with the loans have created 22.5 percent unemployment, shrunk the economy by 6.7 percent and closed more than 1,000 businesses a week, a downward spiral from which Kouvelis said it is unlikely Greece can survive. He told SKAI TV that the risk of defaulting is still very real and spoke of an “extremely difficult situation,” adding ominously that, “Nothing is guaranteed.” Despite the crisis, he said the government wants to protect the salaries of judges and military officers and personnel from pay cuts, even though most workers in the country have taken hits of 30 percent or more while having their taxes raised and doubled in some cases.

He said the government must succeed in persuading the Troika to give Greece more time to meet fiscal targets and make more cuts. “If decisions are not taken in the context of a deep recession that we are suffering, then the measures will not be effective,” Kouvelis said. He repeated that there would be no new measures for this year and that only around 8 billion euros ($9.79 billion) out of the total of 11.5 billion euros ($14 billion) in spending cuts for 2013 and 2014 had been identified but the government would not say what they are.

“We will not have any new horizontal measures,” he said, referring to salary cuts and pensions. He added however that “wage and pension extremities” would be examined, noting that the intention was to avoid touching welfare benefits but that the “special salaries” of specific categories of civil servants such as military and judicial officials would not be touched. Kouvelis said, however, that  there would be efforts to provide support for low-income citizens, noting that there may be exemptions for the payment of the second round of a doubled property tax as one example.

Kouvelis said the area of privatizations was a crucial source of revenue but said the government did not want to give up control of assets of strategic importance such as the Public Power Corporation (PP) whose top executives were getting monthly “family allowance” bonuses of 3,500 euros ($4,287) on top of their salaries and the money-bleeding Hellenic Railways Organization. He said privatization was “a complex affair,” and difficult in Greece because the legal system impedes the sale of national properties, entities and land and that there was virtually no investor interest anyway. Greek enterprises are notoriously overstaffed and unproductive, rendering their value almost nil to many would-be investors.