Greek workers stage strike
Severe disruption expected as workers take action over austerity measures.
Public sector workers in Greece today (4 May) began a two-day strike in protest against a €30 billion austerity package agreed by the Greek government.
The government agreed the measures, which include cuts to public sector wages, an increase in value-added tax, a new business tax, radical pension reform and an increase in the retirement age for parts of the public sector, on Sunday, in exchange for a €110bn loan facility from the eurozone and International Monetary Fund (IMF).
Unions say that the austerity measures will impose unacceptable cuts on the poor while doing little to tackle tax evasion by the rich. The European Commission and the IMF estimate that the measures will slash Greece’s budget deficit as a proportion of gross domestic product (GDP) by 6.5 percentage points this year, and by ten percentage points by 2014, bringing the deficit under 3% of GDP. Greece’s deficit reached 13.6% in 2009.
The strike will cause severe disruption to flights in and out of Greece and to rail travel. Private sector workers will join the strike tomorrow, effectively bringing the country to a halt.
Around 100 protestors from the Greek Community Party scaled the defensive walls of the Acropolis, Athens’ most famous monument, this morning, unfurling banners reading: “Peoples of Europe – Rise Up”.
A group of ten teachers yesterday broke into the main broadcasting studio of Greek television, disrupting broadcasting, to protest against the austerity measures.
Unions are organising two rallies in the centre of Athens to coincide with the strike action.
Loan approval
Both Germany and France yesterday took important steps towards securing parliamentary approval for their share of the emergency loans. France’s lower house of parliament approved lending to Greece of up to €16.8bn over the three-year life of the loan facility. The upper house of parliament is expected to give its approval later this week.
The German cabinet yesterday approved loans to Greece worth €22.4bn over the next three years. Both the lower and upper houses of the German parliament are expected to approve the loans on Friday (7 May).
Herman Van Rompuy, the president of the European Council, has called a summit of eurozone leaders on Friday to asses member states’ progress in getting money released. The summit will also discuss how to handle any similar crisis in the future.
The Commission is expected today to present a proposal to give Greece until 2014 to bring its deficit to within the 3% limit stipulated by the EU’s stability and growth pact (the deficit was 13.6% in 2009). Its previous target was 2012.
Eurozone finance ministers agreed on Sunday (2 May) to activate the loan facility after it become clear that high interest rates had made it impossible for Greece to refinance its debt on the markets. The facility will protect Greece from having to go to the markets for the next one-and-a-half years, on the expectation that it will then slowly return to them thereafter. Greece’s total refinancing needs over the next three years are estimated at €150bn.
The eurozone loans (which will total €80bn of the €110bn) will be pooled by the Commission and provided to Greece at a common interest rate (estimated at 5%) that will be linked to the Euribor rate used in the inter-bank lending market.
Member states have agreed that any government that has to borrow at a rate higher than that imposed on Greece will be compensated, to prevent any country having to lend at a loss. The compensation will be taken from the interest other member states earn on their loans to Greece.